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Learn how to automate accounts payable in 30 minutes.
Accounts Payable has always been a cost center.
Why?
Accounts Payable handles paying off debts and has no direct contribution to the bottom line. But is that true?
Accounts Payable costs are not fixed.
They’re variable and depend on your company’s Account Payable practices. The Accounts Payables costs depend on:
When are you paying your bills?
When your team clears invoices matter a lot, there is a scope for early payment discounts and penalties for late payments, and the margin makes a huge difference.
For every $1B spent on Purchase orders, there is a margin of $3M in potential early payment discount.
So, it makes a huge difference when your accounts payable team clears an invoice.
What are your vendor contract details?
How are your relationships with your vendors? Do your vendors trust you enough to let you clear their invoices later than the due date without huge penalties?
Your vendor contract details directly affect days payable outstanding, which in turn has a direct effect on cash liquidity.
How are you paying your vendors?
- Do you pay your vendors using a credit card?
- Or do you send checks?
- Do you use electronic payment?
While this might not make sense for companies with 10-20 vendors, this makes a difference for larger companies.
Global brands can have thousands of vendors at one point in time. And in that case, a simple reduction of 0.5% charges can make a difference.
What Accounts Payable Software are you using?
Accounts Payable tech stack can lead to an increase in efficiency and productivity.
- Are you using software that accelerates invoice processing?
- What system do you use for PO, SO, and invoice matching?
- What is the error rate?
Invoice OCR errors lead to manual approval systems, which take time and effort. The invoice processes can be smooth, quicker, and cost-efficient with fewer error rates.
What is your FTE productivity?
How much are your labor costs? How many invoices do your FTE clear weekly, and what is the error rate?
Labor costs can play a vital role for large organizations as it directly impacts the cost/invoice cleared metric.
AP cost per invoice process is $4.98 for the best-in-class performers, while bottom performers spend $12.44 for processing one invoice.
From the above factors, we can understand, Account payable processes can be optimized to reduce costs, be more efficient and contribute to the company’s bottom line even when it is just a back-office task.
Check out OCR API, Invoice automation, Passport OCR, AP Automation Solution, Receipt OCR, License OCR Solution, or start your free trial by clicking below!
How to turn Accounts Payable into Profit Center?
Let’s look at how we can turn AP into a profit center by taking a deep dive into four factors:
- Vendor Agreements
- Accounts Payable Automation
- Employee Productivity
- Data Analytics
Do more with Data Analytics.
“Without data, you are blind and deaf in the middle of a freeway.” – Geoffrey Moore.
Start collecting all your financial data in one place. Let all your invoices, employee reimbursements, inquiries, requests, and financial documents flow into one database.
How will this help?
Data Analytics will help you understand the cash flow and the company’s spending trends, identify the real cost centers and provide visibility into the company’s inefficiencies.
Getting data in one place is the first step to making your accounts payable a profit center. It paves the way to map out inefficiencies throughout the company and gives an idea of which software is the best to tackle your problems.
Leverage Accounts Payable Automation
Accounts Payable Automation is not new technology. Companies around the world are adopting Accounts Payable automation software and reaping benefits. Nanonets can help companies of all sizes optimize their Accounts Payable Processes.
Reduced Invoice Processing Time
Use Invoice OCR to reduce invoice processing time. Nanonets Invoice OCR is a pre-trained model that can automatically extract relevant information like date, vendor details, invoice amount, tax amount, currency, addresses, and more efficiently.
Fewer Invoice Errors
Nanonets OCR API gives 95% accuracy and saves over 80% of the time. See how we can do it for you too.
Automated PO, SO & Invoice Matching
Nanonets can match invoices, POs, and receipts more efficiently than other AP automation software. In addition, Nanonets 3-way matching can be set up using custom rules without any developer.
Read more: Purchase order matching & How to OCR purchase orders
Automated GL Code & Expense Tagging
Nanonets can capture GL code in invoices, sales, or purchase orders and automatically tag expenses using pre-defined expense tagging codes.
Reduced Manual Entries
Nanonets automate manual data entry from paper-based, scanned, or electronic documents. Get a free product tour of Nanonets
Automated Spend Analytics
Get a complete overview of your spending with expenses dashboards. Deep dive into spending trends, identify hotspots and improve accountability.
Vendor Updates
Reduce vendor inquiries by sending status updates to vendors directly to their email. Improve vendor relationships with real-time notifications and payment process visibility.
Read more: Vendor Management
Automated Workflows
From creating an expense report to getting manager approvals, handle all the communication and workflow updates. Create workflows using the drag and drop interface.
Easy Integrations with ERP systems
Nanonets can integrate directly with software like a company-wide ERP system, QuickBooks (or a competitor’s) accounting software, and warehouse management system through an API connection.
Vendor Agreements
Take a look at all the vendor’s agreements. Try to negotiate for the following:
E-invoicing
Communicate the benefits of using e-invoices with your vendor. Encourage vendors to shift to e-invoices as it will help them reduce late payments, get real-time updates and maintain the same structured format of invoices. Show proper side-to-side comparisons of costs of using manual payment methods versus e-invoices and educate them from time to time.
Lenient Late Charges & Early Payment Discounts
Ensure your late charges and early payment discounts are appropriately mentioned in the agreements. If they’re not present, have a word with the vendor to include them to ensure there are no misunderstandings at the time of payments. While negotiating, push for no or low late charges, but don’t be aggressive.
Create an incentive plan that is mutually beneficial to both the vendor and your company. This will ensure that your vendors don’t feel cheated.
Employee Productivity
Let the accounts payable team focus on spend analysis, strategy planning, and implementation on optimizing spending rather than manual data entry. With efficient AP automation, you can free up your Accounts payable team’s time and use their insights to make data-driven business decisions.
This way, you can get employees to focus on high-impact tasks rather than menial tasks like data entry.
Conclusion on making accounts payable a profit center
The account payables department can potentially contribute to the company’s growth. Finance leaders should quickly implement Accounts payable automation software and train employees to use technology to create strategies that redefine the company’s growth trajectory.
At Nanonets, we are working towards automating Accounts Payable for companies of all sizes without compromising quality and quantity.
Reach out to our automation experts for a free consultation call where we can demonstrate how Nanonets can impact your business, or Try Nanonets for free!
