Managing uncertainty and building cash resilience are urgent organisational priorities in which Accounts Payable (AP) departments have a crucial role to play. Rethinking tools, systems, and
processes with a view to improved efficiency can guarantee business continuity, even in challenging circumstances.
In this article, we look at the tell-tale signs of an inefficient AP process, and at how managed AP solutions and improved automation can improve your department’s performance across key
metrics.
1) Invoice Processing Time Increasing
In 2022, the average time spent processing invoices from the moment they were received until ready-to-pay status was 10 days. Although this figure varies from company to company, increasing
processing times are a sign of inefficiency at two levels:
1. Operational, due to the unnecessary time spend processing invoices, and;
2. Strategic, due to higher costs involved, which can translate into cash management issues.
2) Cost Per Invoice Is Going Up
Rising average costs per invoice are a clear sign that something needs to be optimised. This cost metric encompasses several factors, such as labour, software, and overheads, so it’s vital to have
access to granular data to spot the actual source of inefficiencies.
3) Late Payments
Late payments disrupt several different organisational aspects, including:
a. Finances, as late payments negatively impact the ability make accurate cashflow forecasts and
often incur late payment penalties.
b. Operations, due to the time wasted handling calls or emails from vendors chasing payment.
c. Diminished trust and frictions in company-supplier relationships, which can affect the ability to
negotiate better terms and / or prices.
4) Errors And Corrections
The impact of invoice errors and corrections is similar to what applies to late payments. Inefficiencies come in the form of wasted time handling vendor enquiries, investigating
discrepancies, strained relationships, and mounting fees.
5) Low First-Pass Match Rates
Low PO (purchase order) first-pass match rates could suggest it’s time to automate or streamline manual and outdated matching processes, as low rates are typically seen where processes are only
partially automated, or if multiple software tools are used – increasing the risk of duplication. They may also indicate gaps in communication and training.
The solution: automation tailored to the needs of your team
Many of these signs of inefficiency can be traced back to an excessive reliance on manual processes, or inadequate or poorly managed automation. Solving AP inefficiencies requires moving toautomated solutions specifically created to reduce the risk of error, improve accuracy, and boost AP performance by taking pressure of staff.
The Solution: Managed Invoice Processing
End-to-end invoice automation and managed invoice processing solutions are particularly useful in helping AP departments anticipate and manage change efficiently. Since 2005, at Cogent we’ve been helping businesses streamline and consolidate multiple AP processes, gain more control and process transparency in SAP invoice processing, and eliminate barriers to productivity with automated validation and approval workflows. Our cloud-based solutions can be deployed using 4 different models, from outright purchase to pay-per-invoice services.
Find Out More
We invite you to get in touch to see how our automated solutions have brought AP efficiency to organisations in the government, energy, automotive, and higher education sectors, and to book a
live demo to find out more.
