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Why Automating Accounts Payable (AP) is so Difficult

Most companies pay too much for payables.

The Funding Dilemma

If you think about it, Accounts Payable (AP) is the ultimate cost center — and revenue-driven executives hate spending on cost centers. But what if they did decide to throw some capex at AP? Spending on new ways to get money from their company’s treasury to those of its vendors faster and more efficiently must sound like an absurdity to those who came up through Sales.
“It takes 8.3 days to process an invoice?” you can almost hear the boss pondering after viewing a supply management expert’s webinar. “How do we make that longer?”
So any business case that drives AP automation better be bulletproof.

Costs Cost

Here’s the bait: Your company is probably paying more than 5x too much to pay its bills. It costs on average more than $10 to process a single invoice, according to Boston-based research and advisory firm Ardent Partners, a number that’s somewhere under $2 for leading-edge AP operations. If you’re a small company with one full-time AP clerk, then you’re probably handling about 500 invoices per month. If you add up the savings over the course of a year of moving to best-of-breed, you can save over $50,000.

But that’s the bait, not the hook.

While it’s also true that there is money to be found in how improved AP processing contributes to lower cost of capital, that isn’t the hook either. Still, it’s worth taking a moment to mention. If you accelerate your ability to pay an invoice, you could choose to pay it sooner and take advantage of discounts vendors might offer for prompt remittance. Or you could choose not to. You know exactly when payment is due and you can pay it right on time. In the meantime, you can use the float to minimize the amount of short-term borrowing and maximize cash flow from investing activities. Besides, your AP clerks would not need to waste their time on where’s-my-money calls, so your company will stand in good stead with both its supply chain and its employees.

The real argument in favor of AP automation, though, is the data to be mined. The majority of firms surveyed by Ardent cited four buckets of data that lives in AP and could be used to inform strategic decision makers:

1. Forecasting, budgeting and planning;
2. Cash flow analysis;
3. Fraud and compliance management; and
4. Invoice exception handling.

“Getting rid of the paper is the onramp,” says Bob Cohen, Ardent’s research head, “The real value-add to the organization is leveraging the data they’re collecting.”

Barriers

Fully three-quarters of all invoices received are paper: through the mail, via fax or packed in the crate with the goods, according to a PYMNTS.com/OnPay Solutions study. While optical character recognition goes a long way toward digitizing these documents, they can’t cure the one problem nested in all these dead trees: human error. Duplicate invoice number? Mismatch with the purchase order or contract number? Any other fat-finger mistake? Wouldn’t it be much better if we could integrate the electronic formats of the vendors’ billing systems and the buyer’s AP?

The technology — machine learning and cloud analytics — already exist.

Why Companies Should Spend on How They Spend

A company’s ability to control its cash flows could well be critical to its survival. Scrypt AI is defining Treasury Management-as-a-Service with an industry-leading Integrated Payables and Integrated Receivables platform that leverages machine learning, artificial intelligence and cloud analytics to deliver fast, zero-touch invoice coding, digital payments, and account reconciliation.