11 Warning Signs Your Business Needs AP Automation
Technology is getting smarter integrating itself into ERP platforms without needing people to intervene. Instead of “being the app,” your people will be focused on “using the app” to give business leaders the information they need to make smarter, faster decisions. Technology is getting smarter integrating itself into ERP platforms without needing people to intervene. Instead of “being the app,” your people will be focused on “using the app” to give business leaders the information they need to make smarter, faster decisions. Deloitte – Crunch Time, Finance 2025.
There are warning signs that your business may need an AP automation solution, and being attuned to them can significantly impact your operational efficiency. As businesses grow, the manual handling of accounts payable can create friction—leading to prolonged invoice approval cycles, increased processing costs, and an overall lack of transparency in cash flow management. These challenges not only hinder your ability to respond quickly to financial demands but can also strain vendor relationships and create compliance risks.
Long Invoice Approval Cycles
Manual invoice approvals often require input from multiple stakeholders, resulting in delays that clog the system. When a single invoice must pass through procurement, finance, and management before payment, it can take upwards of 16 days to finalize approval. These delays have a direct negative impact on vendor relationships, as late payments can damage trust and lead to renegotiated terms—or worse, strained partnerships.
According to Ardent Partners, automating AP approval workflows can reduce processing time to just 3 days by streamlining the routing process and eliminating unnecessary steps. Automation provides faster approvals, fewer bottlenecks, and ensures that vendors are paid on time, which fosters healthier, long-term relationships.
High Invoice Processing Costs
The costs of processing invoices manually are essentially high. Labor is a major factor, and businesses often invest more than 2,000 hours annually in AP-related activities such as data entry, validation, and reconciliation. Based on the average hourly wage of $22.67 for a business processing 6,000 invoices annually, the cost of labor will be over $46,500. Moreover, manual processes are incredibly prone to errors, thus driving up the costs even further. AP automation, on the other hand, cuts these costs by an astronomical degree.
Key cost-saving benefits of automation:
- Reduced Labor Costs: Automation saves thousands of man-hours per year due to the removal of manual data entry.
- Lower Processing Costs: Automation cuts the processing costs of AP from $15-$20 per invoice down to as little as $2-$5.
- Fewer Errors: Automation eliminates the need for error-related corrections, saving a lot of time and rework costs.
Lack of Visibility into Cash Flow
Cash flow visibility goes a long way in making informed financial decisions, but a lot of organizations struggle with this aspect because of their dependence on unautomated and very manual processes. According to the International Labour Organization, 7 enterprises out of every 10 report insufficient cash flow to cover operations and salaries in most regions. This impacts how outstanding invoices can be tracked to efficiently manage working capital.
In fact, in a study conducted by Forrester Consulting on behalf of Corcentric, a surprising 82% of CFOs desire holistic cash forecasting, but only 5% have that capability. More alarming, however, is the finding that just 8% of regional companies can see cash flow in real-time; most are forced to use data that is months old.
Manual processes consume approximately 253 hours a week of data entry and cash analysis, and by the time a cash flow report is even reviewed, it may be as old as ten days. Surely, that-navbar effective business reactions to such information.
How Automation Helps:
- Real-Time Dashboards: Real-time dashboards provide immediate access to cash flow data so that timely decisions can be made.
- Automated Reporting: Reports are generated without any manual intervention. This reduces delays and ensures accuracy.
- Improved Cash Forecasting: The all-in-one forecasting tools enable businesses to anticipate cash requirements in a better manner.
- Manual Effort Reduced: It frees the resources from 253 hours of data entry every week; these resources can then be utilized in value-added work.
- Seamless Integration: It seamlessly integrates with a diverse range of financial systems to ensure data integrity and provide an improved view of overall finance.
By implementing automated AP systems, organizations can be in a better position to enhance cash forecasting, reduce manual labor, and ensure timely access to accurate financial data which is quite critical for maintaining adequate liquidity and smooth flows of operation.
Late Payment Penalties
Missed deadlines for payments often lead to costly penalties that could be so easily avoided if the process were more streamlined. The 2022 State of AP Report denotes that 87% of businesses have reported late payments due to manual AP. These delays have not only financial penalties but have also hurt your relationship with suppliers- 84.4% of whom prioritize timely payment.
How AP Automation Eliminates Late Payment Penalties:
- Automated Scheduling: Payments are automatically scheduled to ensure deadlines are never missed.
- Payment Reminders: Reminders are set innately to remind your team of imminent due dates.
- Reduced Process Time: Through an automated workflow, the invoice-to-payment cycle is reduced and drastically ensures that the company covers all its payments on time, with no exceptions.
