Everywhere you look, business moves faster than ever.
Everywhere, it seems, except in accounts payable.
From receiving an invoice to payment approval, it takes almost half (45 percent) of accounts payable departments between 6 days and 25 days to process a single invoice! (source: the Institute of Financial Operations). Invoices without a purchase order or for non-goods orders — which typically require multiple people to approve — take a particularly long time to process.
The root of these slow cycle times is the paper-based processes many accounts payable departments use. There are six ways that paper slows down invoice processing:
- Manual document routing: The lack of automation in many accounts payable departments requires staff to physically route many, if not all, invoices for approval, typically via inter-office mail. In an Association for Image and Information Management (AIIM) study, nearly 30 percent of organizations said they physically handle every invoice they receive. Physically routing invoices to remote approvers adds one to three days to the typical approval process (Institute of Finance and Management (IOFM)).
- No document tracking: Paper processes provide no visibility into the status of invoices. For example, invoices can become “stuck” on the desk of an approver who is out of the office. In a paper-based environment, accounts payable staff must often make multiple phone calls or send multiple e-mails to track down invoices.
- Lost or misplaced invoices: Paper gets lost, that is a reality. Almost one quarter (24) percent of the AIIM study respondents said losing invoices “in the loop” is the biggest challenge with non-purchase order based invoices.
- Multiple approvers: Non-purchase order based invoices require a median of 2.3 approvers (AIIM). Nearly one quarter of the AIIM study respondents noted that it takes at least four individuals to approve non-purchase order based invoices. It takes time for invoices to wind their way through these multiple individuals.
- Confusing approval processes: In a paper-based environment, accounts payable can never be sure who must approve an invoice. Twenty-percent of the AIIM respondents cited finding the originator of an invoice for sign-off as the biggest challenge with non-purchase order based invoices. In fact, according to Atradius, 21 percent of payment delays in the U.S. are the result of invoices being routed to the wrong person.
- Long exceptions resolution processes: Sixteen percent of all invoices result in an exception (Ardent Partners). Resolving disputes in a paper-based environment requires back-and-forth phone calls and e-mails between internal stakeholders and suppliers, and frequently involves multiple escalations. The process can take days, consuming staff time, straining trading partner relationships, and resulting in missed opportunities for early-payment discounts.
Does your organization suffer from delays that result in late-payment penalties, missed opportunities for early-payment discounts, calls from suppliers regarding invoice status, and strained supplier relationships?
It doesn’t have to be this way. Learn more about how an automated system such as NexusPayables can help speed the invoice approval process.