Goodbye Late Fees, Hello Early Payment Discounts: Discover the Benefits of Invoice and Payment Automation
Accounts Payable (AP) departments play a significant role in the overall success of a business, but chronic late payments make it difficult for finance departments to get ahead. Not only can late payments have damaging effects on you, but they can also impact your suppliers.
Late payments have always been challenging for Accounts Payable (AP) departments but were exacerbated by the COVID-19 pandemic. Research from Hackett Group, Inc. found that, on average, larger companies took 58 days to pay suppliers during the first fiscal quarter of 2021, an increase from 55 days in the same period in 20201. The pandemic also adversely affected invoice approval and payment processing times. In the fiscal year 2020, big companies took an average of 62 days to settle their dues with suppliers, up 7.6% from the previous year.
Many factors contribute to late payments, but one of the biggest offenders is a lack of automation in the finance department. Manual, paper-based accounting processes are costly and time-consuming, but the problems don’t stop there. Other issues include:
- Being error prone.
- Slow approval times.
- A lack of visibility.
- Antiquated methods of managing and storing documents.
These obstacles can negatively affect an organization’s ability to pay suppliers promptly, putting them at risk. Consider some of the repercussions of not paying your suppliers on time:
- Cash flow difficulties:
- Cash flow plays a significant role in determining whether a business will succeed. When companies fail for financial reasons, poor cash flow is to blame 82% of the time2.
- Strained vendor relationships:
- 59% of suppliers that had been paid late reduced or halted discounts, and 62% withheld goods or services that were ordered until invoices were paid3.
- Endless late fees:
- Delayed payments often result in late fees, which can be detrimental to organizations constantly making late payments.
- Extra stress on your team:
- Front-line staff are usually the ones who field angry complaints from suppliers wondering where their payment is. This can be stressful and overwhelming for AP teams.
- Damaged supply chain:
- A late payment can produce a ripple effect on suppliers’ already suffering from an unpredictable supply chain.
Could an outdated AP process be costing your organization more by making these mistakes? If so, you’re probably wondering how to improve the timing of your payments and reduce the risk of damaging supplier relationships.
Implementing AP Automation is the first step businesses can take to eliminate overdue payments and say goodbye to late fees for good. The benefits of automated accounts payable processes can help you reduce costs and more. For example, best-in-class AP Automation saves you 80% of time on processing, meaning you can take advantage of early payment discounts offered by suppliers by saving time from manual processes. In 2021, Ardent Partners saw a third-year increase in early-payment discounts being captured up 15% from the previous year4 thanks to more finance departments embracing new technologies.
Over time, rewards from early pay discounts can produce significant savings and improve cash flow. Here’s how Invoice and Payment Automation help you avoid late payments and take more advantage of early payment discounts:
Invoice processing automation technology uses artificial intelligence to capture, read and route invoices, giving your team a fail-safe electronic paper trail. This results in:
- Greater visibility.
- Increased efficiency.
- Better accuracy.
- Improved timeliness.
By utilizing efficient electronic workflows, you can eliminate check printing and envelope stuffing, while reducing vendor payment inquiries and tedious follow-up on unprocessed payments. This results in:
- Greater efficiency.
- Greater speed.
- Greater security.
- Greater support.
AP Automation eliminates the manual tasks that bog finance teams down, guaranteeing to never miss a payment deadline again. By making payments on time, you can ensure that your business operates effectively and that you remain in good standing with your suppliers.
To learn more about how Paymerang’s AP Automation platform can help you stay on top of your business payments, schedule a demo today.
1Hackett Group, Inc.
2Preferred CEO: Cash Flow: The Reason 82% of Small Businesses Fail
4Ardent Partners’ Accounts Payable Metrics that matter in 2021