How Accounts Payable Automation Transforms the Vendor Management Process

Accounts payable automation is revolutionizing the way businesses manage their finances. According to a survey by Data Bridge Market Research, the accounts payable automation market is set to reach USD 5.8 billion by 2029, growing at 10.8% annually. And one area where this transformation is particularly impactful is vendor management. The 2022 State of AP Report underscores the growing importance of vendor relationships, with 71% of respondents acknowledging their increased significance in the past year.

Enhanced Efficiency and Accuracy

Accounts payable automation is a transformative solution that not only enhances vendor management efficiency but also significantly improves accuracy. According to a report by Ardent Partners, manual invoice processing can take up to ten days. Furthermore, the Institute of Finance and Management (IOFM) notes that approximately 3.6% of manually generated invoices contain errors. In contrast, AP automation comes to the rescue by achieving an impressive 99.5% accuracy rate with automation in place. This heightened accuracy is not the only benefit; it also empowers over 64% of companies to efficiently process a higher volume of invoices with the same team size.

Payment delays and overpayments

Efficient and timely payments are crucial for building strong vendor relationships, trust, and credibility. Surprisingly, 92% of businesses face payment delays due to accounts payable challenges that hinder online transactions. Additionally, the financial risks of duplicate invoices are significant, with 1.29% of invoices being duplicates, costing an average of $2,000 each. Manual processes exacerbate these errors, leading to time-consuming corrections and financial setbacks. A report by SAP Concur highlights that SMEs can lose up to $12,000 monthly due to duplicate payments. Fortunately, AI-driven automation systems can prevent these issues through intelligent invoice matching.

Enhanced Visibility and Streamlined Communication

AP automation enhances financial transparency by providing real-time access to invoice and payment data, extending visibility to vendor relationships. Automation tools tackle challenges highlighted in the 2022 State of AP Report, where 43% of AP teams spend over 6 hours weekly on vendor inquiries and 83% handle payment status inquiries. A vendor portal simplifies payment tracking for suppliers, reducing AP team workload, while electronic invoice submissions and in-system discrepancy resolution cut down on emails and calls, streamlining vendor management for everyone involved.

Cost Saving

Accounts payable automation offers significant cost savings for businesses, addressing

common cost drivers such as processing cycle times, processing costs, and labour costs. According to Business Insider, AP automation can reduce these costs by 81% and improve efficiency by 74%. A 2018 Goldman Sachs report revealed that B2B businesses in North America spend $187 billion annually on AP processing, with labour accounting for over 90% of direct costs. Comparatively, automated AP processing costs only 33% of manual costs.

Furthermore, it enables organisations to seize early payment discounts, mitigating the hindrance caused by manual invoice routing, which impacts 31% of respondents, as per insights from PayStream Advisors' AP and Working Capital Report. These cost-saving benefits can be reinvested in other business areas or passed on to vendors through improved payment terms.

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