A recent white paper from Esker, Inc. of Madison, Wisconsin points out the cost savings that can accrue to companies who make the switch to automated Accounts Payable (A/P) processing for their vendor invoices.
Most businesses including those with fairly modern ERP systems are still employing conventional paper-driven Accounts Payable processes. Esker cites costs associated, including the obvious per-invoice costs, as well as lost productivity. Making a switch to automated A/P, the company claims cost reductions from $70 per invoice via a manual process flow to as little as $4 to $6 when automated, as well as a reduction in payment cycle from 30 days to 7 and a reduction in invoice processing times from 48 hours to 4 minutes.
Whether you believe their examples or not, the fact is, A/P is a cumbersome, costly and time-consuming process that can doubtless be improved by almost any increase in efficiency. Esker sees the challenges in A/P as four-fold:
- Invoice processing cycle time results in delays in posting expenses, waste of cash and damaged supplier relations.
- Lack of automatic validation leads to overpayments for billing errors, duplicate payments and tax errors.
- Lack of process visibility creates difficulty in planning and budgeting, as well as on-time closing, looser controls and difficulty responding to inquiries.
- Invoice processing costs impact dispute resolution, exception handling and more costly approval difficulties.
By increasing the volume of electronically captured invoice line items by 80%, Esker cites a study by The Hackett Group that showed on-time payments are increased by 7%, cost per invoice is reduced by 59% and early payment discounts being increased by a factor of 3. According to their white paper (available at their website cited above), Esker notes how it works, as we quote below:
Esker solutions automate vendor invoice processing from the reception of the original document to the resulting creation of a corresponding business document. The workflow includes automatic and human validation of the data as well as document archiving. Full customization flexibility lets you:
Automate the creation of vendor invoices, including posting and parking capabilities. For invoices and credit memos without a purchase order, users can specify if a credit memo or invoice should be created. Other invoices created in relation to an existing purchase order can flow into the ERP system without user intervention.
Archive the original document for later reference, either on the Esker server or an external system.
Data such as vendor number, purchase order number and due date for routing and indexing are captured when a fax, email, paper or electronic invoice arrives. No predefined templates are needed. The Esker solution checks the extracted data to determine if the invoice is associated with a purchase order.
While we are neither a reseller nor a customer for Esker, and have no direct experience with their solution, we point it out as an example of where ERP is headed. We’ve made liberal internal use of the accounting counterpart to A/P processing, i.e., automated A/R invoicing, and we’ve helped many clients do the same. We suggest checking out Esker’s website and see if their solution for the A/P side of the equation is right for your firm.