The pains of invoice processing inefficiencies
The accounts payable team is tasked with invoice payment. Simple enough, right?
Yet it can be anything but simple – particularly given the fact that the AP team needs to verify invoices as accurate, match them to purchase orders (if they exist), route them for approval and then pay them in a timely enough fashion to meet the terms that the procurement team has negotiated with vendors.
If a vendor calls and wants to know what’s holding up a payment, the AP team needs to be able to locate the invoice in the workflow, determine if there’s a problem and if so, remedy it to pay the invoice quickly. If an invoice becomes lost in the workflow or is difficult to find in the system, AP will spend a disproportionate amount of time hunting it down. This can result in missing early payment discounts, and if it happens often enough, disgruntled vendors.
To gain insight and find out how to streamline the process, a recent joint survey between Hyland and the Institute of Finance and Management, “The AP Control Panel Survey,” took a two-pronged look at invoice processing efficiencies. The focus points were:
1. The ease with which respondents can track invoices (establishing where they are in the payment process, and whether they’re stuck somewhere in the approval workflow)
2. By what methods they are able to sort invoices, as sorting is important to facilitate efficient processing, as well as for research, reporting and analysis purposes
Tracking
The survey revealed an interesting fact: The more invoices an organization has, the easier it becomes to track them.
It’s counterintuitive at first glance. Wouldn’t it make sense that the fewer invoices you must contend with, the easier it will be to track them?
Not so.
This chart shows that those organizations with limited invoice volumes (50,000 or fewer per year), find it most challenging to track invoices-in-process. Nearly half of organizations in this category reported invoice tracking as “difficult.”
On the opposite end of the spectrum, those organizations which reported having 500,000 invoices or more per year overwhelmingly reported (70 percent) that it’s easy to track them.
It’s not hard to understand why this is – if you factor in automation. Especially because smaller organizations typically don’t have access to the automation solutions larger ones have access to.
An automated AP system can provide visibility into the status of every invoice with only a few keyboard strokes. That includes where in the approval process the invoice is. Instead of routing around invoices manually or by email, an AP solution can quickly reveal where they may be stuck and when they’re queued to pay.
Sorting
Sorting invoices becomes a much easier task with AP automation as well — but that depends upon the capabilities of the AP software solution.
In this chart, respondents revealed which sorting criteria they were able to use to find invoices.
While most AP departments can sort by invoice number and supplier, those variables offer limited efficiencies except for individual lookups. A very critical piece of information is invoice due date, which ensures early payment discount capture – yet only about a third of survey respondents have that capability.
And more than seven in 10 respondents aren’t able to sort their invoices by “owner” – the individual responsible for making the purchase and approving it. That can also slow the payment process and cost the organization money.
The bottom line
Being able to track and sort invoices at any stage of the payment process and by any key piece of information is essential to AP efficiency. Without that capability, your organization can lose discounts, make duplicate or late payments and even run the risk of breaching vendor contracts.
Solid automation and an AP team that knows how to leverage its capability can empower them to resolve issues rapidly and consistently make timely payments.
To help, Hyland and the Institute of Finance and Management have partnered to create the AP Control Panel, a first-of-its-kind tool to evaluate AP departments’ level of control over operations, cash flow, compliance and security.