Missing Early Payment Discounts
Failing to execute early payment discounts is another example of how a company dependent on manual processes is giving up an opportunity. Early payment discounts of 1-2% are given by many vendors, but slow approvals or processing hinder the business from taking advantage of the savings. According to the Institute of Finance and Management, for every dollar billion spent on purchase orders, organizations lose more than three million dollars in early payment discounts.
How AP automation helps in capturing early payment discounts:
- Faster Approval Cycles: Automation speeds up the cycles of invoice approvals, thus leaving adequate time to capture early pay discounts.
- Reduced Manual Intervention: While reducing the number of manual touchpoints, delays remain at a minimum.
- Discount Management Tools: An automated system can track invoices with early payment discounts and prioritize their processing to ensure they go first.
Duplicate Invoices and Payments
Human errors are rampant in manual AP processes, resulting in loads of duplicate invoices or payments. An average SMB processes 450 invoices monthly at a duplication rate of 1.29%. That comes to six duplicate invoices a month, with an average value of $2,034 each. If each duplicate was paid, a business stands to lose as much as $12,000 every month. AP Automation removes this risk by flagging potential errors-duplicates, for example, using algorithms before processing and, therefore, not allowing duplicate payments to take place that may hurt cash flow. Aside from overpayment, it protects the cash flow of a business.
Handling More than 200 Invoices per Month
The manual handling of more than 200 invoices a month becomes unmanageable as it scales with the growth of the business. Usage of more than 200 invoices per month, processed manually, increases not only the chance for errors but also puts an extreme burden on your AP team.
Benefits of AP Automation in High-Volume Invoice Processing
- Scalability: Automation can do thousands of invoices with minimal human involvement.
- Improved Accuracy: Automation eliminates manual errors and hence, each invoice is processed correctly.
- Efficient Processing: Higher volumes of invoices can be processed much quicker and consistently, freeing your team to work on higher-value tasks.
It Takes Over 5 Days or Costs Too Much to Process an Invoice
Industry standards suggest that best-in-class companies process invoices in less than 3 days for $2-$5 per invoice. Meanwhile, companies still reliant on manual processes tend to surpass these thresholds at over 5 days and upwards of $20 per invoice. Inefficiencies are increased with business scaling. AP automation cuts invoice processing times down to just a few hours while reducing the costs of those invoices by as much as 80%. This will grant companies faster turnaround times, lower costs, and the ability to reallocate resources to higher-value activities.
Error-Prone Data Entry Processes
Error-prone processes for data entry-from miskeying invoice numbers to missing payment terms. These mistakes disrupt cash flow, damage vendor relationships, and result in costly rework. Inaccurate data entry can result in delayed payments and possibly misallocated funds, harming your bottom line. Automation sidesteps these problems because it deploys OCR technology in addition to a set of inherent validation rules to ensure that the capture of invoice data is accurate and consistent. This cuts down data entry errors, hence the improvement of accuracy, reduction of delays, and maintenance of good relations with vendors.
Difficulty Managing Vendor Relationships
Maintaining consistency and timeliness in a vendor’s payment process would mean sustaining good relations with them, coupled with clear communication. However, manual AP processes result in late payments, errors, and really bad communications that hurt these relationships. This same trend is reflected in the 2022 State of AP Report, where 70.8% of AP teams identified that their supplier relationships became increasingly crucial to their businesses.
Automation improves vendor relationship management by:
- Real-Time Payment Tracking: Vendors can log into portals to track the real status of their payments.
- Consistent Payments: Automation ensures timely payments to foster trust in the process.
- Streamlined Communication: Automated systems can allow for better, more transparent communication with vendors, reducing friction.
Challenges with Year-End 1099 Tax Filing
Year-end filing of 1099 taxes is a very extensive and complex process, which is quite burdensome if it’s done manually. Businesses are opening themselves up to potential penalties for incorrect reporting, data entry errors, or late filing. The chances of these types of errors being made are much higher in manual systems, placing businesses at an even greater risk of non-compliance.
AP automation smoothes out the 1099 filing process by fully automating data collection, validation, and submission so your business is compliant, and the risk of penalties is lowered. Automation not only smoothes out the process but gives finance teams confidence in knowing filings are correct and timely.
Conclusion
With approval cycles taking too long, rising costs, discounts lost, and trouble with vendors, the evidence of inefficiency in your AP processes is enough warning that it may be about time to rethink AP automation. Human-driven processes cannot keep pace with today’s fast-moving business environment but only result in lost opportunities, increased costs, and operational inefficiencies.
AP Automation provides new dimensions of speed, and visibility into cash flow, and even allows taking advantage of early payment discounts. Most importantly, however, automation enables your finance team to focus on actual business growth initiatives positioning your organization well into the future. If any of these challenges resonate with you, it’s time you consider how AP can be streamlined with Zenwork Payments to give you an edge in running your business.
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