AP Automation is not a completely new concept. The benefits of Artificial Intelligence are very well documented when it comes to optimizing business processes. We can replace the mythical connotations of distant and futurist technology with real-life case studies.
Although many a time, one can explain A.I using complicated and convoluted terminologies like neural networks, cognitive decision models, etc. However, the concept is straightforward: you take slow, repetitive processes that typically waste hours or days each month and let a smart tool take care of them for you.
Early adopters across industries realize this simple concept and have put the technology to use in relevant departments. Why? Because the value is obvious: cost-saving (Read: reducing costs). Every finance department’s heart sits accounts payable and has long been a focus of process improvement projects.
With the emergence of A.I., organizations have now started to pay attention to A.P automation. Results show tremendous promise and are paving the way for AP to become a growth engine for an organization, and at the same time, consistently improving costs.
Before jumping into how is AP automation is cutting costs, let us take a peek at the various facets of AP automation.
End to end AP invoice processing, stakeholder correspondence, and risk mapping can be automated using A.I. technologies.
Here are three ways of reducing costs:
1) Cost per invoice:
A large organization can get hundreds of invoices a day, and any AP professional can tell you how time-consuming it can be. An invoice has to go through a full checklist before approving it. This means more man-hours, bottlenecks, delays, and risk of errors. Using A.I, top performers maintain a significant efficiency advantage, with end-to-end processes and approval workflows.
Here are some results-Top performers cost per invoice is 52% lesser than average AP performers. The average cost of processing an invoice is $4.57, and best in class organizations can process an invoice at $2.18.*
Organizations can achieve this by focusing on flawless process execution. This includes order compliance, supply assurance, invoice accuracy, etc.
2) FTE re-deployment:
This is very well established that AP processes are manual, and this dependency brings about costs of FTE employed doing tactical and transactional tasks. According to leading analysts, the average number of invoices processed per FTE across industries is 10k compared to ~24K invoices processed per FTE per annum by top performers.
* Why is there so much difference? You guessed it! Using A.I. systems, most transactional work, including invoice validation and stakeholder correspondence, can be automated.
Here are some results- A fully autonomous AP function of a mid to large enterprise can save up to $ 250K to $ 300K per year just out of FTE costs. (Top performers employ 5.3 FTE per billion vs. 17 FTE for peers)*
Organizations can achieve this by re-deploying the AP team’s bandwidth and process streamlining to digitize labor-intensive and repetitive tasks.
3) Early payments discounts:
AP automation saves processing and departmental costs and reduces incurring expenses by enabling cash flow optimization. Optimizing cash flows helps an organization identify the best payment terms and offers influential negotiation culture before and after contracting, driving value out of each transaction.
Here are some results – Organizations can save up to 0.10 % of the total spend using dynamic discounting*.
In organizations with 1 billion dollars in in-direct spending, top performers can save up to an additional 1 million dollars. One can compare this to an extra 200K by average performing AP organizations.
One can achieve these results with a robust dynamic discounting model that lets AP identify the best payment terms and offers mutually beneficial for both buyers and suppliers.
The value is exact, and so is the road-map to drive more value out of accounts payable. Therefore, organizations that choose to take action will generate a significant competitive advantage. Hence, with definitive results backing the claims that AP automation boost, organizations need to accelerate at the curve and generate sustainable gains.
To know more about how A.I. based solutions can create autonomous AP functions, enabling smart predictions and generate intelligent insights that drive direct strategic value across organizations- Reach out to us at Product.firstname.lastname@example.org or visit our page at https://www.zycus.com.
(*Source: 2019 Purchase to Pay (P2P) Performance Study Results