Businesses cannot afford to make mistakes in processing invoices. Yet accounts payable departments rely on error-prone manual invoice processes.
More than two-thirds of businesses (67.3 percent) report an average payment error rate of more than 1 percent, according to the Institute of Financial Management (IOFM). Ten percent of businesses report errors on at least 3 percent of their supplier payments.
To put these error rates in perspective, a good rule of thumb is that a payment error rate over 0.5 percent indicates weak processes, or that the master vendor file needs a good weeding out.
Most of these errors can be directly attributed to the antiquated approach that most businesses use to process invoices. Only 23 percent of businesses describe their accounts payable department as having a “high” level of automation, with few manual processes, according to research from IOFM.
These errors have a tremendous impact on downstream processes, such as supplier payments. For instance, at many businesses, the enterprise resource planning (ERP) system is fed by manual or semi-automated processes that are more prone to errors. As a result, data fed into the ERP is incomplete, incorrect or not timely, processes are inefficient, and decision-makers do not have access to key variables. This is startling when you consider that the ERP is the financial nerve center of the business; it manages payment terms, supplier data, policies, and invoice and financial data.
Compounding matters, it is difficult, if not impossible, to electronically upload information on approved invoices to an ERP in a manual or semi-automated invoice processing environment, introducing even more opportunities for costly errors and strained relationships with suppliers.
The bottom line: inaccurate invoice processing errors can chip away at an organization’s profits.
Electronic invoicing solutions, such as NexusPayables, increase invoice processing accuracy by automating the extraction, validation and posting of information. This seamless delivery of perfected invoice data also drives financial decision-making and extends the payback of ERP investments.