What does accounts payable automation for mining and construction service organisations mean for your business? How much does it cost your business to process a single creditor invoice? How do you calculate the cost of processing an invoice? How many invoices do you process each month?
These questions are important for any business looking at how it can improve their accounts payable process. For mining and construction businesses accounts payable automation is particularly important for several reasons:
- The business may be operating from several branch offices or locations
- Staff are typically working remotely in the field on client sites
- Creditor invoices need to be matched to purchase orders
- Single invoice line items need to be allocated to different jobs
Accounts payable automation provides mining and construction service organisations with greater transparency and control over this important business function. So what are the risks for mining and construction businesses sticking with a manual accounts payable process?
Invoice processing cost
More than 10 years ago research company Ardent Partners coined the term “20/20” when it came to invoice processing, because the average time to process an invoice was roughly 20 days and the average cost to process an invoice was $20 (1).
Market averages are now $14.21 and 12.4 days to process an invoice, with best-in-class performers taking 3.7 days at a cost of $2.42 (1). Almost three quarters of these organisations automatically route their digital invoices for approval, meaning their invoices are automatically processed in a much more efficient manner.
Some of the cost components in processing creditor invoices includes:
- Manual data entry time
- Time in checking goods were received
- Time in manually allocating invoice line items to purchase orders and jobs
- Time in manually getting invoices approved
- Time wasted tracking down lost invoices or
- Cost to file paper-based invoices, and search for past creditor invoices
For mining and construction services business processing many invoices each month, these costs can add up very quickly. Automating an accounts payable process dramatically reduces or removes some of these costs altogether.
Missing early payment discounts
The Top 20 percent of accounts payable departments know that early payment discounts result in reduced cost of goods sold (COGS). Inversely, missing out on those early-bird payment options impact cashflow management and, ultimately, business profitability.
Automation enables organisations to participate fully in supplier discounting programs, with 17.2 percent of best-in-class accounts payable departments leveraging the advantage of these programs, compared to 2.4 percent of all other businesses (1).
Manual data entry errors are often the biggest motivating factor for organisations to automate their accounts payable processing, with incorrect invoice entry resulting in incorrect payments and/or time spent resolving mistakes.
Intelligent data capture is one of the benefits of automation with invoice data automatically captured, entered into your financial accounting system, validated, matched and posted for payment (assuming all relevant conditions are met).
Automation also decreases invoice exceptions, with the best-in-class accounts payable departments processing half (8 percent) the exceptions of the average department (16.4 percent) (1).
Cost of filing, searching and retrieving files
Storing invoices, finding invoices and providing invoices for auditing purposes takes time. People will often make copies of invoices and keep them in their personal files, which also results in duplication and unnecessary storage costs (2). For organisations with multiple offices, there are also costs associated with moving paper from one office to another via mail or express delivery.
Business Process automation reduces storage costs and enables organisations to improve productivity through the sharing of information in real-time and supporting mobile work arrangements.
Accounts payable automation for mining and construction service organisations is available
Colourworks Australia has been providing leading business technology services for over 30 years. Through our product Autofile, we provide businesses of all sizes in the mining and construction service industry with automated accounts payable services.
Contact Colourworks Australia today on 1300 351 594 to learn more about our Autofile Purchase to Pay automated business technology service.
- Ardent Partners 2014, ePayables 2014: The Quest, May 2014
- David Litzenberg, 2014, The cost of doing nothing: What every CFO should know about accounts payable automation, Tungsten Corporation PLC, pp 1-7