Second, the company saves time and money by eliminating the manual labor associated with paper processing. For some large organizations with numerous local outlets or franchises, that expense can be startlingly massive. For example, a company that served as a master franchisee with hundreds of outlets across the U.S. was paying courier costs of more than a million dollars a year, simply to deliver invoices from local franchise locations to the master franchisee’s accounts payable department. Every week at the franchise headquarters, 15 to 20 people spent their days recording and coding all of the past week’s invoices in a tedious, error-prone, interminable effort. Paperless ERP relieves organizations of these transcription burdens and assures much more accurate results.
Third, the entire AP/AR process is simplified. Paperless ERP technologies—which are often based in the cloud—replace paper files, interoffice envelopes and couriers with digital documents that move themselves at electronic speeds. The solution also can create an automated workflow process. Each document that requires approval, payment or the generation of a communication to a customer moves through the AR/AP department in a prescribed fashion. After initial examination, the document is directed to the specific individual responsible for the next step. That staff member must complete the step before moving on to anything else. If the document is ignored, the system generates an alert to notify the individual that the document requires attention. No longer does a manager need to continuously pester staff or rummage through files to move documentation along. The payments themselves can be made electronically and tracked in the solution to further refine the process.
Finally, data becomes much more visible in a Paperless ERP solution. Paper often creates an accounting blind spot: When accounting staff do not know where documents reside—or even that they exist—the accuracy of their financial reporting can suffer greatly. Hundreds of bills may sit on the desks of district managers and accounting has no idea that this significant financial burden is out there. As a result, executives are unable to generate accurate financial predictions—they see only an incomplete subset of transactions that exclude those in process. A cloud-based paperless ERP solution always can produce the most up-to-the-second data for management reports, customer and vendor inquiries and other purposes. That means managers can spot trends more quickly and easily and can make any necessary adjustments earlier, preserving cash flow and profitability. Far less time is spent responding to calls from clients and vendors and more time selling, marketing, planning and carrying out other profit-producing activities.
In this light, the ramifications of the CCC formula become more apparent and more amenable to the organization’s control. Organizations find themselves more eager to invest in inventory because they know that they can accelerate payment of receivables through the automated internal processes built into Paperless ERP. With receivables coming in faster, the accounting department can pay suppliers on time and take advantage of dollar reductions offered by the suppliers for timely payment of invoices. The process transforms late fees into early discounts for the company.
The amount of time a business takes to turn cash into more cash is often a revealing sign of how efficiently the AP and AR departments are able to manage cash flow. Paperless ERP software provides a way for businesses in every industry to increase the efficiency and effectiveness of their AP/AR departments and, thereby, their cash conversion cycle. The technology decreases the time needed to process incoming and outgoing invoices and allows accounting departments to better capture, manage and access data through the lifecycle of an invoice. Further, companies save time and money by eliminating the need for paper processing and mailing and the overall business process is simplified.
Now may be the time for your business to consider one more cycle: a re-cycling of your accounting processes to take full advantage of Paperless ERP.
Nick Sprau is Vice President of Marketing for Metafile Information Systems Inc., Rochester, Minn., an independent provider of paperless document management applications serving middle-market and large businesses.