Three Ways to Reduce Costs in Your Accounts Payable Office

Growing your company’s bottom line is challenging when everyday expenses chip away at revenue. While there are several strategies to help improve your bottom line, it all starts with reducing costs in your Accounts Payable (AP) department.

Reducing operating costs can be a tall order for businesses unknowingly wasting money. Adding to that challenge is operational inefficiencies, which are one of the biggest culprits of lost revenue. Manual, paper-based accounting processing is one of the biggest inefficiencies impacting finance departments as it’s tedious and prone to errors. According to market research firm International Data Corporation (IDC), inefficiency costs companies between 20% to 30% of their revenue annually1.

AP Automation increases efficiency by streamlining the accounting process from start to finish, saving your team thousands of hours annually. Without operational inefficiencies causing lost revenue, your business department can save money. Here are three ways Paymerang’s best-in-class Invoice and Payment Automation software helps reduce costs in your accounting office:

1. Go paperless

Besides being highly inefficient, manual, paper-based processing often comes with a hefty price tag. According to Goldman Sachs, it costs an estimated $16.00 for medium-sized businesses to manually process one invoice and an estimated $22.23 for small businesses, respectively2. These costs add up quickly, and companies incur an annual fee of $171,000 for processing paper invoices3. Paper checks add to these yearly fees as it takes up to $22 to process a single check. Not only are they costly, but paper checks also create greater fraud risks for organizations. The Association for Financial Professionals found that in 2021, checks remain the payment method most impacted by fraud at 66%4.

Business departments that automate AP processes reduce paper and operating costs. For example, users who’ve implemented Paymerang’s Invoice Automation see an estimated 60%-70% reduction in invoice processing costs, and those using the Paymerang’s Payment Automation solution receive an estimated 80% – 90% reduction in payment processing costs. Finally, paperless document management also reduces costs in other areas of your AP department. Now that invoices and other important documents are digitally stored, finance departments no longer need to spend time or money hunting down extra space to keep overloaded banker’s boxes and filing cabinets.

2. Avoid expensive mistakes

Antiquated accounting processes make it impossible for finance departments to reduce operating costs by causing:

  • Late payments

Manually processing an invoice can lead to slow approval times. On average, it takes an estimated 8.6 days and $11.57 to manually process a single invoice5. Sometimes this process is even longer, leading to late payments. Paymerang’s powerful Invoice Automation technology enables you to process five times more invoices than manual processing.

  • Missed discount opportunities

AP departments struggling to process invoices promptly have no chance of lowering costs with early payment discounts. Invoice Automation speeds up the approval process and allows companies to take advantage of making an early payment.

  • Duplicate payments

Electronic payment solutions like Paymerang provide tools for identifying duplicate payments, ensuring you never pay the same payment twice.

  • Strained vendor relationships

Apart from hidden costs, another negative impacts of manual accounting procedures are strained vendor relationships. According to PYMTS, delayed payments cause strained relationships with vendors while also causing businesses to lose out on perks. For example, 59% of suppliers that had been paid late reduced or halted discounts, and 62% withheld goods or services that were ordered until invoices were paid6.

3. Reduce errors with AP Automation

Manual data entry opens the door to mistakes, which can be costly for AP departments. An estimated $600 billion annually can be attributed to data entry errors in the supply chain, data procurement, and other vital areas7. AP Automation reduces errors and improves accuracy with automated invoice capture and posting, ensuring no mistakes are made and saving your organization money. For example, Paymerang’s Invoice Automation software creates an 80% reduction in errors with coding and invoice exceptions.

Organizations that use finance automation see instant benefits through increased efficiency and reduced operating costs. Implementing Paymerang, which takes 10 hours or less, helps companies improve their bottom line by creating additional funds that were nonexistent because of overspending on manual processes.


Sources

1International Data Corporation (IDC)

2Goldman Sachs: B2B: How the next payments frontier will unleash small business

3PYMNTS & B2B

42021 Association for Financial Professionals Payments Fraud and Control Survey

5PYMNTS

6PYMNTS

7The Data Warehousing Institute

Matthew Carlson

Matthew Carlson

Matt oversees Marketing at Paymerang and believes in cultivating a creative environment while maintaining metrics driven performance. His experience includes multiple successful startups like Inworks, in addition to working for large companies like Xerox. Matt has been involved in the payments industry for over 15 years in a variety of roles, including: Operations, Accounting, Finance, Sales, and Marketing. He received a BA in History and a post-baccalaureate in English Literature from University of Oregon, as well as a Masters Business Administration from Willamette University Atkinson School of Business.