Chapter 7:
Working Towards Automated AP Success

Immediate gains aren’t the only gains. While you will see some instant productivity gains from your new automated AP system, that is just scratching the surface on what is possible. Automated accounts payable, and its inclusion in a larger ERP, gives leaders much deeper knowledge and reporting abilities than paper and a few spreadsheets. Ultimately all business decisions should be made with return on investment in mind. This focus on ROI is much easier to measure with solid systems in place. Getting your reporting in order is vital to achieving the best ROI from automating AP.

Costs Saved Through AP Automation

Because you are staring at costs and expenses all day already, cost reduction is the first thing that comes to mind for most finance leaders when looking at AP automation. Lucky for you, this is relatively easy to measure once your new systems are in place. Based on the number of invoices you process each month, the size of your dedicated AP staff, and a few other inputs, you can quickly estimate your costs and potential cost savings from automated AP. The average cost per invoice at most companies is over $22. Even a small savings per invoice can add up if you have a lot of volume. While the systems used for automation are not cheap, neither are workers. According to data from Payscale, the median annual salary per worker is $37,075 for an accounts payable clerk, with 80 percent of workers getting anywhere from $28,000 per year up to $48,000 per year. Remember, that doesn’t include costly benefits like insurance or the cost of desks, computers, and real estate to give everyone a place to work.

Time Saved Through AP Automation

If you can dramatically cut the payroll hours involved in each invoice, then your company can perform well below the $22 per invoice average. Automation cuts out labor-intensive, error-prone tasks like invoice entry, scanning, receipt and purchase order matching, coding, correcting errors, and the entire process of migrating data from AP into the main accounting system. If your company processes 500 invoices per month, you could be spending $11,000 to process those invoices if you have average costs. That doesn’t include the actual cost of the invoice—it’s just the process to pay them. There is huge ROI potential from upgrading to automated AP. If you could put those $11,000 dollars every month into cost saving analysis and revenue-generating activities, then you will be much better off.

Added Efficiencies from AP Automation

Most of our discussions in this guide focus on cost and time savings within the accounts payable department, but the ripple effect of a new ERP or AP automation solutions can be felt widely throughout the company. For example, most businesses have a chain of approvals based on the dollar value of an invoice or transaction. Many companies use a manual approval process involving either paper or email where an AP clerk has to find and get approval from each signer. With AP automation, the approval workflow is established within the software. When a relevant invoice comes in and goes into the accounting system, the approval requests go out automatically, and as each approval is received, the next email goes out automatically. It’s like magic. Now that your staff is free from these types of worries, take a look at your to-do list, which has probably been growing with a backlog of tasks and projects for a while now. These types of analytical tasks that software can’t do can lead to more revenue and lower costs for your business. Think of projects like renegotiating payment terms and vendor contracts, introducing new payment options, and researching early-payment discounts. This takes you beyond the basics of just reducing costs by transitioning to an automated process. This is turning your AP team into an even bigger contributor to the company’s success through a combination of cost savings and cash flow improvements.