Even in the smoothest of times it is essential that businesses keep a close eye on operating costs but in times of economic uncertainty, it can be a matter of business survival or failure.
A 2024 survey revealed that more than a quarter (26%) of trading businesses admit that economic uncertainty is having an impact on their turnover, and so, with this in mind, business owners are evaluating high spending areas in a bid to identify where costs can be cut.
Particular attention should consider resource heavy, inefficient processes which may be dragging down bottom-line figures. One such area is accounts payable (AP) and invoice processing.
When it comes to asking the question ‘how much does it cost to process an invoice?’, the answer is not so simple as of course it depends on many factors, but research by Gartner revealed it costs businesses on average between £4 and £25, with some complex or error prone AP processes reaching as much as a staggering £50 per invoice. From this comes the age-old joke among AP departments that some invoices cost more to process that the value of the invoice itself. However, these figures are no laughing matter and it’s clear that many businesses are spending far too much on AP, especially as more than half (57%) are still processing their AP manually.
As mentioned, there are many factors involved in calculating your cost per invoice such as the number of invoices you are processing and the size of your workforce involved in processing those invoices, which, in many cases is multiple. However, it’s important to consider that the exact cost of processing an invoice is likely to be much higher in most cases when you factor in the hidden costs. ‘Hidden costs?’ I hear you say:
With manual processes comes the likelihood of human errors occurring such as incorrectly coded line items and manual key-in errors. Even the smallest of errors can cause significant delays, bottlenecks and potential fines from suppliers, plus the added labour costs of your workforce needing to identify and fix the problems. Research by the Aberdeen Group has revealed a quarter (20%) of invoices contain errors, which can amount to large sums over time.
It’s estimated that £295,000 is lost to businesses each year due to invoice fraud, but more shockingly is that 1 in 5 (20%) when asked, were unaware or unable to state how much invoice fraud had impacted their business. Manual AP processes leave businesses particularly vulnerable to invoice fraud as it can be easy to be caught out by duplicate invoices and fraudulent supplier details, however automation software comes with built-in, intelligent fraud detection features which pick up suspicious activity quickly.
Put simply, late supplier payments cost your business cash and research found that 39% of business professionals admit that paying suppliers late has cost them money. By missing payment deadlines, you lose the opportunity for early payment discounts and jeopardise your opportunities of negotiating competitive rates with your suppliers.
Add up the sum of paper, postage, ink and envelopes and you will see it quickly rack up when processing large volumes of invoices.
We’ve established that one key area leaking money in your business is accounts payable so what are we going to do next?
Whether we’re a fan of technology or prefer old school methods, technology is here to stay and AP automation software is transforming the invoice process and making a lot of people’s lives much easier. In fact, by digitising the process companies are witnessing cost savings of 50-75% when compared to manual processing and speeding up the processing time by 30%.
Transitioning away from paper is one of the first steps towards cost reduction in the AP process and improves security whilst making it easier to retrieve documents.
Adopting an end-to-end AP automation solution that incorporates invoice matching functionality and operates at line level detail is a guaranteed way to streamline your processes and reduces the risk of manual errors which can be costly to rectify. Removing redundant, time consuming, administrative tasks gives AP teams the time they need to focus on jobs that add real value to the business.
Tedius, manual processes make the accounts payable function one of the most costly areas of a business and in today’s economic climate, businesses need to be exploring ways to streamline costly processes in a bid to save money and drive efficiency.
The hidden costs behind invoice processing can stack up quickly when you consider the cost of human error, paper processing, late payment fees and the risk of fraud.
That’s where AP automation software comes in! Adopting an end-to-end automation solution can improve workflows, save considerable time and reduce costs significantly.
For more information about AP Automation software from Pegasus please contact us today to learn more.
Posted On: May 07, 2024
