Your organization needs to achieve AP (Accounts Payable) workflow optimization if you want to maximize cost efficiency. As a result, you need a strategy that introduces techniques and technologies that streamline your AP workflow and reduce unnecessary costs. However, if you still rely on an outdated manual process or a less-than-perfect combination of paper and digital AP documents, it’s impossible to achieve your goals. Here we offer a comprehensive guide to help you realize the cost-saving potential of optimized AP by introducing faster processing times, reduced late payment penalties, improved cash flow management, and enhanced vendor relationships.
AP Workflow Creates Faster Processing Times
If you rely on manual data entry, even if it’s not for every invoice you receive, you are likely experiencing bottlenecks related to an outdated, inefficient process. Adding to your inefficiency is using a manual routing process to review and approve invoices. If this sounds familiar, you need to automate the steps involved in your invoice processing. There are four technologies/strategies you can leverage:
- Invoice scanning technology: If your team has scanning hardware in the AP department, they can scan invoices as they come in instead of rekeying the information into your system. Scanning takes seconds, while data entry takes several minutes, saving you time in manual labour.
- Document management software: Document management software allows your team to store and share your invoices and create an automated, streamlined invoice routing process. You eliminate manual searches in disorganized filing systems, again reducing manual labour costs through significant time savings.
- OCR: Optical character recognition software takes your scanned invoices and transforms them into a text document making it easier to search and share. Once stored in your document management system, your team finds invoices almost instantly.
- Scan to zero strategies: Scan to zero allows you to slowly implement a paperless office, scanning your paper invoices in manageable chunks.
These three technologies empower your AP team to eliminate time-consuming manual processes and speed up processing times for impressive cost-savings in labour hours. It also makes your team happier, freeing up time and eliminating stress and overtime.
Reduced Late Payment Penalties with AP Workflow
Outdated manual processing leads to an increased risk of vendor/supplier late payment penalties. When your goal is to reduce costs, one of the easiest ways to do this is to leverage all discounts available to financially reliable customers. Even if not all your suppliers offer a cash or early payment discount, you’re likely paying penalties for late payments or being charged interest when you go beyond the 30, 60, and 90-day payment dates.
With faster processing times in place, you get the invoices to the person who sends that payment through auto-routing, so you’re always up to date on your account. If your finances are in good health, you can also implement auto payments, allowing you to streamline the entire process from receipt and entry of the invoice to approval and payment. It makes vendors happier.
With OCR and automated invoice management, you can resolve vendor disputes instantly. You can quickly search and provide supporting documents such as POs, invoices, and packing slips to help resolve issues such as being short-shipped, being sent the wrong products, or being overcharged. As a result, you avoid ongoing disputes and grudges that ruin relationships.
AP Workflow to Improve Cash Flow Management
Here’s where you start to see how symbiotic the relationship is between faster processing times, reductions in late payment penalties, and improved cash flow management. With your new AP software and technology, you:
- Improve visibility of the money going out of your company to manage cash flow more effectively
- Find cost-saving opportunities based on improved vendor relationships, such as reduced penalties, discounts for early payments, and favorable terms, such as increased credit
- Reduce payment errors that take money out of your cash stream that is rightfully yours
- Reduce labour costs related to inefficient manual tasks
Reduce Payment Errors with Error-Free AP Workflow
Payment errors are bad whether you over or underpay. In the case of underpayment, you will face penalties because you are eating into your vendor’s cash flow. With underpayment, you eat into your own cash flow. You also damage relationships which can increase the risk of debt holders acting against you for late or missed payments. Once again, it’s document management software to the rescue, allowing you to break the cycle of bill payment errors.
The system simply won’t allow errors thanks to triggers you put in place to flag them. As a result, you ensure vendors are never paid without proper authorization. For example, with an automated approval system, the invoice can’t move forward to the payment stage. Say a department head is in dispute with their vendor due to a short shipment.
In this case, they might be sitting on the invoice until the balance of the shipment is received. Your AP team avoids paying a vendor owing you a product because the system doesn’t indicate the invoice was approved. Your AP team can also see who is holding up the process, follow up with them, and then enter a note about what’s happening.
Your system also makes correct calculations for payments. You can reconcile invoices to cheques or direct payments to avoid issues such as the incorrect number of zeros or placing the decimal point in the wrong place.
Audits are a pain in the you know what. With workflow optimization, your new system also streamlines the auditing process. You can easily reconcile invoices to payments, show the workflow of each payment from start to finish, and improve transparency and accountability through the entire AP lifecycle.
Whether it’s an internal audit or the CRA is involved, every transaction is accounted for. No more sifting through scraps of paper and receipts, as everything is scanned, stored and OCR-enabled for quick and easy searches. Your document management software keeps your accounts payable documents organized, so the word audit doesn’t send shivers of dread down your AP team’s spine.
Why Your Need AP Workflow Automation
AP workflow automation provides the technology and software you need to enjoy workflow optimization, including:
- Automated records management to eliminate error-prone paper processes
- Eliminating the need to hire additional staff or overtime for your peak times
- Automated invoice reconciliation to save hours of labour costs each day
- Eliminating stalled invoices
- Automating document routing and approvals
- Eliminating the dread of audits with records always at your team’s fingertips
If you’re ready to learn more about AP automation using document scanning, management and OCR software, MES is ready to help. Click here to set up a free consultation.