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AP automation

4 Ultimate Cost-Saving Tips for Effective Use of AP Automation Tools

Are you a business owner interested in saving costs for your business?

Then you are at the right place.

Accounts payable (AP) automation tools can have a big impact on your cash flow and savings.

How can you tell?

There is more than one way to estimate the magnitude of cost savings with AP automation tools. This figure varies based on the calculation methods used.

Table of Contents

  • Problems You Can Avoid With AP Automation Tools
  • Tips for Cost-Cutting Using AP Automation Tools
  • Karbon Payout – The Ultimate AP Automation Solution

Problems You Can Avoid With AP Automation Tools

  1. Automated Invoice Processing Saves Costs

In a recent survey conducted with 1485 organizations, the Productivity & Quality Center found the top performing companies spent an average of INR 164 processing each invoice.

The lower-performing companies spent up to 5 times or up to INR 792 per invoice for processing. The key differentiating factor between both these companies was that the top-performing companies had adopted AP automation tools while the lower performers hadn’t.

These cost savings multiply as you scale up the invoices processed. The logic is simple. The more invoices you process, the more money you can save.

  1. Decreased Invoice Processing Costs

When you shift from manual accounts payable process to an automated one, the best way to measure money saved from  AP automation tools is to measure the cost per invoice.

It is the most accurate and widely used method for measuring savings.

Based on this metric, the Institute of Finance & Management found that companies reliant on little to no automation, on average, spent INR 695 to process one invoice.

If a high level of automation is used, without accounting for labour costs, it costs only INR 140.

  1. Exponential Rise in Savings

During an assessment of the savings with AP automation, you need to also consider the cost of labour, physical liabilities (paper cheques, stamps etc), processing fees etc.

You might also want to know about the costs related to AP invoicing. These are:–

  • Labour cost: the single most important cost. AP automation can save at least 70 to 80% of employee staff time in the AP department.
  • Paper cheque expenses make up 65% to 80% of all B2B payments towards SMEs. A transition to AP automation will only cost 15 to 25% of the expense of the payment.
  1. Reduced Labour Costs

Labour cost is one of the biggest expenses, inclusive of the time taken by employees to process invoices.

Calculating this labour cost is simple. Calculate an employee’s hourly pay and multiply it by the number of hours spent by them on processing invoices each month. Find out the number of people involved and simply add those numbers.

Additional costs that need to be considered include infrastructure costs. These include ERP systems, accounting software and fraud handling systems.

  1. Protection From Negative Cash Flow Management

If you have invested in manual systems for processing your invoices, then it is not the best business decision you have made.

Regardless of the economic conditions, business owners need to prioritise cash management issues. Without hard cash, it is difficult to pay for expenses, vendors or even invest in growth- activities.

The time and expense involved to invoice a vendor, tracking payment due date, doing a follow-up, collecting cheques, and matching invoices are unimaginable.

With automation, your AP payment is moved to the cloud which eliminates paper reliance. There are also faster alternatives like NACH, virtual cards etc.

This allows payments to simply reach your account after approval. The best aspect is the remittance data reported electronically.

ap automation tools reduce the cost of invoice processing

Tips for Cost-Cutting Using AP Automation Tools

Now that you know about the type of cost savings that come with AP automation, the question is – What Next?

Here are a few tips for the way forward:-

  1. Lower your invoice cost processing by implementing AP automation. Research software to see what meets your unique requirements.
  1. “Cut” paper cheques out of your business. A cheque is a completely unwanted expense and the same thing can be done digitally at a fraction of the cost.
  1. Reduce manual data entry processes. It costs time and money to enter invoice data manually.
  1. Evaluate which payment method costs you the least for vendor payment processing.
  1. Keep an eye on the Return on Investment(ROI) from AP automation. If it is disproportionate, immediately switch to another AP automation software

If you want to know more about which AP technologies can help you implement AP automation, check out our article on AP automation technologies.

Karbon Payout – The Ultimate AP Automation Solution

Karbon Payout is one of the best AP automation tools
  1. Payout is a vendor payment portal that automates vendor payments to avoid the manual payment process.
  1. Our user-friendly interface has only one single dashboard to help you focus on business excellence and growth.
  1. It provides Error-Free transactions that save time and ultimately money in terms of transaction failure fees.
  1. Our advanced system automatically selects the best payment channel out of NEFT, RTGS, and IMPS and reduces payment failure chances.
  1. With Payout links, you can just send one link to your vendor in a single click and allow them to add themselves into your system. All history and processed failed transaction information are synced instantly.

The views expressed in the blogs on this page are solely the opinions of the authors and do not constitute expert advice. While we strive to provide accurate and up-to-date information, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk. We disclaim any liability for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.

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