Many companies don’t realize how much it actually costs to pay bills beyond the expense itself.
The cost of labor required to extract the vendor information from the invoice, obtain necessary approvals, and make and record payments can add up to hundreds of hours a week, especially for a business with multiple entities. An AP automation system drastically reduces or eliminates these labor costs, allowing your accounting team to focus on higher priorities that can reduce expenses and increase revenue.
Here’s a closer look at what you can save and the returns you can expect with AP automation.
If your company is a multi-entity business using legacy accounting software, even the first step in the invoice payment process — recording vendor information — typically requires logging into and out of multiple databases and typing or copying/pasting data multiple times. Other steps in the process include:
Total cost can vary depending on the pay rate for your accounts payable team and the number of invoices your company processes each month. According to Gravity Software's handy accounts payable automation ROI calculator, it can cost anywhere from $120 all the way up to $24,000 per month to process your invoices.
If your accounts payable team totals $50 per hour in wages, for example, and processes 130 bills per month, each invoice costs $6.04 to process, for a total of about $785. For that same team to process 500 bills per month, it would cost $3,020.
The cost of invoice processing is based on factors in addition to labor, such as whether your company is still mired in largely paper-based processes. If this is the case, you'll pay not just for paper and printing but for storage and disposal. There are also the late fees you’ll incur when an invoice inevitably gets lost in the wilderness of loose papers on someone's desk.
Even if you use paperless billing processes, manual bill pay still opens up the possibility of errors, which can include:
In addition to added fees, too many missed or late payments could result in damaged or even severed vendor relationships. This could lead to disrupted supply chains or company operations, ultimately resulting in lost revenue.
Other hidden costs of not having an AP automation system include employee turnover due to burnout from performing repetitive tasks created from their manual accounts payable process day in and day out. This will result in additional output to recruit and train new team members. Underutilizing your finance team's expertise will cost you, too.
What's a better use for the $50 per hour your accounts payable team receives? To use a manual accounts payable process for invoice management process invoices or to use their considerable analytical skills to save the company $5,000 on inputs over the next six months?
According to Gravity's accounts payable automation ROI calculator, automating your company's accounting systems can save anywhere from just under a thousand dollars per year to more than $225,000 per year.
Data from Tech.co reveals that companies can experience 80% increased operational efficiency when accounts payable is automated, which translates to a 366% ROI.
Where, specifically, does this ROI come from?
While supply chains have largely stabilized since the chaos of the early 2020s, there are still flare-ups of disruption now and then. When that happens, who is likely to get priority when a vendor has limited wares to distribute? The company who pays on time or early on a consistent basis, allowing the vendor to experience a reliable source of revenue? Or the company that pays their bills sporadically and often has to be chased down to make a payment at all?
AP automation ensures your company is paying its vendors on time, every time, which not only makes for a better relationship but can also result in tangible savings. Many vendors offer a 2% discount for paying a bill within 10 days of receipt. That 2% adds up when talking about invoices in the tens of thousands of dollars.
The companies doing AI and accounts payable automation right are leveraging new technologies to enhance their employees’ productivity and help their jobs become more meaningful and purpose-driven — not to replace as many employees as they can with bots.
An accounts payable professional can trade repetitive data entry tasks such as inputting vendor information into multiple databases for expertise-driven tasks that will propel the company forward. They’ll have the space to contemplate operational inefficiencies and how to get rid of them. They’ll have more time to interact with customers, employees and vendors, increasing the potential for a more productive workplace with better vendor relationships and higher customer lifetime values.
They’ll also have more bandwidth to make strategic decisions that will ensure the company's long-term success.
The Sunray Companies — a 47-entity hospitality enterprise consisting of salons, spas, hotels and more — experienced this phenomenon firsthand after switching their accounting to Gravity Software. Because of the time they saved using Gravity, the company's accounting team members have become “problem-solvers” rather than simply performing data entry.
“They can focus more on high-end accounting, which helps to keep them engaged,” said Stephanie Welborn, the enterprise's accounts payable administrator. “They don't feel like their talents are being wasted.”
“Surprise billing” is a common concept in health care, but accounts payable automation can help your company avoid a different type of surprise billing: the kind where an invoice sits on someone's desk or in their email inbox for so long that by the time they remember it exists, it's become an unexpected expense.
With accounts payable automation, invoices can be processed almost as soon as they're received, so money that's headed out the door to pay a vendor invoice isn't mistaken for money that you can spend on new equipment or adding an employee to your sales team. With a shorter AP cycle, you can even free up cash for short-term investments.
There are several factors that separate Gravity from other accounting software providers when it comes to accounts payable automation.
While other AI-powered data extraction tools use OCR (optical character recognition), Gravity uses Intelligent Document Processing (IDP) from Microsoft Azure Cognitive Services. This technology uses AI to read more complex and unconventional documents, leading to fewer invoices needing to be processed manually.
Gravity can also automatically match invoices to your internal records, making it a breeze to reconcile expenses and ensure you're being charged correctly for your purchases.
AI-powered data extraction can automatically input invoice data into a database. But for a multi-entity company with 40 different databases, your team still has numerous steps in the login/logout/copy/paste dance before their work is complete. Gravity Software stores data for multiple entities in a single database.
Once you enter or change the information for a vendor, you can apply that input to any number of entities within your enterprise with the click of a button.
Your company may require approval from a C-suite executive or board member before paying an invoice over a certain amount – a recipe for bottlenecks. Gravity uses Microsoft Power Automate to ensure invoice approvals skate through smoothly. Multiple possible approvers? No problem. An escalating chain of approvers? Power Automate can accommodate a wide variety of approval scenarios.
Gravity also simplifies inter-company billing by automatically balancing due to/due from entries. This reduces the time your team spends checking and rechecking your transactions to make sure everything is balanced correctly. This aspect of Gravity has been a game-changer for Sunray Companies and thousands of others..
“Now it might take me 30 minutes to settle (transactions for) 47 entities in a company, where before it would take me days,” Wellborn said.
Learn more about automating accounts payable with Gravity Software. Schedule a demo today.
Gravity Software
Better. Smarter. Accounting.