Archaic approaches to AP processing are expensive, inefficient and risk undermining supplier management. Although recent research has shown that most businesses have at least partially digitised AP, 22% of companies still cite inefficient processes (such as manual B2B payments) as an obstacle to achieving optimal supplier relationships. Regardless of whether finance functions adapt to digital processes, departments are expected to do more with less, a trend that is likely to continue as the global economic outlook worsens. Forward-thinking transformation executives are looking for ways to update their automated AP processes, however internal business culture can cause resistance to substantial change, irrespective of how necessary digital evolution has become.
What’s slowing down the process of AP automation?
A significant factor contributing to corporate inertia is a misunderstanding of AP automation costs. The incorrect assumption is that if nothing changes, neither do the consequences of inaction. In fact, this assumption could not be further from the truth.
Other reasons why corporations have been slow to adopt AP automation include:
- Too many projects: Companies struggle to prioritise AP automation when digital initiatives offer advantages across departments
- Lack of capital: Securing investment can be a challenge at the best of times, let alone during periods of protracted economic uncertainty
- No senior sponsorship: Change directives require senior management buy-in, without it no project can expect to get off the ground
- Minimal internal IT resources: If solutions aren’t designed to fit flexibly into established tech stacks, they can be difficult to deploy without significant IT resources
- Solutions not compelling enough: Finance teams need powerful solutions that solve a range of problems if they’re to reap the benefits of onboarding new technologies
- No business case: Documenting the cost of current processes can be challenging for time-poor executives, making it difficult to visualise the full potential benefits of AP automation.
In this blog, we’ll explore the true cost of standing still when deciding whether or not to transform your Accounts Payable (AP) process. We’ll take a detailed look at AP automation costs, comparing them to the expenses businesses incur under more traditional financial management methods. We’ll also cover how proactive stakeholders can motivate their companies to act now on AP automation.
Why automate AP?
Automating AP is not as novel a concept as it might appear. Not so long ago, electronic data interchange (EDI) processing was hailed as the ultimate solution for AP departments. However, the reality was less than ideal, with processes still requiring error-prone human intervention.
Modern systems, like Total AP from Tungsten Network, help ensure maximum visibility across a wide range of suppliers. Manual intervention is minimal, reducing the need for finance departments to hire additional staff.
AP automation costs versus standing still
The best AP automation tools do represent a small investment for finance companies. However, the cost of doing nothing is significant. We’ve collected some of the top benefits forward-thinking finance and technology leaders are aiming to achieve with AP automation:
Reduced cost of processing AP transactions
Fewer mistakes and higher invoice accuracy
Quicker processing times
Increased departmental visibility.
Of course, it’s possible to hire diligent finance personnel to manage traditional processes. But the capacity for scalability is dramatically reduced by manual AP processing. Additionally, finance teams that rely on an increased headcount for processing greater volumes of invoices are more expensive to grow, impacting companies’ bottom lines even as the economic outlook continues to look bleak.
What are the benefits of effective AP automation?
The companies that have deployed the best AP automation enjoy a substantial advantage over other businesses. Companies with the highest degree of accounts payable automation saved up to 80% on processing costs compared to the average AP department.
Automated AP departments were also much more likely to take advantage of early payment discounts. Automated AP tools can process an invoice 73% quicker than manual invoicing processes, helping companies become more strategic in their budget planning capabilities.
Overcoming internal inertia: The finance leader’s persuasion toolbox
Persuading senior leaders of the benefits of AP automation is critical to enhancing the capabilities of your AP department. In our experience, finance and technology leaders often find the greatest success by executing the following steps:
- Gain executive support: You’ll need the top finance leader to back your plan
- Document your existing processes: Record cycle times and costs
- Evaluate current operations: Explore opportunities for improvement
- Gather budgetary information: Assess the cost of potential solutions
- Document your business case: Put together your findings in a sound, defensible paper
- Internal alignment: Get both IT and finance departments to recognise the value of the project
- Secure approval: Then put your plan into action.
Once you have approval, it’s a good idea to loop in an AP automation expert like Tungsten Network. Working with experienced providers of finance automation platforms can help you spot potential challenges ahead of time, reducing onboarding times and ensuring your business is fully equipped to extract maximum value from AP automation.
The cost of doing nothing
Corporate leaders can confidently spearhead successful AP automation projects, alerting key stakeholders to the cost of not transforming finance functions, by understanding the limitations of manual processing. Although AP automation costs represent a modest investment, the potential savings are significant and well documented.
In short, AP automation represents an opportunity too good for proactive leaders to miss. Partnering with platforms that can demonstrate significant expertise will also be essential to securing buy-in throughout your organisation as finance leaders seek to modernise their businesses and earn success in the future.