Author: Victor Bensusan, Vice President & Managing Director
The Situation
Few back-office processes epitomize the need for Enterprise Content Management (ECM) systems more than the accounts payable (AP) function. The AP function is vital to running a business smoothly and has a direct impact on a company’s bottom line.
Over the past few years, many businesses have tried to improve accounting efficiencies by using Enterprise Resource Planning (ERP) technologies to automate core financial processes. But the AP function itself has remained stubbornly reliant on costly and archaic paper-based processes that have dragged down overall efficiencies.
Though electronic invoicing and payment technologies have been available for some time, the processes for handling invoices, expenses, payments, purchase orders and receipts continue to be manual and heavily paper-based at most companies. According to Boston-based Aberdeen Group, nearly 80% of all invoices received by a company are in paper format. That number is likely even higher in the case of small businesses, according to Aberdeen.
As a result, AP departments have been forced to deal with burgeoning paper-handling costs and crushing storage requirements. A lack of automation has left AP functions at many companies struggling to cope with issues such as duplicate copies, redundant files and delayed cycle times.
Much of these issues have stemmed from the constant need to file, search, retrieve and re-file endless invoices. According to some estimates, more than 75% of the time that is required to manually enter invoice data, is spent on just finding the information. PricewaterhouseCoopers estimates that companies on average spend $20 to file a document and up to $120 to find a misfiled one. Meanwhile, industry estimates peg the average cost of handling an invoice at between $40 and $50 per invoice. Besides being costly, such inefficiencies substantially increase receipt-to-payment times.
Where ECM can fit in
Capturing and digitizing content and automating processes via the use of ECM technologies can improve efficiencies in the account payables function. Many companies, especially large ones are already successfully using ECM systems to manage other document-centric business processes such as contract management and human resources functions. The use of ECM systems in these areas has dramatically improved efficiencies and lowered document management costs.
Applying ECM techniques in the AP arena can yield the same benefits as well. A benchmark study last December by The Accounts Payable Network (TAPN) showed that invoice processing costs can drop to as low as $1.77 per invoice depending on the level of process automation a company had implemented within the AP function. The TAPN study found that companies which had automated document-driven AP functions also had significant productivity gains.
Most of the benefits are typically derived from a reduction in non-value added activities. Automation of the AP function can reduce staff time spent on tasks such as data entry, filing, document searches, document retrieval and duplication. The order that is imposed on data by ECM technologies also enables enhanced compliance and auditing capabilities and adds to its ROI benefits within the AP function.
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About the Author
Victor Bensusan is Vice President Sales, Operations and is a Managing Partner at Yakidoo. He has 20 years experience in Finance and Information Technology primarily in the area of process automation, information management and business performance improvement.
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