4 Ways to reduce AP expenses and streamline the AP process
In today’s sluggish economic climate, reducing business expenses is always a top priority for executives. The ultimate goal is to maximize profits. According to IOFM research, AP is the most time-consuming financial function, burdened with heavy tasks such as debt, taxes, and audits. So, what is the key to untangling the complexities and reduce AP expenses for your business? Read the article below to find the right solution for your AP team.
Reduce ap expenses per invoice
According to CFO, in 2018, low-performing organizations needed to spend about $9 per invoice in the accounts payable process, while high-performing ones only spent around $2. By 2022, top-performing companies reduced this cost to $1.42 per invoice, whereas low-performing ones spent nearly three times more, at about $6 per invoice. Have you ever wondered why companies manage to reduce AP expenses per invoice over the years? One major reason is the integration of invoice automation and RPA.
When processing invoices, beyond the visible costs such as employee salaries, businesses also incur additional fees such as bank account management fees for online transactions, office supplies for manual invoice processing, and costs associated with manual data entry errors, audits, and taxes.
Don’t worry—one of the easiest ways to cut costs is by reduce AP expenses per invoice. By identifying “gaps” in your AP team’s invoice approval process, you will notice significant improvements. A suitable solution for your business is:
- Using OCR software, which scans and converts images into text, minimizing errors due to manual data entry.
- If your business has a large volume of invoices and needs a more powerful solution, our IDP software will be the ideal choice to fully automate the invoice processing process.
In addition to manual invoice processing costs, your company may also face various online transaction fees when paying invoices through a bank account, such as credit card management fees and bank transfer charges. Therefore, it is crucial to review banking terms carefully to avoid unnecessary late payment fees and ensure compliance with transaction limits.
Invoice Automation – electronic invoicing (E-Invoice)
Manually processing invoices in the AP department is time-consuming and often leads to misplaced documents, excessive storage, and duplicate orders, all of which slow down approvals. The main purpose of automating invoicing is to resolve these bottlenecks while reducing time and labor costs. This, in turn, helps reduce AP expenses due to order discrepancies and improves PO storage transparency via cloud computing. Additionally, it enhances the efficiency of your AP team in managing invoices and payments.
Some may think automation will replace AP staff, but this is not entirely true. Automation does not replace employees-it simply automates time-consuming tasks, allowing AP professionals to focus on more strategic, high-value activities for the business.
Some other benefits include:
- Properly storing invoices is one of the biggest benefits when your business uses electronic invoices.
- Helps businesses save on storage space and thus makes it easier to find invoices.
- Helps to quickly present invoices during each audit period. Searching for invoices will become much more streamlined than traditional storage methods, saving time and minimizing errors.
Early payment discounts
No business wants to be caught in a situation where they pay late and incur additional late payment costs. Furthermore, manually tracking all of your suppliers will overload AP accountants with information and make it difficult to keep a close eye on accounts receivable. If you can eliminate late payments, you are also eliminating the potential AP costs of late payments. In addition, late payments can affect your brand reputation and the quality of your supplier relationships.
The best solution is to pay invoices on time or early to secure early payment discounts from suppliers. By doing so, your company can immediately reduce AP expenses by receiving discounts, which help reduce AP expenses on goods and services. Updated policies also minimize security and compliance risks, ensuring ethical and responsible business operations.
While your company benefits from discounts, suppliers receive payments earlier than standard contract terms, improving their cash flow and fostering stronger business relationships. Negotiating early payment discounts as a win-win strategy increases the likelihood of supplier acceptance.
A small but crucial factor affecting costs is prioritizing penalty-bearing payments and settling them as early as possible to avoid unnecessary fines. Additionally, businesses should take advantage of supplier relationships by negotiating more flexible payment terms and discounts. Setting up automated reminders and workflows for early payments can ensure that companies never miss an opportunity to save money.
Fully automating the AP process
Your company may have already implemented some automation, but outdated technology or partial automation can still cause inefficiencies and frequent errors. Indeed, the errors that arise in these processes are all the money it takes to maintain that technology, which is also an added factor to the overall cost that makes businesses troubleshoot but still do not reduce AP expenses. Delays in AP automation or failure to optimize workflows can result in unexpected financial losses. Additionally, the long-term expenses of manual processing can significantly drain your company’s cash flow.
Although CFOs see the danger, not everyone agrees to change processes and streamline quickly to reduce AP expenses. However, relying entirely on manual processes, without leveraging AI, forces human resources into repetitive tasks such as document storage and invoice verification. This leaves businesses trailing behind in technology, struggling with slow invoice processing, and lacking time for more intellectually demanding work.
According to PYMNTS, upgrading automation solutions can help companies save approximately 11% in wasted costs. Their report also states that 90% of surveyed companies believe AP automation improves payment transparency. Furthermore, automated AP tracking enables businesses to identify reliable suppliers through reporting metrics, allowing them to negotiate better credit terms or discounts.
Reviewing and automating the accounts payable workflow helps pinpoint inefficiencies, such as task bottlenecks, redundant steps, and outdated manual processes in need of automation. RPA adoption significantly reduces task completion time and minimizes human error risks.
Gartner predicts that by 2026, 30% of enterprises will automate over half of their network operations, up from less than 10% in mid-2023. The global race towards automation and technology-driven optimization is evident. So why wait? Follow AFusion and contact us to explore how we can help you cut expenses and streamline your AP process. Ultimately, many solutions exist to reduce AP expenses, but the key is choosing the one that best fits your business’s needs and resources.
By making automation a priority and continuously evaluating your AP workflows, your company can achieve long-term cost reductions and efficiency improvements. Adopting modern AP solutions will ensure that your business remains competitive, eliminates unnecessary expenses, and focuses on strategic financial growth. Investing in automation now will lead to sustained profitability and success in the future.
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