AP Automation ROI: The Key to Streamlined Processes and Cost Savings

AP automation has revolutionized traditional accounting processes by delivering significant value through time and cost savings, as well as streamlined processes. If your company still relies on manual accounts payable processes, you might not be oblivious to their inefficiencies. 

Manual tasks are generally time-consuming and error-prone. However, with AP automation software, you can automate your invoice data extraction, and streamline your entire approval process, ensuring timely bill payment.

If you're considering investing in an AP automation, you may have concerns about its return on investment (ROI). Although it offers added benefits such as faster invoice processing, faster book closing, and timely payments, is the cost of software worth it? In this blog, we will cover how you can calculate the ROI of AP automation. 

Benefits of AP automation

Labor efficiency

On average, it takes an accountant approximately 10-12 minutes to process a single invoice. When you factor in the additional time needed to rectify manual errors found during and after posting bills, you could end up spending anywhere between 15 to 35 minutes per invoice!

By implementing AP automation in your invoice processing function, you can substantially decrease the processing time to as little as 2-5 minutes per invoice and minimize the time spent on error correction. This streamlined process not only frees up your accountants' bandwidth but also empowers them to handle a significantly higher number of invoices, potentially boosting efficiency by up to three times.

Faster processing

Have you experienced late payments due to delays in the approval process? Approvers often procrastinate taking action on an invoice because gathering the necessary information and context to approve it would take them anywhere between 6-10 minutes per invoice. These delays are further exacerbated when emails get lost in inboxes, forcing finance teams to constantly send regular reminders.

Accounts payable automation offers a solution by reducing the approval time to just 2-5 minutes per invoice. With features like auto-assignment of approvers and automated reminders, the software drastically decreases the time required to approve and process invoices.

Error reduction

Manual processes are prone to errors, which can lead to delays in book closing and late payments. With automated payables processes, errors in invoices are promptly identified, enabling timely corrections and ensuring a seamless accounting process.

Payment errors could also be causing financial losses. Duplicate payments may go unnoticed, and payment frauds may remain undetected, resulting in substantial monetary losses, amounting to hundreds of thousands of dollars. By implementing automation, you gain insights into duplicate payments and maintain complete control over your finances, reducing the risk of such losses.

Avoid late payment fees

AP automation software not only ensures that your payments are made on time but also notifies you of any early payment discounts you might be missing. With payment discounts and late fees typically ranging from 2% to 5% per invoice, paying early can potentially save you up to 50,000 USD per year. Adopting AP automation presents a lucrative opportunity to optimize your financial processes and unlock significant cost savings.

Compliance

Performing internal audits can often be a cumbersome task when relying on manual invoice processing. With data stored in multiple locations and inconsistent formats, accurately accounting for payments can become a hassle. Automated processes ensure that all invoice data is stored in a single platform and easily accessible for compliance checks. Furthermore, through secure login and restricted access, sensitive information like payment details remains accessible only to authorized individuals within the organization.

Cost of accounts payable automation

Software cost

Accounts payable automation software typically operates on a monthly payment model, where you subscribe to pricing plans based on your requirements. The fee varies depending on factors such as the chosen pricing plan, the volume of invoices processed, the number of users on the platform, cloud storage needs, and the included features. On average, well-known accounts payable software solutions can range from 1,000 USD to 2,000 USD per month.

Implementation and integration cost

Ease of implementation is an important factor to consider when calculating the ROI of accounts payable software. Implementing the software in your company usually incurs a setup or subscription fee, which includes costs for software integration, onboarding, and training your employees, and occasionally user and vendor setup costs. These costs are typically one-time investments associated with the initial software purchase, amounting to approximately 2,000 USD.

Implementing Accounts Payable automation software

While AP automation software offers a high return on investment, it is important to choose the right software for your business needs. Several factors, like available features, pricing plans, customer support, level of automation, and integration with your accounting system should be considered for this. By carefully evaluating these, you can ensure that the chosen software meets your requirements and maximizes the benefits of AP automation for your business.

ClearTech stands out by significantly reducing your processing time through advanced invoice data extraction, leveraging accurate OCR technology, and human-assisted services to ensure 100% accuracy. Additionally, its auto-cost center allocation feature helps reduce errors identified during book closure. With ClearTech's smart approvals feature, you can easily configure approval policies and seamlessly approve bills with a single click.

Furthermore, ClearTech provides valuable insights into your vendor spending, helping you identify additional savings opportunities. It also reduces payment costs by minimizing ACH transaction expenses and eliminates the inconvenience of printing and mailing checks. With ClearTech, you can streamline your accounts payable processes while maximizing cost savings and efficiency.

FAQs

• What is AP automation ROI?

AP automation ROI indicates how well your accounts payable automation solution is performing. Most automation solutions help reduce your invoice processing cost and time by reducing errors and cutting down on processing times at a small fee, helping you save money on resources and overspending. ROI calculates how long it would take for the automation solution to become profitable for you. 

• How can I calculate the ROI of AP automation?

You can calculate the ROI of AP automation by calculating the first-year savings and dividing it by the total investment in the product in the first year. The payback period of the product can be calculated by dividing the total investment by the savings incurred in that time period. 

• What are some tips for maximizing the ROI of AP automation?

You can maximize the ROI of AP automation by selecting a cost-effective automation solution that offers maximum cost savings and 100% accurate data capture. Most AP automation software provides an ROI calculator to calculate your company's total savings in the first year and payback period. 

• What are the direct benefits of AP automation?

Direct benefits of AP automation include increased labor efficiency and faster processing times. Reducing manual errors and timely payments are also added benefits of AP automation. 

• What are the indirect benefits of AP automation?

Accounts payable automation solutions also help you reduce fraud and identify cost-saving opportunities. You can also digitally manage vendor documentation like invoices, creating an elaborate trail for future AP audits.