If there’s one thing that’s sure, it’s that efficient operations are necessary to stay afloat in business. Companies are constantly looking for ways to cut costs and find ways to do more with less. While there are many ways to approach this goal, one area that doesn’t receive nearly enough attention is the accounts payable (AP) department.
Among other things, accounts payable invoice automation helps businesses in a variety of different ways. However, there’s one question to answer: how do businesses accurately measure the return on their investment? What key performance indicators (KPIs) should they be aware of? Let’s discuss.
Reducing Processing Costs
Perhaps, the most logical way to measure ROI in an AP automation solution is to consider how much money the organization saves in the area of processing fees. After all, paper-based AP processes are inherently inefficient and costly. Because the manual processing of invoices is tedious, requires verification, and is bogged down by manual data entry, there’s a significant price associated with pushing an invoice through in any given organization.
Consider the fact that it takes companies using manual processes days or weeks to process and approve an invoice. On the other hand, an organization with an AP automation solution can accomplish the task in just a few hours or minutes. That’s an incredible opportunity to save in terms of labor costs and manual intervention costs.
Improving Vendor Relationships
Another, perhaps more important, KPI is the end-result of better vendor relationships. Because invoices can be processed and paid faster, all without pesky errors that send invoices back to the beginning of the line, vendors get their payment within a more appropriate flow. The more vendors feel confident enough to rely on your organization, the more they’re going to be willing to bend over backward to work with you.
This goes without saying, but when you have a more efficient invoicing process in place, you’re automatically in a better position to take advantage of extended credit terms and early payment discounts from suppliers. So, while you’re already saving money and processing payments faster, there’s more on the table that becomes accessible when you look at this side of the equation.
Enhancing Productivity and Efficiency
Now, let’s address the impact that automation has on employee productivity. When the underlying concept of manual invoice processing is eliminated from the workplace, employees are no longer left handling these repetitive and resource-intensive tasks. As such, companies get a more efficient version of previously-implemented workflows by enabling employees to spend their time engaging in more value-driven tasks.
Instead of manually reviewing and entering invoice information, your employees can spend their time on cash flow optimization, analyzing vendor performance, or managing vendor negotiations. It may present an opportunity to make a larger impact on the company’s balance sheet.
Mitigating Risk and Improving Compliance
An opportunity where AP automation can be invaluable is in risk mitigation. Manual processes are more prone to errors and fraud. When transactions are simply logged into automated systems, they can be more thoroughly tracked, with improved accuracy and reduced potential for errors.
Further, accounts payable automation supports compliance management. Operating the whole of AP automation through a secure, transparent system that follows proper protocol ensures compliance across the board. Automation removes the possibilities of mishandled transactions, which could result in fines or legal repercussions.
Calculating Your ROI
Now that we’ve gone over what metrics you should track, let’s examine how to evaluate ROI. Tracking ROI for accounts payable automation software involves measuring the cost of software against savings and productivity improvements. The factors are:
- Cost Savings: How much will you save on processing, errors, and vendor terms?
- Productivity Gains: How much time will staff save by no longer participating in non-essential tasks? What will the improved capacity for revenue-generating activities mean?
- Risk Mitigation: What is the value of preventing costly mistakes, fraud, and compliance fees?
Compile this information over time and you’ll have an accurate idea of your return on investment.
A Better Way to Pay
Ultimately, the numbers don’t lie when it comes to the ROI of accounts payable automation. Whether you’re saving in manual errors, costs of processing, improving vendor relationships, or helping employees be more efficient, the benefits are numerous.
If you want to digitize your AP workflow, the first step is to look into accounts payable invoice automation software. Look for seamless software that integrates with programs you’re already using. It very well may be a good investment in more ways than one.
