How to Slash Your Payment Costs by 75% Without Breaking the Bank: A Guide for SMBs

In the modern integrated business world, no business can survive without collaborating with third-party vendors for goods and services. Making on-time payments is critical for maintaining healthy relations with third-party vendors and keeping the operations running in full swing. Still, so many companies continue to use an antiquated manual accounts payable process that is costly and inefficient.

 

The Hidden Costs of Manual Accounts Payable

The statistics show that with manual AP processes, only 25% of business firms could pay their invoices on time. This inefficiency isn’t just an operational nuisance; it’s a financial burden.

Manual AP processes are prone to errors, latency, and hidden costs that substantially drive down the profitability of a company. Automated AP, on its part, has been able to help businesses save an average of $2.5 per invoice, this number may sound small but after some time earns quite a pretty penny in savings.

Take a closer look at the ways in which manual AP processes are eating into your profits and how shifting to automated AP solutions will slash payment costs as high as 75% with no budgetary strain.

Manual AP processes are prone to errors, latency, and hidden costs that substantially drive down the profitability of a company. Automated AP, on its part, has been able to help businesses save an average of $2.5 per invoice, this number may sound small but after some time earns quite a pretty penny in savings.

Take a closer look at the ways in which manual AP processes are eating into your profits and how shifting to automated AP solutions will slash payment costs as high as 75% with no budgetary strain.

Suggested Reading: What is AP Automation and How Does It Work?

AP Automation Challenges and Solutions 

Manual AP processes are fraught with issues that shave dollars and cents off the bottom line. Following is a closer look at the problems and how they can be resolved through automation.

Manual Coding Errors

Manual data entry through the AP processes is prone to errors at an error rate of 8% to 12%. These mistakes further lead to incorrect payments, compliance issues, and expensive rectifications. For instance, wrong invoice coding will have the effect of paying against the wrong vendors or elapsing deadlines and bringing financial and reputational damage.

The Solution

These risks decrease significantly when there are automated AP systems in place to get rid of manual entry of data. Some modern technologies applied for tackling the challenges associated with the capture and validation of invoice data include Optical Character Recognition or OCR and machine learning. To this effect, error rates in businesses are dramatically lower by automating such tasks. Automatic systems also provide real-time error-checking and correction capabilities, ensuring that invoices are processed both efficiently and correctly.

 

Inefficient Approval Workflows

Some of the inefficiencies related to Approval Workflow include:

• Approval Uncertainty: The manual process might bring misunderstandings about which approver has to approve which documents, further leading to delay.

• Availability Issues: The approvers may not be in the office or may not be available, which adds extra time to the delayed approval process.

• Ineffective Follow-up: Manually following up on approvals is very time-consuming and prone to oversights.

• Document Loss: Physical documents get lost, leading to delays and complications.

• Vendor delays: All these inefficiencies normally lead to late payments, which can affect vendor relationships and may result in fines.

• Complicated payment management: Different means and timelines for making payments, if handled manually, will add to the complexity and possibility of errors.

The Solution

Automation of the AP process flows with predefined rules and digital routing. The invoices get auto-routed to the right approvers for approval based on predetermined criteria; hence, minimal delay. Similarly, automated reminders and notifications ensure approvals well in time, while all documents managed digitally avoid loss, and tracking of documents becomes easy. Consequently, processing times become shorter and result in better satisfaction among vendors.

 

Outdated Payment Methods

Despite all the progress in payment technologies, 36% of companies still use physical checks for more than half of their sets. Reliance on physical checks is outdated and highly vulnerable to fraud as such:  

Persisting with physical checks presents several growing challenges: 

Declining Usage: The number of check payments in the U.S. has dropped dramatically from 42.6 billion in 2000 to just 14.5 billion in 2018, reflecting a significant shift away from checks. 

Increased Costs and Complexity: Since the pandemic, 49% of businesses have reported heightened difficulties and costs related to processing checks and paper invoices. 

The Solution

Shifting to automated AP solutions offers significant improvements. Digital payment methods like ACH transfers and virtual cards not only reduce fraud risks but also accelerate processing times. Automated systems enhance tracking capabilities and streamline payment scheduling, helping companies achieve greater efficiency and better cash flow management. 

