Investing in invoice automation can save your business a significant amount of money. Working out where you could make these savings will help you persuade the managers who hold the purse strings that they will see results on the bottom line.
The main areas that invoice automation could save you money are:
o Staff costs
o Speedier payments
o More accurate payments
o Reduced storage costs
o Reduced operations costs
Ten ways to save money
1. Reduced cost of invoice processing – Research from the Institute of Management and Administration (IOMA) suggests that it costs companies with a low level of invoice automation £ 7 to process each invoice payment. However, accounts departments with a high level of automation report reducing this to around £ 4.20. This represents a saving of almost 60%.
2. Reduced staff costs – With invoice automation, your accounts staff will be able to deal with invoices more quickly and accurately. This means you may require less members of staff. You should not need to hire any extra workers and the need for temps will be reduced.
3. Fast Return on Investment (ROI) – Many companies report reducing their accounts costs by 50% within nine months of implementing a purchase to pay solution.
4. Early payment incentives – Invoice automation gives you much tighter control over when your invoices are paid. You will be in a much better position to take advantage of early payment discounts. These are typically a 2% discount for payment within ten days. On a £ 5,000 invoice this would represent a saving of £ 100 so you can see how these savings add up.
5. No late fees – Legally, if you pay late, your clients can charge you extra. Under the Late Payment of Commercial Debts (Interest) Act 1998, if an invoice is not paid on time, clients are entitled to charge you interest calculated at the Bank of England base rate plus 8%.
6. Improved cash flow – If no early payment incentive is offered, automated invoicing gives you the control and accuracy to pay bills on time but not early, then improving your cashflow.
7. Greater accuracy – Invoice automation means that it's simple and quick to find invoices, meaning you'll avoid the problems associated with errors such as duplicate payments. According to IOMA's findings, 17% of businesses have a duplicate invoice payment rate of 0.1 to 0.5%. If your firm's duplicate invoice payment rate was 0.3% and your accounts payable team processed £ 300 million worth of invoices each year this would represent an overpayment of £ 900,000 annually. Of course, you should be able to retrieve this cash (as long as your system alerted you to the overpayment). However, this could involve paying a third party. Recovery companies charge, on average, a third of the outstanding invoicing amount, which in this case would be £ 300,000.
8. Lower storage costs – Research suggests that it costs businesses around £ 11 to file each document. Lots of potential productive working time is also wasted looking for lost or misfiled documents.
Invoice automation slashes the costs of storing documents because you'll no longer have to find somewhere to put a growing body of paper documents. Nor will you have to buy additional equipment such as filing cabinets to keep all the paper in.
9. Working with paper documents means a lot of printing, faxing, posting and copying. The costs of these processes all add up. Invoice automation means that many of these processes are no longer necessary and therefore reduces costs, especially those associated with postage and other shipping services.
10. Business continuity – If there was a disaster such as a flood or fire, losing all your paper files would be a catastrophe. With invoice automation, files are stored electronically and backed up – the risk is minimized.