According to Ardent Partners, 51% of today’s AP organizations are prioritizing the link between procure-to-pay processes and associated automated systems.
You know the feeling when you’ve been working on a jigsaw puzzle for countless hours and you place that final piece snugly in its spot, forming a complete picture that matches the image on the box perfectly? You sit back, admire your work, and experience that sense of accomplishment that can only come with a job well done.
Now, imagine feeling that way about your on-going accounts payable (AP) automation project – envision automation spanning the entire invoice handling process from receipt to processing all the way through payment. It’s possible with payment automation.
What is payment automation?
Payment automation is an integrated solution that allows organizations to make check, ACH, virtual card, and wire payments. This takes automation a step further than the “ok-to-pay” that purchase-to-pay solutions provide by issuing payment to the suppliers once invoices are received and processed.
Why is payment automation beneficial?
Payment automation removes manual activities from the final step in the AP process to bring the entire cycle full circle. This creates a better link between your purchase-to-pay system and your payments solution and increases your automation levels, which extends five major benefits:
Faster Cycle Times: For AP teams, time is literally money. The more automated and efficient a process is, the more return the company will see on their investment and the faster suppliers will get paid. This also means cost savings from faster invoice processing and capturing more early payment discounts. According to Ardent Partners “The State of B2B Payments 2017,” 51% of organizations rate cost savings as the top benefit seen from electronic payments.2
Cheaper Transactions: Electronic payments are far cheaper than paper checks. The Association for Finance Professionals said in its inaugural 2015 Payments Cost Benchmarking Survey that the estimated median cost of a check transaction is $3.00, compared with a range of between $0.26 and $0.50 per automatic clearing house (ACH) credit transaction and $1.50 for a purchasing card transaction.3
Fraud Prevention: In 2015, 73% of organizations were targets of payments fraud—a significant increase of 11 percentage points from 2014. Checks continue to be the payment method most frequently targeted by those committing or attempting to commit fraud. 75% of organizations that were victims of fraud attempts/attacks in 2016 experienced check fraud. On the other hand, fraud via ACH is only at 22%.4
Reduced Errors & Duplicate Payments: Errors in the AP process eat up valuable time, erode supplier relationships, and can result in duplicate payments. According to Ardent Partners ePayables: AP’s New Dawn, best-in-class companies that leverage automation can reduce the percentage of duplicate and overpayments from 3.12% to 1.07%.5
Increased Visibility: By moving to automated, electronic payments, you can capture more financial data to support advanced analytics and process improvement. Payments are becoming a strategic focus area to help finance executives better understand, predict, and forecast their cash flow. This visibility also opens the door for strategic tools that optimize cash position, like supply chain financing and dynamic discounting.
Additional Discounts: Lengthy processing cycles are the primary reason for missed early payment discounts at 41% of organizations, according to the 2017 AP and Working Capital Report by PayStream Advisors.6 Payment automation can compress the processing cycle and enable organizations to capture more of the discounts available to them, optimizing their working capital.
Less Supplier Inquiries: AP spends a lot of time responding to supplier inquiries around invoice and payment status. Automating the payment process enables organizations to provide suppliers with real-time visibility into transaction statuses, via a portal, thereby reducing time spent on fielding supplier inquiries and improving supplier relations.
Increased Supplier Satisfaction: Automating payment processing results in shorter payment cycles, which means that suppliers get paid faster and can decrease their days sales outstanding (DSO). This goes a long way in improving relationships with the supplier base.
How does payment automation affect the future of AP?
AP is changing rapidly – this is not new information – industry experts have been saying for a long time that the surge in automation and technology is forging a more strategic future for AP professionals. Payment automation is another example of a step in that direction. Ardent Partners says, “AP sits in an ideal position today to take the reins of cash management by implementing basic strategies that can augment the treasury department’s processes, and become a true strategic partner in managing enterprise liquidity.”1 So, finance leaders should think about how to transform their AP departments to be the hub of financial data and cash management, while arming their teams with the skill set to support the business in this way.
Ready to learn more?
Learn about Basware’s integrated solution for payment automation– Basware NetworkPay –and read how to digitize more of your AP process (even exception handling!).
Reach out – we’re here to help!