 

Fraud Risk

Accounts payable processes are particularly vulnerable to fraud. According to the 2024 AFP Payments Fraud and Control Survey,

• Check Fraud: 65 percent of organizations experienced check fraud.

• USPS Fraud: Organizations reporting USPS fraud increased by 10 percentage points to 20 percent.

• ACH Credits: ACH credits emerged as one of the most frequently targeted BEC fraud areas, affecting 47 percent of organizations.

The Solution:

AP automated systems address advanced fraud prevention through encryption, secure authentication, and real-time monitoring. Such features help identify fraud and prevent it from happening to minimize risks of fiscal loss for the business concerned. By integrating these high levels of security, the business can make safe and secure financial dealings.

Suggested Reading: Comprehensive Guide on Vendor Payment Process and Automation

 

High Fees for Basic Features

Most of the available solutions at this time involve high costs even for basic features, high expenses, and minimal returns for whatever business is using it for a particular purpose. These include:

• High Costs with Minimal Return: High upfront costs where the features of the payment solutions are so basic that they do not fully address business needs.

• Fragmented Systems: Most businesses pay with the use of different platforms for invoicing, processing their payments, and meeting their tax compliance.

• Limited Automation: Despite the loud outcry for automation in general, many systems remain predominantly manual and are therefore very time-consuming.

• Non-Integrated Solutions: Most solutions lack full integration with accounting software, making data synchronization and reporting difficult.

• Lack of Compliance Support: Most solutions lack the depth for comprehensive tax compliance, hence increasing the possibility of non-compliance.

• Hidden Fees: Most such platforms advertise an initially cheap overhead cost, whereas, but include hidden fees that inflate overall cost.

The Solution

Zenwork Payments solves these problems through a holistic AP automation solution that saves money for companies in every possible way, including:

• Centralized Platform: Zenwork Payments centralizes the AP process into one platform, reducing the need for too many platforms in use.

• Comprehensive Features: The platform includes comprehensive features, including vendor self-onboarding, automated W-9 collection, real-time TIN matching, bulk import functionality, and automated integrations, providing a complete solution for all your AP needs.

 

How Zenwork Payments Can Change Your AP Process

Next Level Accounts Payable with Zenwork Payments: Save Money, Boost Productivity Easily. Here’s How:

• Reduce Errors and Save Time: Zenwork Payments reduces errors and simplifies workflows.

• Vendor Self-Onboarding: Allow vendors to onboard with ease, without adding to your administrative overhead, and capture all data accurately.

• Automation of W-9 Collection: Speed up the collection of tax documents with the least compliance risks.

• Real-Time TIN Match: Ensure taxpayer identification numbers are correct and current, reducing errors and compliance issues.

• Bulk Import Functionality: Import volumes with ease, hence minimizing the need for manual entry and thus saving hours.

• Automated Integrations: Allow seamless integrations with your current accounting systems; make sure that data is correctly mirrored across your apps, without excessive manual work on your part.

• Multiple Payment Options: Supports Standard & Same Day ACH, checks, and cards, providing flexibility in payment methods.

• Payments Scheduling: Supports bulk and recurring payments to make cash flow management easy, thereby reducing a lot of administrative tasks.

• Cashflow Visibility: Get visibility into payment schedules and cash flow to empower your business with the right financial decisions.

Reduce Costs and Improve Efficiency

Automation of AP processes with Zenwork Payments brings huge cost savings:

• Lower Processing Costs: this would reduce manual tasks and errors, hence giving a lower cost of processing and operational expenses.

• Improved Vendor Relationships: timely, accurate payments mean increased vendor satisfaction; hence, strengthening business relations with them.

• Increased Compliance: advanced compliance features help businesses in following the regulatory requirements for betterment and reduce fines and penalties issued by authorities.

 

Conclusion

Manual AP processes can take a huge bite out of your profitability in your SMB as a result of natural inefficiencies, high costs, and increased fraud risk. This means you’ll be able to realize significant cost savings, help ensure better compliance, and experience smoother payment processing through automated AP solutions, such as Zenwork Payments. Success not only enhances efficiency but also positions your company to capture major savings and position your business for financial stability and growth without having to break the bank.