Manual accounts payable processes have been the norm for years, but with them come numerous potential minefields to navigate.
You might be aware of some risks, like the susceptibility to human error and the time-consuming nature of repetitive tasks–but have you ever considered how much money your business could be losing by sticking with conventional methods?
Given the volatility of our current economic climate, it’s understandable why some business leaders may be hesitant to make tech investments. However, inaction now could lead to even costlier problems down the line.
Read on as we uncover some of the largest expenses that businesses face in the absence of business process automation.
Employee Burnout and Turnover
Manual tasks like keying in and individually validating invoice line items and cost codes can be tedious, repetitive, and time-consuming.
Having to contend with these inefficiencies on a daily basis can quickly lead to employee burnout. When finance teams are bogged down with manual tasks, they may feel overwhelmed, stressed, and frustrated–all of which negatively impact job satisfaction and overall well-being.
Employee turnover has been on the rise in recent years. Gallup reports that U.S. businesses alone are losing 1 trillion dollars each year due to voluntary turnover, making it essential to understand the actual cost of employee turnover.
Sourcing and recruiting a replacement employee is both time-consuming and costly. What's more, all new hires must be onboarded and trained, with associated costs ranging from a few hundred dollars to tens of thousands of dollars (depending on the complexity and level of the position.)
Based on some reports, the average cost to replace an employee can be:
- 1.5 to 2 times the salary of an employee's annual salary
- Up to $3,500 for hourly employees
- 100% to 150% of an employee's salary for technical positions
The indirect costs and implications of employee turnover can be just as significant. The workload of lost employees must be reallocated to others on the team, or put on hold until a replacement is found.
As a result, you run the risk of two likely scenarios: either your other employees are left feeling overworked and undervalued, or you jeapordize the timeliness of your ongoing projects and deadlines.
Automation, however, can alleviate many of these challenges.
With solutions including automatic data capture, two and three-way invoice validation, approval routing, and integrated vendor payments, finance automation technologies can be an effective solution to reduce employee burnout and improve productivity, allowing employees to focus on more challenging, meaningful, and fulfilling tasks.
In fact, reports suggest that using integrated accounting software can boost employee retention rates by up to 80% for accounting teams. As such, implementing automation in the CFO's back office is a smart way to cut down on expenses caused by employee turnover due to dissatisfaction with their daily tasks.
Fraud and Compliance Issues
Compliance in AP is key to not only managing secure payment activities but also to preventing legal pileups.
Regulations are constantly evolving, and it can be challenging for finance departments to stay abreast of all of them. But poor compliance can lead to financial penalties, a tarnished reputation, and fraud–a serious issue that businesses of all sizes face.
The risk is particularly high in accounts payable since all company funds flow through the AP department.
The cost of invoice fraud alone is substantial, with estimates suggesting that it costs companies billions of dollars each year. According to Forbes, the annual estimated cost of invoice fraud to mid-market businesses is $280,000.
Today’s fraudsters often use sophisticated methods to present false invoices as legitimate, but the best AP automation solutions have safeguards in place to reduce the risk of the most common types of fraud.
End-to-end automation solutions offer a range of powerful features that empower finance teams to ensure compliance, maintain cost control, and enhance accountability in their invoice and payment processing.
These solutions offer rule-based permissions to protect financial records and employ algorithms that detect fraudulent or duplicate payments, helping finance teams confidently manage invoice and payment processing to ensure financial integrity.
Late and Missed Payment Risks
As companies grow and face an increasing number of invoices, finance teams that rely on manual processes can quickly become overwhelmed. This not only puts them at risk of making mistakes on invoices but also increases the likelihood of issuing past-due payments.
Late payments and errors can harm relationships with suppliers and incur significant costs to businesses. Suppliers typically charge late fees of 1-2% or interest on overdue payments, and over the last year alone, 41% of buyers have incurred late fees on payments to vendors.
And late payments create issues beyond the immediate vendor. When cash flows don't reflect overdue payments or transactions still in the queue, finance leaders might think they have more budget than expected, leading them to make decisions based on inaccurate forecasts.
To address these problems, vendor payment automation simplifies the process, leading to an 80% straight-through processing rate on average.
This means that manual intervention is only needed for a small portion of the invoices processed by the system. Streamlining vendor payments not only prevents late fees but also makes it easier to take advantage of early-pay discounts by ensuring better adherence to payment terms.
Making the Case for AP Automation
In today's digital age, relying on manual AP processes is too risky. With accounting automation, you can free your team to focus on higher-value tasks, save your company money, ensure compliance, prevent fraud, and improve vendor relationships.
The risks and hidden costs associated with manual AP processes are substantial. In an increasingly competitive business environment, embracing automation is necessary to enhance efficiency, reduce errors, and ultimately drive your organization toward greater success.
Are you ready to take the next step towards automation? Read our guide on how effective change management techniques can make the transition to automation seamless, and schedule a demo with our automation experts today.