South African companies need to streamline their accounts payable environments to reduce the high cost of processing invoices, says Ronald Melmed, MD of Digital Archiving Systems.
Every time a company settles an invoice, money is often wasted and this necessitates the need to improve the efficiency of payment processes, he adds.
“In an uncertain economic environment where companies are under enormous pressure to cut costs, streamlining the accounts payable function provides quick wins in terms of efficiencies and cost savings.”
There are several options available to companies looking to cut costs, he says. “One of the first steps a company can take to improve the efficiency of accounts payable is to centralise functions like receipt of paper invoices, standardise the process across suppliers as far as possible, and put all invoices onto a single system. These steps may cut the cost of processing a single invoice by up to 50%.”
Accounts departments should be moving towards electronic approvals of purchase orders and receipts of electronic invoices, Melmed says. However, these departments are still highly dependent on paper-based systems. He sees outsourcing as a solution to this costly method.
“For many companies, it makes sense to outsource the scanning process to an external service provider who can capture documents in an appropriate format and make them available to those who need them. An outsourcing service provider will already have infrastructure such as scanners, OCR software and enterprise content management solutions in place. That means organisations can turn these into an operational cost rather than needing to invest capital in their own infrastructure,” he explains.
Over the years, businesses have worked hard to streamline areas such as manufacturing, finance and sales, yet many have steered clear of trying to transform the accounts payable environment.
Organisations must understand the cost impact of an inaccurate, illegible or incomplete invoice, Melmed says. “Companies need to secure the co-operation of their suppliers and give them incentives to produce good invoices, so less time is wasted chasing down missing or mismatch PO numbers. A change management programme is essential.”
The rewards are significant, says Melmed. “Operational costs should drop significantly since there will be fewer exception invoices and supplier queries to manage. The business should also have better visibility into its liabilities at any time. Efficient accounts payable processes also mean companies can strike the optimum balance between keeping working capital in the bank and paying promptly to benefit from supplier discounts. Relationships and negotiating positions with suppliers should also improve, since they will value the good service they receive.”
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