Companies are paying renewed attention to spend, cash flow and working capital in today’s economic climate. Much of the information about how and where they are spending their money and details on their outstanding liabilities reside in the Accounts Payable (A/P) department. In A/P, companies can not only see what they are actually spending, but they can also identify potential opportunities for cost savings.
But what if A/P processes are inefficient and the information is inaccurate or out-of-date? Under those circumstances, it’s very difficult for management to really see what’s going on. Unfortunately, that is how many businesses are operating today.
Despite the many benefits organizations can gain from A/P automation, many are still finding themselves stuck in “old world” processes, where paper invoices are handled entirely manually in paper format or are scanned and processed manually. Even though many companies are interested in moving to the “new world” of e-invoicing and process automation – where they can have large volumes of invoices passing straight through their systems without any human intervention – statistics suggest that this “new world” is far from the current reality.
The first step in an automated A/P workflow is e-invoicing – the electronic exchange of invoices between supplier and buyer – and a key area of interest for organizations. A recently released survey, “e-Invoicing: The Buyer A/P Perspective,”1 conducted by IAPP-TAWPI2 and sponsored by my company, Basware, found that 80 percent of companies recognized the importance of e-invoicing to their organizations. They cited improved processes, increased accuracy and lower costs as the leading reasons to pursue e-invoicing. Eliminating paper and speeding up transactions were also important considerations.
Despite their interest, the reality is that many companies are still in the early stages when it comes to e-invoicing, and business payments and invoices continue to remain largely paper-centric. According to the survey:
Only 19 percent of large businesses receive more than 61 percent of their invoices electronically.
Only 26 percent of the companies surveyed fully automate their invoice receipt and approval process.
More than half of the companies surveyed continue to manually capture invoice data and have a manual review process.
Of the respondents that started an e-invoicing program in the past year, only 2 percent receive more than 40 percent of their invoices electronically.
The report uncovered key barriers that are impeding broader adoption of e-invoicing, including insufficient business system capabilities of buyers or their suppliers, resistance from suppliers, inadequate funding, and the need to overcome the learning curve.
To overcome resistance, savvy companies are collaborating with suppliers to get them onboard with e-invoicing adoption. A key best practice is to ensure that suppliers see the added value that e-invoicing provides them, such as increased invoice accuracy and faster payment. While some companies are making it mandatory for their suppliers to submit e-invoices, it is important that they make sure the process is easy and convenient to encourage supplier participation.
Other invoice workflow processes are similarly lacking the level of automation needed for Finance departments to function properly. A related Basware survey, “Lost in Transaction,”3 studied 550 A/P departments around the world, and found that weaknesses in A/P processes are costing companies money.
According to the study, more than one-third of companies surveyed had not paid suppliers on time due to invoice and cross-departmental errors. In the previous 12 months, 30 percent of the companies missed early payment discounts, while 27 percent incurred late payment fees.