The ROI of Account Payables Automation: Quantifying the Benefits for Your Organization
July 25, 2023

In the pursuit of operational excellence, businesses are increasingly turning to innovative solutions to streamline processes and improve financial outcomes. Embracing the potential of Account Payable (AP) automation has emerged as a game-changer in this endeavour. In this blog, we uncover the remarkable benefits that AP automation offers, from significant cost savings to error reduction and improved payment processes.

Labor Cost Savings

Manual invoice processing can be a daunting task, not only for its labour-intensive nature but also due to its inefficiency, which results in increased costs for companies. According to a report by the Institute of Finance and Management, businesses that rely on limited or no automation end up spending an average of $8.78 to process a single invoice. In contrast, those that implement a high level of automation bring this cost down to just $1.77.

AP automation offers advantages beyond cost reduction. According to a study by the American Productivity and Quality Center, automated processes enable companies to handle 23,333 invoices per FTE year, while manual workflows manage only 6,082 invoices. This highlights the significant boost in workflow efficiency through automation. Labour costs, a major expense driver as per Goldman Sachs, can be substantially reduced with AP automation, resulting in immense time savings of 70% to 80% for AP staff. As a result, automated costs are a mere 33% of manual costs,making the case for AP automation compelling in streamlining operations and achieving greater financial efficiency.

Reduction in Errors and Duplicate Invoices

Manual processes are prone to errors, resulting in time-consuming and costly corrections. AP automation reduces the invoice error rate from 2% to 0.8%, saving valuable employee hours and resources. A study by SAP suggests that 1.29% of invoices are duplicates, with an average cost of $2,034 per invoice. Automation detects and prevents these, saving unnecessary expenses.

Paper Processing Cost Reductions

Despite technological advancements, paper remains dominant in the AP ecosystem. According to PYMNTS research, 72.4 percent of AP professionals receive invoices through postal mail, and 43.8 percent receive them via fax. Additionally, 80.8 percent of firms still rely on paper checks for payments. Manual, paper-based processes are costly, accounting for 65–80 percent of B2B payments for SMBs. Adopting AP automation enables businesses to cut paper costs, reduce office space usage, and streamline the processing of invoices and purchase orders, reducing expenses and improving efficiency.

Avoidance of Late Payment Fees

Late payments have emerged as a widespread concern for businesses, as revealed in The 2022 late payments report. An alarming 87% of businesses have reported experiencing delays in receiving payments after the invoice due date. These delays are frequently attributed to slow invoice processing, leading to a cascade of adverse consequences, such as incurring late fees, experiencing withheld shipments, and straining vendor relationships. Surveys indicate that 59% of suppliers offering discounts have reduced or entirely halted these incentives when payments are made late, while 62% have withheld goods or services until invoices were settled. Clearly, the issue of late payments is not only a financial burden but also a significant disruptor of business operations.

AP automation has brought much-needed relief to businesses by significantly reducing invoice processing times. This technology enables prompt invoice payments, avoiding penalties, and strengthening supplier relationships. According to Ardent Partners' report, there was a remarkable 15% increase in early-payment discounts captured in 2021, demonstrating the positive impact of innovative finance solutions across industries.

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