Invoicing should be easy.
A contractor performs work for your company, submits an invoice and is paid by Accounts Payable within 10 days, right?
Not so much. Accounts Payable often gets backed up. Sometimes it takes months to get contractors paid. And while those contractors are becoming increasingly irate about not getting their money, your organization is losing money.
According to the most recent data from APQC (American Productivity & Quality Center), the businesses with the least streamlined business processes spend $9 or more to process an invoice. That sort of money adds up if your organization pays several invoices every month.
On the other hand, the organizations with automated business process management (BPM) for Accounts Payable are spending $2 to process each invoice.
Accounts Payable Needs An Update
There's no shame in admitting it — every company has some manual processes that slow down business. Invoicing is one of those processes that often gums up the works.
Why? The root problem is that no two contractors invoice the same way. Some contractors email invoices, some use web-based sites like Freshbooks, some mail paper invoices in, drop them off on your desk or even fax them in (remember fax machines?).
All of these formats then need to be entered into your organization's system. The paper ones need to be entered manually, but even the electronic formats — the webforms, the Excel files, the Word docs — don't necessarily contain the same fields, so a human being may have to manually enter some that information into your company's system, adding work for Accounts Payable. It might be so much work that you're considering adding employees to handle it.
And there's another problem: any time you've got employees handling a monotonous task like data entry, you increase your risk for human error.
Data entry, labor-intensive as it is, isn't even the most time-consuming part of invoice processing. Depending on your organization's system, each invoice needs to be approved and some invoices might require multiple layers of approval.
If you're moving a paper invoice — or even an email — from office to office, the time it takes to move that invoice from place to place for all the required signatures can take days, weeks or even months. Or even worse, the invoice could get lost, disappearing in the shuffle or being buried in an inbox.
'Where's My Money' and Other Fun Phone Calls
Losing paperwork even happens at small companies that don't require several sign-offs on an invoice.
Maybe the invoice comes into your inbox, you think "I'll deal with that at the end of the month" and then forget all about it ...until the contractor emails you, wondering where their payment is.
No contractor likes to act like a collections agency and no one likes to take those phone calls, or respond to those messages. In many cases, the contractor's point of contact simply responds to a message about delayed payment by copying someone from Accounts Payable on the email to check in on the invoice, which is in many cases still making its way through whatever process exists. In many cases, the finance department may not even know where the invoice is in the approval process.
In other words, people are angry and messages are sent, but that almost never speeds up the invoice.
Responding to those emails and taking annoyed phone calls isn't fun and also means that — once again — your organization is losing money because your Accounts Payable staff is dealing with problems rather than concentrating on their work.
Depending on how late invoices are being paid, you're also getting hit with late fees, credit holds and maybe even irate social media posts online from angry contractors, which isn't good for your brand.
All of these problems can be prevented simply by automating your workflow.
How one company revolutionized their invoices
No one sets out not to pay invoices. Some of the business processes that were perfectly adequate when your company was small may simply not work for your purposes now.
Take GEFCO Slovakia, an industrial and automotive logistics company that was founded in 2004, but grew quickly. By 2009 the company had expanded considerably, bringing in annual revenue increases of 10-15 percent.
That success, however, meant that the manual process that worked just fine five years before were no longer cutting it. One of those processes? You guessed it: manual approvals for invoices.
“When we are growing we are purchasing more and, when we are purchasing more, we are receiving more invoices,” said Michal Bugar, head of IT at GEFCO Slovakia, in a case study for business process software company K2. “Our invoice volumes were increasing so we needed a better, simpler way to process them.”
At the time, the company allowed a week for invoices to be validated, then between one and two days for the invoice to be processed in the accounts department. In the meantime, the invoice had to travel between sites to be approved by as many as three managers.
This was unwieldy, so GEFCO turned to a local partner to help them implement an automated solution.
The company used a K2-based process, which integrated with its existing electronic document system and Microsoft applications. All the company's employees can access the system, so approvals are no problem. Now, rather than sending a paper invoice rocketing around the company, invoice validation can be accomplished in just one day. Contractors receive their payments in days, not weeks.
Bring Accounts Payable into the future with BPM
Good business process management has been touted as a must for companies that want to improve customer experience. However, it's also a must-have for companies that want to improve the experience of their vendors, contractors and employees.
It's not easy to improve business processes that have grown up organically, even if those processes are slowing your team down. That's why Omni's consultants first take the time to learn about your business, your processes and the tools you're already using before we make any recommendations.
As a data agnostic team, we'll always help you solve your problems with whatever tools work best for you, but if you choose to a K2 solution, as GEFCO did, we're K2 partners and can help you design a workflow that optimizes Account Payable, keeps your contractors paid and happy and saves you money.
Ready to learn more? Contact us today.
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