Invoice processing can be a big point of contention in even very large companies. So many companies are still handling invoices in outdated, manual ways. Manual processing leads to inefficiency, and it can also create more potential for errors and even fraud. Plus, manual invoice processing in the AP department is incredibly time-consuming.
Rather than suffering the effects of manual invoice processing, there are steps a company can take to eliminate errors, fraud and general inefficiency in the accounts payable department. The following are some tips to make accounts payable more efficient and to make it a strategic and cost-savings area of the business.
Identify Common Errors
There are a lot of different errors that can occur along the way in accounts payable if the system isn’t automated. It’s important to have a clear idea of what the most common types of errors are because it gives everyone a better idea of what to look for.
For example, one error that often happens is paying an invoice before the product or service is received. Another example of a common error is mistakes in data entry, and unauthorized purchases can be problematic as well. Double payments are something else everyone should be trained to watch out for.
Automate Invoice Processing
If there is one thing every business does regarding their accounts payable department, it should be automation of invoice processing. The time required to process an invoice manually can be on average around 20 days. With automation, this can be reduced to an average of fewer than four days.
There are so many benefits to saving time with invoice processing. There is the general concept of efficiency, but there’s more to it than that. For example, when vendors are paid on time, there aren’t late fees to worry about, and there are often discounts available. It can improve overall cash flow when there is a sense of efficiency through automated invoice processing as well.
Automated invoice processing provides centralized visibility that allows all pertinent stakeholders to follow the process, and this reduces the likelihood of both errors and fraud. Even if errors or fraud aren’t spotted by the people responsible for managing and tracking invoices, the automated system can flag it.
Visibility from End-to-End
Having end-to-end visibility goes hand-in-hand with automated invoice processing, but it’s important enough to mention on its own. There needs to be a way to quickly and easily see the entire invoice process. This includes oversight of what was ordered, who received it and signed for it, when an invoice was paid and pretty much every other detail that runs through the accounts payable department.
If you feel there’s an error or a mistake and you have to go through multiple channels to find it or fix it, it’s extremely time-consuming.
If your focus is on improving efficiency, then you need to have benchmarks in place that will allow you to determine and measure whether or not you really are making improvements. You can start by looking at what it currently costs to process a single invoice. This needs to include not only the cost of the tools used but also the employee time and labor costs that go into processing. Then, look at what your current tools are costing you, which you can compare against the potential costs of new tools you might be investing in.
Also, look at the projected costs that can come from errors such as duplicate payments, and the risk of fraud and how much that could cost or has previously cost the company.
Something else to think about is one that’s often overlooked—how happy are your vendors with the processes you currently have in place? Vendor partnerships need to be maintained and nurtured in a positive way, and this can be a key benchmark that can indicate to you that there’s not only inefficiency but overall changes that need to be made in how things are done in accounts payable.
Once you have specific benchmarks outlined, it’s much easier to start focusing on specific ways to meet objectives.
Finally, think about what your processes are and how your employees are trained in these processes. Even if you have an excellent invoice processing automation platform, if your policies aren’t modernized, effective or relevant, it’s going to be difficult to maximize the use of that technology. If policies aren’t updated, it’s going to be very difficult to meet your objectives in accounts payable.