In today’s rapidly evolving business landscape, efficiency and cost optimization are not just goals but necessities. AI-driven Accounts Payable (AP) automation stands out as a transformative solution, driving significant improvements in financial operations, but how do you build a compelling business case for AI-driven automation? Let’s dive into the data and insights that underscore its value.
Traditionally, AP processes have been manual, time-consuming, and error-prone. According to a report by the American Productivity & Quality Center (APQC), companies that operate with manual AP processes can see processing costs as high as $10 per invoice. Furthermore, the Institute of Finance and Management (IOFM) states that manual invoice processing can take up to 8.6 days. This inefficiency not only drains resources but also hampers business scalability.
AI revolutionizes this scenario by digitizing invoices and streamlining approvals. A pivotal study by Ardent Partners found that automated AP solutions can slash invoice processing costs by up to 80%, reducing the expense to as little as $2 per invoice. Additionally, automation can cut processing times to just 3.3 days on average, enhancing operational efficiency.
Processing cost savings:
Consider the direct cost reductions from AI-driven automated invoice processing. For a business processing 1,000 invoices monthly, transitioning from a manual process costing $10 to an automated process at $2 per invoice saves $8,000 monthlytranslating to annual savings of $96,000.
Early payment discount opportunity :
AI aggregates and recommends to CFOs/Finance controllers the vendor invoices where it makes economic sense to avail early payment discounts. It is usually done by comparing the annualized discount rate with the cost of capital. In the above example considering the average invoice value to be $500, there would be a total accounts payable to be $400,000 per month. Let us take a typical case of 25% of vendor payments having an early discount payment term of 2/10 net 30. It means 2% of 25% of $400,000 = $2,000 per month can be saved translating to annual savings of $24,000.
AI frees staff from manual data entry, allowing them to focus on higher-value tasks. As highlighted above, the AP clerks have been seen processing 300-400 invoices a day as against the 30-40 invoices per day, pre-automation. This efficiency not only accelerates the payment cycle but also improves staff satisfaction and retention.
Manual processes are susceptible to human error. AP automation significantly reduces these errors, ensuring data accuracy. Compliance is another critical consideration. Automated systems maintain detailed audit trails, simplifying compliance with regulations and standards, which is a non-negotiable aspect of modern business practices.
When building your business case for AI-led AP automation, consider the following steps:
The data is clear: AI-led AP automation offers a path to significant cost savings, efficiency improvements, and enhanced financial controls. By carefully constructing a business case that highlights these benefits, supported by solid statistics and data, you can make a compelling argument for adopting AP automation in your organization.
Embracing AI-led AP automation is not just about keeping pace with technology it’s about seizing an opportunity to transform your financial operations fundamentally. The time to act is now.
Are you ready to explore how AI-led AP automation can benefit your business? Contact us for a personalized assessment and take the first step towards transforming your accounts payable process today.