The AP process is a fundamental element of a company’s daily operations. With a departmental impact that can touch distant elements of the work the business performs, efficient invoice processing and handling are essential to offering solutions instead of problems.
Despite the importance of invoice processing, many businesses remain mired in slow and inefficient manual invoice processing techniques. Even with potent computing power close at hand, AP departments continue to hand-key information and depend on paper. These habits have drawbacks that are clear to most AP directors today.
The number of manual invoice processing steps in such systems is greater—and each step takes longer—than in a system with even a slight degree of automation. However, you may have legitimate concerns about the impact of suddenly changing your invoice processing cycle. How can you adopt a smart approach to adding automation tools to your software lineup, and what can you do to reduce the number of invoices that require manual handling?
In this guide, we’ll lay the groundwork for improving your AP team’s productivity, deploying general strategies for driving down costs and eliminating more human error. We’ll cover the following topics on how to reduce manual invoice processing:
- How Can the Invoicing Process Improve?
- Reducing Human Error in AP Invoice Processing
- How Automation Can Save Money
How Can the Invoicing Process Improve?
There’s a constant need for workflows that can adapt to the high-pressure demands of the full AP cycle. While many techniques have remained the purview of business accountants for decades, they can’t carry big businesses as far as they need to go. Instead, these businesses require a more focused approach.
Within such an approach, KPIs are under frequent consideration, cycle times shorten and costs fall while supplier satisfaction rises. How do you achieve these goals? Let’s answer some key questions to find the answer.
What Are KPIs in Accounts Payable?
You can’t make performance improvements if you aren’t sure how to measure them. By clearly defining the key performance indicators your department should meet, you can gauge whether you’re making progress or coming up short. What are some of the KPIs you should measure?
- The cost of processing a single invoice. What is the average cost, and is it acceptable for your business? In almost every case, cost improvements are within reach.
- What is the volume handled by the company’s accounts payable? Invoices per month is an essential metric.
- How many invoices does each clerk on your team process per day? Granular statistics such as these reveal weaknesses as well as strong points.
- Matching success and exception rate. How often does your team successfully link POs with their invoices? How often do you encounter problems that lead to the risk of (or the completion of) double payment?
Without the right software, measuring these KPIs is a major challenge. Once you implement tools that will give you these insights, however, you can measure just how much of an impact manually processing invoices has on your team’s efficiency.
What Is Invoice Processing Time?
Looking at your KPIs might reveal a common issue: It takes too long for your staff to process critical invoices. The impact is threefold. First, suppliers constantly request status updates, waiting for their payment. Second, your business misses out on the value of early payment discounts. Finally, you risk taking so long to process invoices that you incur late fees.
Consider an invoice that arrives for a major order. Your team begins processing and struggles to locate the appropriate purchase order. Next, it cannot easily confirm that all the invoiced goods or services have been received. An exception arises because of a discrepancy, and the siloed nature of your department means that it takes up time to track down the information that will help resolve the problem.
Each of these steps could take days when mixed in with all the other work that an AP team completes. Shortening your processing time means moving away from manual systems.
What Is the Average Number of Invoices Processed Per Month?
Is your team staying ahead of the curve with its monthly invoicing volume, or is it in danger of being swept away by the tide? Looking at the average number of invoices that AP processes can reveal that you aren’t completing each task nearly as quickly as you should. Such deficiencies don’t just make optimum performance harder to achieve, they can also have a cascading effect on the business, including impacts on cash flow and even the availability of materials.
An invoice aging report can be especially helpful in gauging your month-to-month efficiency. Tracking this information manually on paper or in a spreadsheet is not likely to provide you the instant snapshot that you need, however. An integrated and automated solution can produce these reports in seconds, letting you quickly assess where more help is necessary.
How Do You Reduce Invoice Processing Costs?
Although implementing a solution may be a complex undertaking, the path toward reducing costs and processing times is clear. Today, reasonable AP automation cost makes it a clear winner over manual processing.
Through automation, you can address multiple issues at once. Reducing costs is a matter of making invoice information more visible, linking departments and connecting with your vendors electronically. Many B2B companies have begun to embrace the cost-saving potential of electronic invoicing and payments, which means that these options should be available from your business, too.
You may be daunted by the task of achieving better visibility and driving toward results that you can see reflected in the business’s bottom line and daily cash flow. Paired with AI-powered invoice processing, tools such as Kofax ReadSoft Online™ or Kofax AP Agility® put results within easy reach for every business.
Find out how easy it is to adapt your business processes to include these tools today.
Reducing Human Error in AP Invoice Processing
Even the most advanced automation systems available today still require human intervention and attention at some steps. We don’t have true “artificial intelligence” yet—so the human touch remains essential. Unfortunately, there are some drawbacks, such as the ever-present risk of human error.
What can you do to reduce this stumbling block in AP? Take a closer look at the concerns facing your team, and you’ll reveal several opportunities for smart automation or process restructuring.
