Invoice processing is acknowledged to be a significant cost in AP departments. With difficult economic conditions, spend management has never been more important to maintain a functioning business. Yet statistics show that less than 20% of businesses have achieved process maturity with their invoice settlement operations.
Automated invoice processing technology is now available that can radically transform your AP efficiency and accuracy. In particular, it can improve spend management, saving costs and enabling better forecasts. Let’s take a closer look.
What Is Automated Invoice Processing?
Invoice processing has traditionally been a labour-intensive process for AP departments. From initial receipt of invoices, then approval, through to PO matching and payment, the process is inherently complex, and inefficiencies can creep in at every stage. Though fully digital technologies are now on the market, many companies are still dealing with at least some level of paper-based documentation, which remains especially hard to manage and prone to error.
Automated invoice processing involves digitising, tracking and analysing invoices. It improves the speed of the invoice lifecycle and saves staff hours in the process. Invoice data is persisted in a database, meaning accounts can be more easily identified, with all payments matched and tracked. Late and duplicate payments are avoided, and useful data becomes available for analytics and process improvement.
How Does Automation Improve Spend Management?
Let’s take a closer look at three key ways in which automation improves spend management:
1. Timely Payments
Without a consistently managed and accessible system for invoice processing, AP departments run the risk of losing track of invoices, resulting in late or missing payments. This can directly incur costs in the form of late payment fines. But indirect costs are also raised through back-and-forth communication with suppliers, which takes time and resources. Automation provides timely and accurate information to allow account settlement without excess trouble.
2. Staff Costs
Manual processing is labour-intensive. It requires checking and correcting invoices, matching with POs as well as inefficient data capture if invoices are received in paper form. These processes have become yet more problematic as remote working practices have expanded in recent years. By adopting automated invoice processing, AP managers can drastically reduce labour costs.
With the majority of companies still some way from achieving process maturity in their invoice management, accuracy remains a significant sticking point. Manual processes can be inconsistent and prone to error. With late or missed payments these errors can result in excess payments, where invoices have been reissued or late payment fees are charged. Automation tracks and matches invoices to POs and flags duplicate invoices to avoid erroneous payments.
Next Steps For Improving Spend Management
As we see, invoice processing automation can significantly improve spend management. With most businesses still near the bottom of the automation scale, there is much scope for AP improvements through technology. To find out how automation can help your AP department, book a live demo with Cogent Consulting.
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