Many times the relationship between an accounts payable department and the vendors they pay can be described as “love/hate.” Employees in various departments in any given company rely on the goods and services that vendors provide in order to do their jobs most effectively. Civic organizations—like cities and townships—rely on vendors to maintain and improve our communities. And vendors appreciate the business they receive. That’s the “love” part.
The “hate” comes in when AP professionals can’t keep up with the mountain of paper invoices they must process manually; and with all of the paper and data entry, documents get lost or misplaced and errors get made, all resulting in late payments to the very vendors the company relies on. And vendors have to spend time tracking down their money. In the case of the construction industry, as one example, project managers might have to delay payment to their sub-contractors, which could compromise their ability to find and retain the best at what they do.
There are many costs associated with the “hate” part. The financial costs come by way of late payment penalties. And equally costly, the time spent with mundane tasks, tracking down approvals, looking for documents, and trying to pacify angry suppliers. It’s also disrespectful to the suppliers, putting them at risk for disruptions in cash flow and potentially supply chain.
Let’s put the numbers to it. According to a recent report from Sage, over thirty percent of small to medium businesses currently experience or expect to experience direct negative impact from late payments, including ten percent of receivables written off as bad debt, and all equating to three trillion dollars globally. This same thirty percent view protecting the client relationship as the top barrier in chasing late payments. It’s a vicious circle.
Cash flow issues aside, automating the invoice and payment process with an advanced solution like Yooz will solve all of the pain caused by a manual process and allow AP professionals to dramatically improve their supplier relationships. How?
- Invoices received in any format—paper, email attachment, XML/EDI—can be easily scanned or uploaded into the system where advanced technologies powered by AI such as OCR (optical character recognition) which reads the data, smart data extraction which knows where to place the data, and machine learning which recognizes data, pushes populates and pushes the invoice through the approval process.
- Approving managers can easily access the system from any desktop or mobile device to review and approve invoices.
- AP professionals have complete and up-to-date visibility into where invoices are in the approval process and a history of who has accessed the document.
All of this allows AP professionals to reduce the processing time from weeks to days, even hours, give status updates to suppliers, and prioritize payments according to those that offer early payment discounts.
Ultimately, they are freed from the drudgery of the manual AP process, and instead of avoiding calls from suppliers can instead proactively initiate conversations around more strategic, partnership-building topics, such as negotiating better pricing.
Suppliers are able to pay their sub-contractors and supply chain partners on time, so they keep the best talent as their business keeps moving.
Here’s what Terry Leak, director of finance for the City of Cleburne, Texas has to say, “One of the most valuable benefits for us has been speeding up payments to our contractors. This allows us to get a wider choice of contractors bidding for construction projects, and to keep the best ones coming back. When we pay them faster, they can pay their subs on time. It has created a lot of goodwill between the city and our suppliers.”
For a European take on this topic, read the blog published by Yooz U.K.