Manual Payments Processes Often Slow Small Business Growth

The 21st century wasn’t supposed to be full of so many headaches.

Or so much paper.

“Mid-sized companies say their [accounts payable (AP)] departments are spending about 50% of their time collecting invoices and paying suppliers,” Brett Sussman, vice president of American Express Business Blueprint and Banking, told PYMNTS. “That’s not the vision that they had for those departments.”

That’s because while manual accounting and finance processes do work, they remain full of ongoing inefficiencies whose operational impact can be like pouring molasses over a firm’s growth flywheels.

AP automation is becoming increasingly popular in the business world, helping save costs and reduce labor hours spent on repetitive but necessary tasks.

“One of the most finite resources we have is time,” Sussman said. “CFOs who institute modern accounts payable solutions say that it’s comparable to expanding their AP departments due to the extra time it frees up for employees to spend on more value-added strategic options.”

There are many ways in which automating AP can save costs and increase efficiency.

Compared to the headaches of doing things manually, automated AP systems create consistent approval flows for payments, which dramatically reduce reconciliations on the back end.

Digitizing AP processes also effectively removes a crucial layer of operational risk by eliminating error-prone manual processes, such as comprehensive credit reporting (CCR).

Read also: Why B2B Tech Will Drive the Next Innovation Cycle

The Benefits of Streamlining Business Operations Are Automatic

Businesses are always looking for an edge, particularly in an environment like today’s, which is full of operational challenges and uncontrollable macroeconomic frictions.

And in challenging times, a firm’s cash conversion cycle is often considered a critical strategic tool.

That’s why solving for legacy AP frictions by automating processes and taking steps to limit manual data entry can help firms more deftly navigate the realities of working capital management.

“Early pay trade terms, such as the typical 2% discount if an invoice is paid in 10 days from the order date, are hard to get to, particularly with manual processes,” Sussman said. “That is, it’s easy to miss the 10-day deadline when paying manually. But the beauty of AP automation is that you can set it up to run so that your suppliers are paid in time.”

He added that pairing AP automation with a credit card also represents “an underrated tool” for businesses looking to extend their cash flow while simultaneously capturing rewards like points or cash back.

Still, while the stakes for keeping internal operations mired in manual processes are becoming higher than ever, firms must establish a true business use case before investing in any tool.

See also: The Trickledown Consumerization of B2B Payments Helps Firms Win Business

Automating AP Processes Helps Solve Missing Simplicity

To ensure that automated tools improve working capital transparency and do their job effectively, businesses should perform a self-assessment to consider factors such as the number of invoices processed, suppliers used, and payment types.

By identifying the inefficiencies in their current processes, businesses can choose a solution that effectively solves these challenges.

After all, in today’s challenging environment, businesses need to cut costs without cutting essential functions. And there is a tremendous potential for both cost savings and operational benefits to automating the AP function, especially when coupled with the strategic leveraging of payment tools like credit cards.

“Firms need to assess the different payment types they’re using — check, ACH, credit card and more — and then make sure that the solutions they are evaluating support all of those payment types, as well as confirm that the solution actually solves for their chokepoints,” Sussman said. “When businesses answer those questions, it becomes quite clear which solution is going to work for them.”

The good news, he explained, is that due to the ongoing digitization of the operational landscape, AP onboarding specialists have “seen it all” and know how to integrate most solutions relatively seamlessly with few hiccups.

With the guidance of experts and a thorough self-assessment, businesses can successfully integrate AP automation into their existing systems, paving the way for a more streamlined and efficient future.

By eliminating manual processes, reducing errors and improving efficiency, AP automation allows firms to streamline operations and focus on strategic growth.

And as emergent firms boasting all the bells and whistles increasingly enter the landscape full steam ahead, automating the AP department remains a low-hanging, easy win that firms and finance departments should consider, Sussman said.

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