Your Accounts Payable Knowledge Center

Accounts Payable Automation and Staff Reduction

When people hear “Accounts Payable Automation” they think jobs will be eliminated.  They think that there is no need for an AP team, since everything will be automatic, or they can cut the team AP in half because there is very little else to do.  We have not seen this to be true for small to medium sized businesses.  There are many factors that contribute to this.  We have outlined a few of them below.

  1. Accounts Payable teams are often already understaffed. This means that tasks are not getting done or people are working overtime to finish their work or both.  Both of these have a cost and are a drain on the company.  One company was over a year behind on payables.  This was having a huge impact on their ability to hire subcontractors to get their projects completed.  They were paying overtime, losing vendors, and paying late fees.  Automation helped them dig out of that hole. They eliminated the overtime and the late fees and now have a much better reputation with the subcontractors.
  2. There are many other tasks for the AP team to work on besides invoices. Petty cash, account reconciliations, reporting, research and analytics, audits. CEOs and CFOs need data to make decisions.  AP is part of that information as it affects cashflow.
  3. Savings typically come from early payment discounts and reduction in late fees. Rarely do savings come from reducing staff. The savings are realized in not having to pay late fees on invoices.  This can be 2% or more depending on the vendor.  That is money that could be spent growing the company instead of being tossed out the window.  Think about it, if you are processing $1,000,000 a month in payables and you are paying late fees, that could be $20,000 per month you are losing. You could also be missing out on the same amount in early payment discounts.
  4. Systems are not perfect. Even the most expensive AP automation solutions are not 100% perfect. You still need someone to perform quality control. You also still need managers to approve invoices. 

So, the next time you hear that AP automation will help eliminate part of the AP team, stop and think it through.  What else needs to be done to add value to the company that is not being done? How much savings will be obtained by the automation and where can it be applied to grow the company?

Topics: Workflow, Accounts Payable, Business Process Automation