A recent study conducted by Forrester Research on behalf of Basware, a provider of purchase-to-pay solutions, shows the significant impact that accounts payable can have on an organization’s bottom line. Representatives from 550 accounts payable departments located across the globe participated in the survey. On average, they processed 93,000 invoices annually, of which 6,000 or so contain errors. Forty percent of the invoices were based on purchase orders.
The survey found that errors and inefficient processes within AP can cost real money. In the last year, just under one-third of survey participants had foregone early payment discounts, while 27 percent had incurred late payment fees.
What’s behind these these less-than-stellar numbers? Lack of communication between AP and procurement was mentioned by one-fourth of companies. In addition, nearly half the respondents receive more than half their invoices via paper, leading to manual, lengthier processes.
Several practices can boost efficiency. To some extent, scale matters. Nearly all the respondents that handled more than 200,000 invoices annually were able to process at least 15,000 invoices per FTE. (Of these respondents, only four were shared service centers, so these numbers probably were not a result of moving processes to a low-cost country.) Automation, such as electronic invoicing and electronic procurement, not surprisingly, also plays an important role. “Combining invoice automation with e-Invoicing and e-procurement within organizations was shown by the research to double the chances of achieving AP invoice processing excellence and maximize straight-through processing,” the company said in a release about the study. In fact, one FTE at the top 18 percent of AP departments could process 40,000 invoices annually, or ten times the amount at the bottom quarter of firms.
While many AP departments still have manual processes, at least to some extent, automation appears just about inevitable. Forty-four percent of respondents said that electronic invoices will completely replace paper-based invoice handling within the next five years.