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Why you should switch to automated payables processing

Less Cost, More Profit: Why Companies Should Switch To Automated Payables Processing

Working capital is the lifeblood of any company — from paying for raw materials to processing invoices for delivery payment, substantial capital is needed. However, overspending working capital on operations can be unfavourable to a company’s overall financial health, so the need to reduce cost and ensure a free-flowing working capital is a top priority for many companies.

Thanks to advancements in technology, many business-to-business transactions can now be accomplished effectively with minimal cost. Below, we explore why companies should make the switch to automated payables processing for easier and more effective processing management.

Manual Payables Processing is Costly

Before a buyer starts paying for goods delivered by their supplier, they must first receive an invoice. An invoice is a billing statement that shows the number of supplies delivered, how much it costs, and what the agreed payment terms are. While preparing this may sound like an easy task, there is an actual cost in the manual processing of invoices, especially for big supply companies that have a lot of clients.

Many companies today still manually process paper invoices. A report from the Institute of Finance and Management (IOFM) shows that the average business receives around 63% of its invoices as paper, and the majority of them manually handle over 75% of the invoices they receive. This can lead to costly mistakes like wrong keying of invoice information, lost or misplaced invoices, fraudulent activities, and long approval and exception resolution cycles which result in late fees and missed discounts.

Another research from the Association for Image and Information Management (AIIM) shows that businesses spend an average of $12.90 for the processing of invoices. In the long run, this can translate to thousands of dollars of potential revenue lost because of manual invoice processing. And with market volatility and tight competition, companies are finding better ways to improve their revenue growth and simplifying their payable processes.

By automating the invoice processing and management, companies can reduce the cost of processing and disbursement of invoices to clients, reduce errors in the input of invoice information, misplace or lost invoices, reduce fraudulent activity by storing information in a cloud storage, and speed up the distribution of invoice to avail discounts.

Better cash flow

Seeing a company’s overall cash flow is important, even for the most enterprising companies. Without a full and accurate view of a company’s cash flow, company finance executives cannot project the flow of cash efficiently enough to prepare for setbacks due to economic instability or prepare for possible company expansion.  According to a study conducted by the Aberdeen Group, businesses can forecast their mid-term cash flows but with only 5% accuracy. This makes any forward planning initiative a challenge for company executives.

Revenue management requires accurate data to improve working capital, but in a paper-based invoice setting, data needed to efficiently manage cash flow is not readily available and cash managers have a difficult time pinpointing the best time to release cash for efficient use. The lack of efficient disbursement of cash have a negative domino effect on the company; these negative effects include higher borrowing costs from banks and inability to invest for growth.

With the unstable economic downturns happening worldwide and volatility of markets, the majority of businesses researched by the IOFM say their demand for real-time visibility into accounts payable financial data is significantly higher or slightly higher compared to previous years. By automating the payables process, data needed to oversee the company’s financial standing will be easily accessible and a more concrete financial plan can be created, reducing the risk of falling for bad investments and loans.

Managing company finances require more attention now than ever before, especially for mid-market companies and start-ups who don’t want to get caught in a bad financial situation. But using manual processing could be doing more harm to your company, so automated payables processing is something business owners should take into thorough consideration.

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Joseph Seah

Joseph Seah



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