Chief Financial Officers (CFOs) must always be prepared for rare "black swan" events, which have significant destructive potential. By definition, they are difficult to predict and are often triggered by natural forces, such as hurricanes, fires, and pandemics. Beyond activating business continuity plans, there is little more one can do than wait for them to pass.

However, operational issues originating from within are a completely different matter—at least in theory, they are controllable.

Accounts payable (AP) and its labor-intensive tasks have long been a pain point in global finance operations, and the pandemic has further exacerbated the frustration with AP processes. The lack of digital or automated invoice processing is precisely the primary source of inefficiency in AP budgets.

Shan Haq
Image source: Transcepta

Too many hands, too much time

Every manager wants to accomplish more with fewer resources. Therefore, solving manual processing issues by adding more staff is not an ideal solution. Moreover, as the number of employees increases, costs, data, and communication issues also grow accordingly.

In fact, more employees can actually exacerbate daily problems and challenges. Incomplete invoices cause communication bottlenecks because more people become involved; subsequent phone calls or email follow-ups become more complex; and suppliers are also unclear about whom to consult with questions. In short, too many hands spoil the broth. Moreover, these extra efforts consume time, cost real money, and increase risk.

Digitizing the AP function can bring several unique and substantial benefits to CFOs. The following are just a few of them.

Six benefits for CFOs

1. Significant cost reduction

CFOs can expect costs to drop by 80%, enabling them to redeploy staff to more value-added activities. In the current uncertain environment, these savings help maintain profit margins and enhance business agility.

2. Dramatically reduced processing time

Reducing manual intervention, errors, emails, and phone calls can shorten invoice processing time by up to 95%. Concerns about late payments will become a thing of the past. Once suppliers understand how automated AP benefits them, the acceptance rate for electronic onboarding will approach 100%.

3. Reduced fraud opportunities

In the United States alone, losses from deposit fraud are estimated at up to $25 billion annually. Replacing manual interactions with automation can significantly reduce the likelihood of fraud occurring and, when fraud does occur, greatly narrow the pool of potential suspects.

4. Unlimited scalability

Once a company's AP is digitized, its potential for scaling (up or down) is almost unlimited, with negligible incremental costs. Additionally, businesses can avoid the financial and human costs associated with hiring, training, and firing.

5. Actionable real-time data

CFOs and their colleagues need accurate, timely financial data. When an automated AP system ingests and digitizes all invoices while updating all accounting records in real time, budgeting and forecasting become more effective and reliable.

6. More precise cash management

With accounting records updated in real time, cash management will no longer be an "art" but closer to a "science." Invoices will not pile up on someone's desk waiting to be entered. CFOs will know exactly what the company owns and owes, and will have the financial visibility to schedule payments within 24 hours of receiving an invoice.

Perhaps most importantly, CFOs will be able to confidently seize financial opportunities that might otherwise have been missed.

Real-world success story

A large university recently digitized its AP function, providing an excellent case study. With 27,000 invoices from thousands of suppliers, the vast majority arriving by mail and requiring manual processing, staff were overwhelmed.

The university needed five additional full-time mailroom employees to work alongside the AP team to handle the mountain of documents, but adding staff still could not solve the problem. Documents were lost, payments were incorrect or delayed, and employees were on the verge of burnout.

According to the Institute of Finance and Management, the cost to manually process a single invoice is approximately $13, while the cost per invoice with best-practice automation is about $2. After digitizing approximately 60% of its invoices, the university began saving $178,000 per month. Additionally, AP processing costs dropped by 90%, freeing up staff to focus on more critical needs.