How Many Invoices Can One Person Process?
Having high expectations for your staff can motivate them to achieve greatness in the workplace, but there are limits to how much one person can achieve. Assuming no exceptions, an experienced AP clerk can generally process five invoices each hour working with a manual workflow. Over the course of a typical workday, they might be able to complete several dozen.
Considering that a high-volume business might receive hundreds of invoices per day, it’s easy to see how even a large team can fall behind quickly. Continually expanding payroll isn’t the answer, as you only increase the likelihood of human error. Instead, shift the burden to automated invoice processing software.
With the right tools, some invoices can pass through your system with barely any human interaction at all—matching, validation and invoice approval can all be automated.
Implement or Improve Three-Way Matching
The three-way match is essential to avoiding certain exceptions and speeding up the process. Ensuring that there is an agreement between what a vendor says you owe, what you ordered and what you received guarantees you can approve the proper payment amount. Unfortunately, this process is tedious without automation solutions.
Imagine that an AP team is physically distant from warehousing operations. The AP team is working on matching an order with components that went to several different destinations. There might be more than one receiving report to match to the invoice and PO—but perhaps one warehouse didn’t report the right numbers. Determining whether this situation was caused by human error or an actual problem with the receipt of goods will become an AP clerk’s least favorite part of the day.
Automatic three-way matching occurs when your team’s computer systems can use AI to enter and categorize all these documents. Exceptions receive a red flag for human attention immediately. Scanned copies of the documents make review easier. With automation, resolving exceptions and achieving a match take far less time.
Automate Record Keeping
A simple typo can cause an exception that takes an immense amount of time to fix. You don’t need to think hard for examples—a mistyped PO number or an invoice that’s missing key line items can easily become headaches. Optical character recognition and AI are the answer.
Cognitive capture tools can intelligently read invoices and automatically input their data into your key systems, allowing humans to quickly scan the data for errors. These same tools offer instant visibility for any invoice while making it simpler for your staff to perform critical tasks that speed up payment approvals. You can look forward to seeing your invoices-per-person KPI steadily rise.
Prevent Payments Fraud
Can you trust every vendor that you do business with each month? Unfortunately, the answer might not be “yes.”
Although not all payments fraud is intentional, there are bad actors who will look for opportunities to take advantage of their buyers and bill for more than necessary. In manual processes, there are many potential gaps where an oversized line item can slip past your team.
If your team approves that incorrect payment, your business loses money—and then has to fight to get it back. Automation dramatically reduces the potential for these human errors by highlighting discrepancies immediately upon detection. While mistakes may still happen, you’ll reduce the likelihood that they’ll ever result in a financial loss for the business.
How Automation Can Save Money
It’s easy to imagine how automation tools from Kofax can make the daily workload lighter for your team. How do those changes translate into concrete improvements for the company’s bottom line?
Drop Cost Per Invoice
In AP, cost per invoice is one of the key measures of success. Properly implemented processing automation reduces AP costs throughout every invoice’s life cycle. You can shave several dollars off invoice processing costs by reducing the time that it takes your staff to handle each invoice. Fewer exceptions also mean a drop in cost. The result is a value-enhanced AP department capable of processing more for less.
Reduce Average Payment Cycle Time
Combined with instant data visibility, faster exception handling and a smoother approval process minimize the amount of time that any invoice spends in your system. When you can see at a glance which invoices are the oldest and which invoicing deadlines are near, prioritizing staff resources becomes far simpler.
While some paperwork will always take longer to process, automation boosts your standard workflow while freeing up your staff to give their expert attention to edge cases.
Increase Staff Productivity
Automation boosts productivity in invoices processed per day and exceptions handled, but it does more than streamline time consuming tasks. You will free up more time for AP with workflow automation software that can handle invoices in the background until a human touch is necessary.
Use this time to generate business insights and more accurate forecasts. You’ll save the business money with better budgeting, stronger supplier selection and efficient payment timing for discounts.
Reduce Error Rate
Every error in AP requires a resolution or the business loses money. With smart programs that always follow best practices and capture data accurately, your error rates will drop. The result is improvements in your KPIs across the board. When staffers don’t need to rush to handle as many invoices as they physically can each day, human error becomes less of a factor.
From reducing the cost of processing an invoice to eliminating common errors and pleasing your vendors, there are clear benefits to automated invoice processing. When you consider how many other businesses have moved toward cloud computing and intelligent automation, you may wonder why your own AP team doesn’t have the same advantages. With maturing software solutions available to suit businesses of every size, now is the perfect time to seize the opportunity to automate.
With tools from Kofax and a clear plan for how to reduce your team’s reliance on manual data entry, you can structure your department as a money-saving, insight-generating powerhouse. Leave unpleasant explanations for costly double payments behind and embrace the opportunity to explain how much AP saved the business each quarter.
Explore in-depth information about these exciting solutions today.