- Calculate the cost of issuing vendor checks which is estimated to be $5.00 to $8.00 per check.
- Apply the 1-10-100 data entry efficiency rule to realize how much a data entry error costs.
- Understand that time is one of the many unseen costs of manual payment processing.
- Identify the ways your company can reduce spending in order to streamline your AP process.
- Save time and money by choosing a secure, low-cost payment method, digitizing your financial records.
How to Identify the Major Problems
Your Accounts Payable department is responsible for some of the most important facets of your company: managing your finances, maximizing your cash-flow, and keeping your vendors and suppliers happy. Accounts Payable automation is a great way to increase the speed and efficiency of the entire process; from invoice processing all the way to vendor payments. If you are looking to tackle some of your AP’s biggest challenges, it is important first to understand what they are and how they might be costing your company more money than you realize. In this article, we identify three major problems: the cost of paying vendors, the cost of manual processing errors, and the labor cost of account visibility and access issues.
How Much Does it Cost to Pay Vendors?
Paying your vendors is one process that many businesses do not view as a challenge and assume that there is not much that could be improved about it. However, not all payment methods are the same in terms of efficiency, cost, and fraud exposure. For example, electronic payments like ACH transfers and Virtual Cards are much more efficient and secure than paper checks. The cost of issuing vendor checks is estimated around $5.00 to $8.00 per check. Take this figure and multiply by the number of checks you print and you will quickly realize the thousands of dollars wasted on this process annually. If you are curious to know your true cost of printing and mailing vendor checks, use this one-page check issuing cost calculator to come up with your own true costs. The tool will walk you through all of the elements that go into issuing a check and help you assess your own costs. Regardless of the size of your business and even if you are only issuing few hundred checks per month, the cost savings from automating your AP process and transitioning your vendors to electronic payments could add up to thousands of dollars annually.
The Real Cost of Manual Processing Errors
Manually tracking invoices, payment amounts, and vendor information can be tedious and fraught with error. The most diligent accounting professional can find themselves rushed or overwhelmed with work and miss a decimal point, enter the wrong payment date, or accidentally use an old account number. You might not realize how much of a problem this can be for businesses of any size.
Even the smallest data entry error can end up costing your business a lot if you account for labor costs to identify, rectify, and reverse problems. This is assuming you catch the error. If your business issues an incorrect payment and it goes unnoticed, you could be facing late payment fees from your vendor and insufficient fund fees from your bank. The 1-10-100 data entry efficiency rule gives you a good idea of how much a data entry error costs: the prevent cost of verifying a record is $1, the correction cost of a record is $10, and the failure cost of a correction going unnoticed is $100. Even worse, you could lose vendors if these errors occur frequently.
These are human errors that can be greatly reduced through AP automation, as information is processed, entered, and verified digitally. Your AP automated software automatically gathers data from invoices and enters it into your payment system, leaving little room for mistakes.
Problems Accessing and Viewing AP Records
Do you know how much time your staff spends tracking down payment information? Or how often vendors call to check on payment statuses? Keeping paper records makes accessing them difficult, meaning you might be spending the better part of your day tracking down historic payment data. One of the many unseen costs of manual payment processing is time dedicated to processing, issuing, tracking, and storing vendor payment information. This is made even worse if paper invoices are floating around your office, because your AP department may not know your true financial liabilities until it makes its way to them. In the meantime, you do not have an accurate picture of your company’s financial situation.
The lack of payment visibility and access can be detrimental, but automating your accounts payable process presents a solution. Easy access to vendor payments and supporting documents allow your AP team to be more productive and enable them to provide vendors with the information they need quickly. It can significantly improve your staff productivity, enable them to provide better service to your vendors, and significantly reduce the costs of handling vendor inquiries.
Understanding and Addressing Your AP Challenges
Identifying the ways your company can reduce spending is the first step in streamlining your entire accounts payable process, which will keep both your AP department staff and your vendors happy. Whether you are looking to reduce the cost of paying vendors, reduce the occurrence of manual entry errors, or looking for a better way to access and view your financial records, AP automation tools offer real business solutions to fit your needs. Save time and money by choosing a secure, low-cost payment method, digitizing your financial records, and adopt easily accessible solutions to resolve payment visibility issues with AP Automation software.