Is your accounts payable process holding your business back? All signs point to the answer being yes. From inefficiencies to inaccuracies, continued use of manual and paper-based processes is leaving many businesses with a cash flow blind spot.

Following recent articles discussing the shock to the system that the pandemic has put on spend management processes, exploring the first steps in stabilizing cash flow, and the evolution of roles and responsibilities for controllers, we would today like to explore something that has been a perpetual challenge for controllers—even if they didn’t know it: The Accounts Payable Process.

Cracks to an Already-Shaky System

Much like payroll, the accounts payable process leaves a lot of room for improvement ranging from speed of processing to timeliness of transactions to visibility into the spending. Similarly, much like payroll, the weaknesses in these processes only appeared when exposed to the immense strain of the COVID-19 outbreak.

Half a Week on Transaction Processing?

That said, this shouldn’t be one of those issues that you forget about if and when pressures ease. Did you know that regardless of company size, about half of finance teams’ time is spent on transaction processing? This according to APQC, who surveyed 832 finance leaders to see how much time their finance organizations spend on different activities deemed necessary to the organization:

• Transaction Processing
• Control Activities
• Decision Support
• Management Activities

The results were a bit gloomy—no matter the size of company, about half of finance teams’ time is spent on transaction processing. This means that in an average work week, highly paid staff members are spending the equivalent of Monday morning through lunchtime on Wednesday making sure that the money is moving through your organization.

The Ripple Effect

But a slowdown in one area creates a ripple effect. Say it’s a crisis moment—maybe a pandemic has put significant strain on your cash flow. The slow payment processing is going to affect your ability to establish a daily cash position and possibly make a company-saving decision. Or say you needed to make a big decision to help the company pivot to recovery. Hours matter, and one of the biggest obstacles to understanding is quite often manual processes.

AP Automation for a Smarter, More Sustainable Cash Flow

As discussed in a recent article on PYMNTS.com, money remains tight for small and medium businesses. With an uncertain future, AP speed and visibility should be atop the list of priorities. SMBs need fast and precise insights into their finances and processes to help them make more informed spending decisions, but unfortunately, manual and paper-based AP procedures stand in the way of making this a reality.

Combined with the lack of speed, these manual processes create a lot of issues in regards to accuracy, with errors that should be avoided failing to be avoided. Here are two areas where AP automation can help.

Get Rid of Unnecessary Inefficiency

Whether it’s in the form of snail mail or fax, one of the biggest challenges presented by manual processes is the speed or lack thereof with which business moves. Often, SMBs are less likely than their mid-market or large counterparts to facilitate the supplier relationship process—a 2019 report found that SMBs reported receiving approximately 48 percent of their invoices as paper documents, compared to 41 percent of mid-market businesses and just 22 percent of large firms. 

This leads to a variety of unnecessary inefficiencies. Rather than automatically extracting and submitting data, you add a human element to the equation. Human interaction increases the likelihood for error, resulting in challenges paying suppliers on time, approving invoices fast enough to capture discounts, and catching invoice duplications.

Through AP modernization, firms can reduce late fees, capture more discounts, and avoid paying up to $12,000 a month in invoice duplications.

Make Better Use of Your Money

It’s not just cost and error avoidance, either. AP automation plays a major role in creating visibility and control over payments. Maybe an early payment discount helps, maybe it doesn’t—but the only way to know, according to PYMNTS, is to see how each choice affects them. The ability to see and understand AP data could reveal to SMB buyers that the interest earned from keeping money in their bank accounts longer outweighs the early-payment benefits vendors offer, for example. 

One Tool In Your Arsenal

AP automation delivers a variety of benefits for growing (or recovering) companies looking to take control of their cash flow. As a controller, you have many tools available to you to keep your business afloat and to keep money moving effectively. We will continue to explore these in greater detail in the coming months and invite you to subscribe to our newsletter for all the latest.

Additional Resources

What Technologies Are Top of Mind in the Accounting World Right Now?

Audit in a Connected Business: How Will the Use of Big Data Change Audits?

Controllers’ Guide to AI Part 1: Know Your ‘Enemy’