Creating an ROI for Invoice Automation

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Author: Sarah Cornish

Author: Sarah Cornish

Although you may know that your accounts departments systems and processes for dealing with vendor invoices need updating, if managers are to be persuaded to invest in an invoice automation solution, they will want to see evidence that they will get a good return on their investment. By doing your research, you can prove this to them. Statistics from Zona Research reveal that the majority of businesses that use invoice automation make back their investments within six months of implementation. These are the main areas where invoice automation will save your business money: Labour costs Speed of payment Payment accuracy Costs associated with storage Post, photocopying, faxing etc. costs Labour costs Labour costs come from staff time spent: Sorting invoices Matching invoices with PO numbers Filing Inputting invoice data Processing invoices (copying, faxing etc.) Looking for misfiled invoices Investigating invoice disputes Figures from the Institute of Management and Administration (IOMA), suggest that it costs companies who dont use invoice automation 7 to process each vendor invoice. On the other hand, firms who do use automation have been found to reduce this to 4.20 a 60% saving.

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Greater control over when invoices are paid Being able to control when your invoices are paid through invoice automation means you will waste less company money on fines for late payments. It also means youll be able to take advantage of late payment incentives. Usually an early payment incentive will be a discount of 2% for 10% of the invoice amount. As an example, a 2% discount on a 2,500 invoice will result in a saving of 50. Dont forget that legally if you pay your invoices late, clients can charge you. The law says you can be charged a late fee of up to 100 depending on the amount of the invoice, as well as interest calculated at the Bank of England base rate plus 8%. For a 5,000 debt which is late, you could actually end up paying at least an extra 400 unnecessarily. Fewer errors Invoice automation will reduce the number of errors made on invoice payments. IOMA figures suggest that the average invoice error rate for businesses is 1.4%. Errors include over-payments, under-payments, inability to match invoices and PO numbers, and lost invoices. According to IOMA, 17% of businesses say that their duplicate invoice payment rate is between 0.1 and 0.5%. If your company had a duplicate payment rate of 0.3% on 150 million worth of invoices, this would represent an overpayment of 450,000 per year. You could recover these costs but this might mean paying a third party. It would almost certainly mean wasted time and hassle. Storage

Research has revealed that it costs around 11 to file each paper document. On- and off-site storage costs add up. Invoice automation drastically reduces the number of paper documents you need to store. Therefore, your storage costs will go down and you wont need to spend money on equipment such as filing cabinets. Say your company spent 300 per month before invoice automation on storage costs, you could realistically save 3,600 every year. Printing, faxing, copying and posting The costs associated with processing invoices, such as printing, faxing, photocopying and posting all add up. Invoice automation makes these processes largely redundant and therefore reduces costs. According to Gartner Group, a company which processed 50,000 invoices each year could make an annual saving of 25,000 on photocopying costs alone.About the Author:

DCS provides tailored solutions for invoice automation. We can work with you to identify what the potential savings/ROI would be on an invoice automation solution for your business.

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