This article is the second in a series of three, titled "Getting the most out of the Accounts Payable Department", dealing with basic concepts that affect the productivity of Accounts Payable departments. In the first article in the series we talked about the cost of the process of Accounts Payable, in this second we deal with the improvements derived from automation and error rates , and the third will discuss fraud and duplicate payments, financial Controls and provider satisfaction.
Accounts payable automation process
When dealing with the opportunities provided by the automation of Accounts Payable processes both the type of system used to process invoices, as if the process remains in a distributed environment, in a Shared Services Center or if it is outsourced should be considered. Whatever the model, automation can positively impact the overall process from receipt of provider invoices either electronically,by fax or paper, through ...
Benefits derived from Automation
- scanning and imaging using optical character recognition,
- certification of documents and subsequent electronic archiving
- automatic matching of 2 or 3 ways: purchase orders and delivery notes with bills
- electronic routing of the process by workflows, so that those responsible can proceed with the online approval of invoices,
- the processing or automated management of exceptions,
- automatic coding of general accounting records, etc
Technology, in short, is proving very useful in automating the Accounts Payable process , which has largely been based on paper and also required a high manual effort. Over 40% of respondents in a benchmark indicated that workflow tools, digital imaging and optical character recognition (OCR) are important elements in their investment strategies for automating Accounts Payable in the next 18 months, in the same study it highlighted that 25% of all companies use some form of electronic invoicing and 27% are investigating process outsourcing options.
Studies have emerged show an intriguing uneasiness in some companies that have opted for greater automation of Accounts Payable process but despite this, their productivity diminished. It was only when they exceeded a specific level of investment that they experienced the expected jump in productivity. Companies with a high level of automation have achieved cost savings in Accounts Payable of up to 70% lower than the cost incurred by companies with a low level of automation.
Error Rates
Mistakes can be costly in many aspects, among which include the loss of capital, the loss of staff time and the deterioration of relations with suppliers. On average, 18.6% of invoices have errors. While this percentage may seem low as a percentage of total annual expenditure, it can be really important in volume for certain companies. Companies that apply best practices in Accounts Payable, have error rates below 1%.
Almost 75% of the Accounts Payable departments use a method of automatic detection to help detect this problem, the system is based on 2 or 3 way matching between purchase orders and delivery notes, and the provider invoices. However, while traditional companies achieve automatic matching rates in the order of 25-30%, leaving more than 70% for manual matching processes, technologically advanced companies, such as companies engaged in the outsourcing of processes or Accounts Payable Shared Services Centers have automatic matching reaching levels of up to 80% of the documents.
