AP Automation Can Save Finance Teams $400 an Invoice

Efficiency is the key to preserving margins in an age where macro-concerns dominate and inflation rages.

Chief financial officers (CFOs) and their finance teams are well aware of the need to run leaner.

At the same time, the demands on those finance professionals are only getting more onerous, especially as transaction volumes surge and supply chains remain choppy.

Matthew Tillman, CEO of OpenEnvoy, noted to Karen Webster that cost cutting is in laser focus. And the decisions about how to cut costs usually boil down to how to automate the mundane and manual tasks that consumed the time of dozens, hundreds or even thousands of staff members. Yet, there can be some skittishness about embracing the very technology that helps streamline the work behind the scenes.

“People have this fear of automation — that it has to be a long journey,” he said.

In part, Tillman said, that’s because enterprise resource planning (ERP) integrations have traditionally stretched out over years and involved open-ended management contracts.

Tillman’s observations came against the backdrop where Stanley Black and Decker is reportedly in the midst of cutting 1,000 finance jobs — a move that would reduce expenses. The conglomerate’s strategy is illustrative of what’s happening in corporate boardrooms across any number of verticals as CFOs look across the enterprise for logical places to cut administrative costs.

But there is some low-hanging fruit that can be plucked where the choice does not have to be so stark. Automation, Tillman said, can be leveraged in ways that allow firms to shift the focus of staff onto more strategic, skilled tasks, starting with the invoices they are about to pay.

“Companies overpay and they don’t know it because it’s humans looking at paper,” Tillman told Webster.

Supply Chains Are Stretched

Supply chains are stretched even as the pandemic recedes, and as Tillman noted, legacy integrations aren’t helping matters. They’re clunky, inefficient and require a lot of manual data entry, which is then shifted onto suppliers. All the while, employees on both sides of the transaction still fill out forms, chase paperwork and juggle data held captive in Excel sheets.

Modernizing payables by automating those manual tasks is just the first step, Tillman explained. Real savings begin when there is a process that scans invoices in detail at the line-item level to determine what is being billed on a particular invoice and whether that particular item has been paid in a prior invoice. It’s a capability that goes beyond the simple purchase order (PO)/invoice matching and avoids companies paying for things more than once.

“That way, you don’t have to go and beg your vendors to get that money back,” he said.

Based on Tillman’s and OpenEnvoy’s experience, as many as 10% of invoices in the United States and as many as 30% of international invoices have some sort of error in them in favor of the vendor or supplier. And joint research between PYMNTS and OpenEnvoy found that as many as 8% of invoices are duplicates — which gives a hint as to just how much wasteful spending is out there.

It’s why it’s far less disruptive, Tillman said, to use automation to simplify payables and make the process more programmatic and proactive, particularly with larger firms like Stanley Black and Decker that have subsidiaries around the globe, with complex supply chains and invoices that may span many pages.

What Automation Isn’t

Companies have tried many ways to find a workaround to this problem, including removing the finance teams from the approval process, only to push it back to other areas of the business, Tillman said.

That simply transfers risk elsewhere but does not actually save money. In fact, it may exacerbate the problem. The handoffs between departments and teams working in those departments often leave gaps in the flow of information and of payments in general and often require the involvement of suppliers to address questions. All of that takes time and increases days sales outstanding (DSO) for the supplier and costs for both finance teams.

Automated payables providers that use artificial intelligence (AI) and machine learning (ML) to scan invoices at scale for duplicates, including OpenEnvoy, help organizations minimize the heavy lift associated with paying the right amount on the right invoices across the organization as a whole, and they do it in real time, so overspending is eliminated.

Improved communication is critical, as going digital can be a complex undertaking, particularly when there are many suppliers and subcontractors in the mix, Tillman said.

The cost savings are significant, as Tillman told Webster that OpenEnvoy saves some of its multinational clients as much as $400 an invoice.

“If you can make things efficient using automation, with AI and machine learning, you solve many problems and make everything more efficient,” he told Webster.