By Daniel Ball, director, Wax Digital
The paper-based invoice – the thorn in the side of every finance team but a necessary part of doing business. In fact our research into the pains of manual invoice processing showed that 82% of finance departments are overwhelmed by the high numbers of invoices they are expected to process on a daily basis and the variety of formats they’re received in.
The manual processing of these invoices is a slow and laborious task: once they arrive they need to be processed, coded and submitted for the budget-holder’s approval before being entered into the organisation’s ERP system. Data entry errors are all too common and delays frequent, with invoices easily misplaced or overlooked when Accounts Payable (AP) sends them out to the business users for approval, or for comment or coding.
Given that our survey showed that 80% of finance departments have struggled to keep pace with digital transformation compared to the rest of the business, it’s perhaps no surprise that invoice processing remains a mainly manual procedure for many organisations. Our respondents also reported that on average, manual invoice processing accounts for over 30% of the AP team’s costs, and over 32% believe that these costs could be saved if invoice processing was automated.
With the cost of processing an order from requisition through to invoice payment thought to be as much as £25-£40, it’s a pricey affair, in more than just a financial sense.
To understand how much manual invoice processing could be costing your business, it’s important to consider the following:
- Are invoices stifling productivity?
Our survey respondents acknowledged that the time it takes to process invoices prevents the accounts payable team from performing other tasks that could provide greater value to the business. If you take a look at the entire invoice processing life cycle, from the point of receiving an invoice through to it being processed for payment, the act of doing this manually for each individual invoice impacts hugely on the AP team’s time, stifling their ability to perform more tasks that add value to the business.
- It’s a dirty job
Ever spared a thought for the poor accounts payable team whose job it is to manually process all of those invoices? 82% of our survey respondents said that poor invoice process management was impacting their teams’ ability to perform effectively and leading to low job satisfaction. 60% said that processing supplier invoices is the most hated aspect of the job amongst their team, 70% find it tedious, and it causes frustration for 69%. Team morale is important, what would be the cost to your business if your productivity dropped to an all-time low or you suddenly lost valuable staff due to job frustration or boredom?
- AP clerks aren’t robots
With any manual process comes user error, and in the case of the invoice, this could be a mistake by the supplier who sent it, or the AP payable clerk at the data entry stage. Over half of our survey respondents admitted to regularly receiving supplier invoices with an incorrect financial value, while mistakes such as incorrect or missing PO numbers; line items not matching POs; and missing VAT numbers are common problems which delay payment. These everyday errors not only come at a cost to productivity but also often prevent invoices being paid on time.
- Payment delays
And what about the price of late payments – unhappy suppliers imposing late payment fines or refusing to honour pre-agreed discounts because they haven’t been paid as expected? From data entry errors to misplaced invoices, our research shows that many invoice payment delays are not intentional but simply down to ineffective and inaccurate processes that could be improved. Can you afford to upset a valued supplier over an over-looked or incorrect invoice?
Clearly, manual invoice processing is causing UK businesses unnecessary costs and not just of the financial type. It’s also having a significant impact on staff morale, supplier relationships and productivity levels. And although the finance teams we spoke to acknowledged that they were behind with curve with digital transformation, they did recognise that eInvoicing had become a priority in order to improve efficiencies not only in finance, but for the wider business too.
About the research
The research was conducted by Sapio Research and Wax Digital. It targeted 200 senior managers with a responsibility for finance in medium to large UK enterprises. 44% of respondents were from organisations with 50-249 staff, 37% had 500-999 staff and 19% had over 1000 staff.