Automating AP Processes: When Is It Worth It?

26.04.2019

Topic: AP Automation

In times of digital transformation, one sometimes gets the impression that automation and digitization are ends in themselves. There is an app for everything, and every work step can be performed digitally. This has clearly become a trend—and it does not stop at business processes and documents.

However, trends, even if they wave in the new, have the disadvantage of sometimes being overvalued. Therefore, in this article we'll look at what's behind this one by asking the questions:

• When is it worth it to automate financial processes?

• Can this be expressed in tangible figures?

We will illustrate this below using the example of automation for inbound invoice processing.

Exactly which steps can I automate?

There are two typical starting points for automating invoice processing:

• Automatic capture of invoice contents

• Workflow-supported processing of invoices

OCR (Optical Character Recognition) technology is mostly used for the automatic capture of invoice contents. It extracts content from digital invoices such as PDF files or scanned paper invoices. The content detected by the OCR technology is then automatically transferred to the ERP system.

This procedure saves you having to type in manually the invoice contents. Above all, it means a significant reduction in the workload for accounting staff. One of our customers calculated that by implementing our solution, they were able to reduce the amount of work required to process an invoice from an average of 37 minutes to 25 minutes. The customer was thus able to reduce his time expenditure by around 33%.

Invoice processing (validation, verification, completion, release) usually involves several employees from different departments: the accounting department, the department that has ordered the goods and, in some cases, the goods receipt department or the purchasing department.

A workflow solution for processing invoices facilitates and accelerates collaboration between these parties. As soon as a work step is completed, the invoice is available to the processor responsible in the next step. There's no more waiting for the house mail.

Since collaboration takes place digitally, access is possible from any location. This is particularly relevant for personnel who travel a lot and are not present in the office every day, such as cost center managers or sales employees.

Time is money—especially when it comes to late fees!

Through automation, both workload and time can be reduced in invoice processing. In a recent survey, we wanted to find out how much our customers could speed up their processes by using our solution. The result was that the lead time of an invoice was halved on average from 10 days to around 5. All results of our customer survey can also be found here.

Reduced time becomes a cost factor if you include cash discount losses and dunning charges in your calculations. The significance of this factor blares out in the example of the Deutsche Bahn, which lost a paltry 20 million euros in 10 months by casting a blind eye to discounts*. Deutsche Bahn is not a customer of ours.

This example is certainly an exception. But the point remains: you can lose money by wasting time, and you can make money by being fast. Customers of ours have been able to save significant amounts due to the decreased processing time that automation has brought them. To offer one example, one customer was able to take advantage of early-payment discounts for the first time, and saved around 500,000 euros a year.

If you would like to learn more about the costs and benefits of a workflow solution, I recommend our whitepaper on this topic. It contains various market figures and two sample calculations. You can download it here.

 *Source: www.spiegel.de/wirtschaft/unternehmen/deutsche-bahn-bezahlt-rechnungen-zu-spaet-millionenschaden-a-1186742.html, accessed in April 2019.