• Annabel Sim, VP Global Sales at Compleat Software


• 06.04.2022 11:00 am
#finance

How technology is removing the hidden costs of finance

Tedious, repetitive, and menial manual business processes are presenting significant hidden costs for businesses, threatening to eat into much-needed finances.

Economic uncertainty continues to linger, with businesses battening down the hatches - especially when it comes to new or excessive spend.

But this is only expanding the hidden costs that are building up. As finance departments struggle to get their head around current cash flow build and forecasting for the new financial year, the last thing they need is to be bogged down with mundane tasks.

Manual processes, such as data-entry, invoice scanning, and payment chasers, are costing businesses a lot of time, resources, and ultimately money. 

Research has found that manual processing is costing companies as much as £10 million in inefficiencies every year.

If businesses still have processes that could quite easily be automated, then staff aren’t focusing on the things that would be of the most benefit to the company, and therefore aren’t providing their best value.

To uncover and get rid of hidden costs, businesses need to embrace change.

What are the hidden costs associated with accounts payable?

The real task in improving accounts payable is to identify the hidden costs of the manual account payable process and eliminate them. 

There are some sneaky hidden costs that can really drag business business and prevent them from progressing into the digital world, including:

1. Poor cash flow:

Processing invoices by hand is not only slow, but it also leaves businesses vulnerable to error. Essentially, the more steps it takes to generate an invoice, the more likely it is that someone in the team will make a mistake. 

Vague descriptions, inaccurate numbers, wrong addresses, incorrect payment details ‒ mistakes like these can delay payments and going back and forth to rectify them significantly increases your time to cash. 

2. Late payments: 

As the saying goes, ‘time is money’, and this has never been truer when it comes to manual processing. The time wasted and reduction in efficiencies unfortunately leads to many businesses missing payment deadlines.

Shockingly, the majority (94%) of medium sized firms across the UK are currently waiting on late payments from customers.

The consequences of late payments for a company who falls behind means being succumbed to paying late fees, missing out on early payment discounts, and the destruction of supplier relationships, ultimately affecting both business bottom line and reputation.

3. Poor customer experience:

Overworked staff and a disorganised workflow make it tricky to get invoices out the door on time, which is frustrating for suppliers. They are working hard to plan their budget and delivering an invoice close to deadline upsets their process and forces them to scramble around. 

Invoices are an important touchpoint with your suppliers. If the payment experience is slow and frustrating, eventually it’s going to deter prospects from doing business.

4. Staff burnout:

An element of manual invoicing that isn’t always top of the agenda is how much finance team members despise processing invoices by hand, with research showing 60% think that manually processing supplier invoices is the most hated aspect of the job amongst teams.

Dealing with the same dull, repetitive tasks every day saps the life of workers. It increases the number of mistakes made and leads to a higher staff turnover. Poorly written invoices cause endless headaches for both internal and external parties. Constantly training new employees is also a major drain on time too. 

How can automation help?

It’s clear there's some room for improvement and, more importantly, that finance teams are crying out for it - so, what better way for your finance team to scale back on everyday administrative tasks than to automate them? 

Automation gives businesses more time to focus on strategy, growth, managing team’s needs and helping the business to perform well.

Incorporating automation technologies into financial processes can help to increase agility, lower costs, improve productivity, reduce delays, minimise errors, and ultimately improve customer satisfaction.

Each of the following finance functions can achieve significant benefits from implementing a touch of technology:

1. Financial operations:

Managing the monthly general ledger close process and generating timely, accurate financial reports is a key responsibility of the finance department. 

While many processes are automated through enterprise resource planning (ERP) systems, there are still many repetitive, error-prone activities requiring human intervention such as performing manual reconciliations, journal entries, and external reporting. 

Small (or even some medium) sized businesses are priced out of ERPs with the most functionality, making do with simpler accounting software.

Automating can improve operational efficiency, timeliness, and accuracy of these manual steps.

2. Order-to-cash:

The process of invoicing customers and collecting funds from customers is key to ensuring sufficient cash flow and business liquidity.

Automation helps to streamline these activities by retrieving information directly from a variety of sources, reconciling amounts to ensure accuracy, and reducing repetitive tasks.

3. Financial planning and analysis:

Budgeting, forecasting, and management reporting are key functions enabling a business to make intelligent business decisions based on timely and accurate financial information. 

The finance function typically dedicates a disproportionate amount of time on sourcing, aggregating, and formatting data instead of on financial analysis and strategic planning. 

By automating these manual data-related activities, enables finance professionals to shift their focus to more value-added work.

4. Purchase-to-pay:

The process of validating and paying supplier invoices for goods received is vital to ensure the validity of procured items, the accuracy of billed amounts, and timeliness of payments to avoid late fees and interest charges. 

The accounts payable department typically dedicates significant resources to manually setting up new supplier accounts, entering information from invoices, matching billed amounts to purchase orders, and authorising payments. 

Automating accounts payable tasks such as updating supplier details, extracting invoice information, and validating amounts to improve the efficiency of this process and avoid overpayments.