Today, many businesses feel the pressure of economic uncertainty, supply chain bottlenecks, and the lasting effects of a global pandemic. In Deloitte’s 2022 CEO survey, 56% of respondents ranked their financial insecurity as high or very high, and 98% of CEOs expect operational costs to rise in the coming year. As a result, it is a critical time for organisations to consider where they can cut costs and increase overall profitability.
Accounts Payable (AP) might not be the first business area you’d consider optimising when seeking ways to boost profits. However, with a digital transformation, AP can reduce residual spending and help companies increase retained revenue, ultimately improving profit margins. On top of this, AP departments offer a wealth of data that can provide valuable insights into a company's spending and financial health.
In this article, we outline the five ways that e-invoicing and automation can drive corporate profitability.
1. Reduce the costs of Accounts Payable
Ardent Partners’ research shows that automated invoicing processes can cost between 40% and 90% less compared to paper-based processing methods and improve processing times by 81%.
By switching to e-invoicing, businesses can boost profits by reducing the AP costs associated with manual data entry, paper handling, filing and retrieval, routing of documents, supplier inquiries, and audit requests. Plus, decreasing the likelihood of losses due to late or misplaced invoices.
The same research from Ardent Partners also shows that organisations spend, on average, $10 per invoice, while best-in-class organisations utilising e-invoicing spend just $3.12 to process a single invoice.
These savings can help to protect profit margins, increase sustained revenue, and promote a company's long-term financial health. Organisations can also reinvest these funds into other business areas instead of wasting this cash on outdated and inefficient processes.
2. Improve operational efficiency
Operational efficiency is an integral part of profitability in business. So it’s no minor issue that 47% of AP teams list “invoice/payment approvals taking too long” as their top challenge in 2022. Dysfunctional AP puts organisations at a significant disadvantage in volatile markets.
The introduction of restrictions on movement and commerce during the pandemic forced millions of companies to adapt to remote and hybrid operation models. Demand for AP automation tools increased as a result, and it is more important than ever for finance teams to keep up with competitors who have already made the switch to digitised AP systems.
Though organisations recognise the importance of automation in efficiency, 54% of AP teams are still only partially automated. IFOL’s 2022 survey reports that 68% of AP departments still manually key invoices into software, with 56% of employees spending over 10 hours a week processing these invoices.
Automation, AI, and e-invoicing can maximise the efficiency of AP teams, increasing agility and adaptability. These tools help new team members train faster and increase their capacity, as the overall payment cycle shortens with the introduction of automated AP.
3. Manage cash and working capital effectively
Deloitte’s 2022 survey found that CEO’s top priorities include better cash flow (37%) and reduced costs (35%). Slow invoice approval cycles can result in costly late fees and the removal of early-payment discount opportunities.
As e-invoicing makes it easier and quicker to pay out, it can help AP stay on top of all possible discounts suppliers offer, which provides greater opportunity for savings within AP and reduced core business costs. For example, there are many instances in which businesses that pay an invoice within 10 days, receive a 1-2% discount– this provides more of a benefit than they would receive from a typical interest-bearing bank account.
Invoice financing is another way that e-invoicing networks can help save funds, providing suppliers with access to cash held in invoices approved by a buyer but not paid. This can help improve cash flow and decrease the need to chase after late invoices.
4. Increase the transparency of spending data
Visibility into corporate spending is critical to profitability and growth. When a business isn’t accurately tracking its spending, this can lead to redundant purchases, budget variances, “maverick” spending, and contract disputes. The inability to plan for large expenditures can also have adverse ripple effects throughout the business. With this in mind, it’s no surprise that low visibility is one of the top challenges in AP.
E-invoicing networks can provide data reporting and analytics, which enable buyers to improve procurement controls, ensure contract compliance, and reduce their cost of goods and services.
Users can aggregate data and drill down into numbers to find transaction volumes and price trends. If companies notice core components in their supply chain are getting expensive, they might find ways to reduce their foreign currency reliance or seek new suppliers to lessen overall costs.
According to research by Ardent Partner, 64% of respondents consider analytics and Business Intelligence (BI) the most desirable skill for the next generation of AP teams. Combining automation and AI with analytically skilled individuals will give your business the power to optimise data and improve profit margins.
5. Improve agility and scalability of AP teams
Agility and scalability are two more profit-boosting benefits of e-invoicing. Through electronic invoicing networks, teams can manage exceptions online, eliminating the back-and-forth phone calls and emails common in a manual AP environment. It can also improve communications between partners via electronic newsletters and messaging in purchase orders, and streamline the onboarding process for new suppliers.
Productivity can be boosted among external teams as e-invoicing networks enable users to collaborate easily and share information. Multiple individuals can review and approve the same invoice simultaneously, while security controls ensure that access to specific data is restricted only to authorised employees.
Automated and electronic systems allow organisations to quickly adapt to changing needs and grow their volume without needing additional staff or infrastructure. This frees employees to focus on activities that add value to an organisation rather than just manual admin or back-office functions – in turn, making room for growth and profitability.