Categories: Business

AP Automation: What Is Its Return On Investment

Several industries are experiencing an increase in automation. Businesses have introduced automation into many areas of their operations, and one of these areas is their accounts payable operations. Accounts payable operations are critical to keep track of all of our accounting information.

These operations’ importance is one reason AP automation software has become more popular in recent years. This software allows us to perform all our accounts payable tasks at a much lower cost. We should review the benefits of AP automation and how much money this automation ultimately saves companies in the long run.

IMAGE: UNSPLASH

AP Automation Saves Companies Quite A Bit of Money

One of the issues with having employees manually handle accounts payable tasks is that it can be quite costly. This is most obvious when one looks at invoice processing, which is a major task for any accounts payable department. It is difficult to figure out the exact cost of manually processing invoices.

However, research indicates that manually processing one invoice costs between $12 and $30. If a company has a more complicated accounts payable process, this cost can increase to almost $40 per invoice. One practical example of how to put this cost into perspective is to use a $10 invoice and calculate its cost.

The cost of manually processing a $10 invoice will easily exceed $10, and it may be almost four times as much as the value of the invoice. However, if we use AP automation software and fully automate invoice processing, it costs only about $3.50 per invoice.

This significant decrease in cost means that a company can run its account payable department at a much lower cost and be able to spend its resources elsewhere. AP automation has this benefit as one of its main advantages.

AP Automation Saves Company Time And Enhances The AP Department

The financial ROI of AP automation is one of its many benefits. AP automation also saves the company time. One of the challenges a company’s AP department often face is that it must spend quite a bit of time on lower-level tasks. Obviously, this means that the AP department needs more time to take care of higher-level tasks. However, with AP automation, the automation software can handle many of these lower-level tasks.

This means that the AP department staff are free to complete higher-level tasks since they now have the time to do so. The AP department will now be able to handle tasks such as discovering and negotiating possible discounts, analyzing opportunities, improving the company’s payment schedule, and collaborating with vendors to achieve better results.

The company’s AP department can now generate revenue for the company. AP automation software is one good option for turning the AP department into a revenue center. These benefits of AP automation can increase both the company’s revenue generation and its operational efficiency.

What Percentage Does AP Automation Save A Company On Its Accounts Payable Costs?

As with the cost of manually processing invoices, precise numbers are difficult to come by when it comes to how much a company spends on its accounts payable department. However, the average company spends roughly $7.75 per invoice. As one might expect, labor costs are the main factor in accounts payable costs.

A total of 62% of total costs for accounts payable tasks are due to labor costs, according to research on the subject. This highlights the need for AP automation software since this software lowers labor costs significantly.

On average, AP automation can save a company roughly $4.25 per invoice if we use the earlier mentioned $7.75 cost per invoice. However, some companies spend much lower than the $7.75 per invoice, so that the savings could be even more significant than that.

Accounts payable costs differ from company to company, so determining the exact amount a company saves on these costs by automating its accounts payable activity is challenging. Still, it is clear that companies will save quite a bit of money on their accounts payable activity if they automate it.

Why Should Companies Invest In Accounts Payable Automation?

There are multiple reasons why it is a good idea for companies to invest in accounts payable automation. Aside from the financial benefits of AP automation described above, AP automation can also save quite a bit of time. AP automation software can complete accounts payable tasks much more quickly than people can.

Additionally, AP automation greatly reduces errors in accounts payable activity. Such errors can cost the company time and money, which compounds the cost of manually performing AP tasks in the first place.

AP errors can also worsen the company’s reputation with other companies and its customers. In any case, investing in AP automation provides a number of benefits for the company, and many companies have already begun investing in AP automation.