Invoicing is a necessary but time-consuming part of the business cycle. When done manually, it can be a headache, resulting in lost revenue, missed payment discounts, and costly late fees. Accounts payable automation eliminates these issues by dramatically reducing invoice approval times and processing costs. Here’s how it benefits your business: improved spend visibility and increased employee productivity.
Better Relationships with Vendors
Managing healthy cash flow is imperative for businesses of all sizes, especially during economic uncertainty. Whether it’s the threat of inflation, an unpredictable global supply chain, or a looming recession, finance leaders must be ready for anything. Automated invoice payment systems can help. Manually processing invoices is time-consuming and prone to errors. Using an automated system reduces the amount of manual data entry work and helps improve accuracy, which cuts costs per invoice processed. It enables precise and speedy payment processing, allowing your team to concentrate on more important strategic tasks.
A digital payment platform like Paystand can also improve the quality of your relationships with suppliers. By reducing the time it takes to process invoices and allowing you to take advantage of early payment discounts, automation can help you build trust and rapport with your suppliers.
It can enhance your negotiating position when discussing terms and conditions and improve the reliability of your cash flow. For example, consider a dynamic discounting program, which lets you pay your invoices early in exchange for a small discount from the supplier. Or you might use a supply chain finance solution, which allows your buyers to purchase goods and services on credit and pay the supplier later, giving you an advantage in cash conversion.
Improved Time-to-Cash
Businesses need healthy cash flow to cover expenses, invest in new opportunities, and guard against unexpected financial challenges like recessions or high inflation. Manual accounting and invoicing processes can lead to lost invoices, inaccuracies in calculating customer amounts, and delays in making payments that can hurt your business’s bottom line and impact cash flow. An integrated, automated invoice-to-pay solution can help improve time-to-cash and cash flow by significantly speeding up invoice processing, reducing costs, and eliminating human error. You can also negotiate with suppliers happy to have their invoices paid on time to take advantage of early payment discounts. Research suggests that highly automated AP departments capture seven times as many early payment discounts as their peers with little or no automation.
In addition to speeding up the invoice-to-cash process, incorporating automation into your accounting and AP processes can allow you to work with more flexible payment terms. Working with customers prone to paying late or delaying their payments can be particularly beneficial. With an automated invoicing process, you can easily embed a Stripe link on your invoices so your clients can pay using a debit or credit card with just one click.
Early Payment Discounts
In today’s volatile economic environment, finance leaders must be prepared to handle any number of scenarios. Rising interest rates, sky-high inflation, unpredictable global supply chains, and a challenging labor market create uncertainty for businesses of all sizes. Maintaining healthy cash flow is paramount to a resilient business model. Invoice-to-pay automation – integrated platforms that automate and optimize the invoice-to-payment process from invoice receipt to payment reconciliation and reporting – gives finance leaders the tools to manage uncertain cash flows by shortening the lag time between invoicing customers and receiving payments.
For example, many companies offer early payment discounts to encourage buyers to settle their invoices quickly. Commonly expressed in terms such as “2/10 net 30,” this discount gives buyers a 2% discount if they pay the total amount of their invoice within ten days. Early payment discounts can help improve a company’s cash position while strengthening customer loyalty and reducing credit risk.
The fact that only some clients are eligible for early payment discounts should be noticed, though. Some may delay payment well past the discounted period, negatively impacting suppliers’ and buyers’ finances. Rather than pressuring customers to pay invoices early, it might be more beneficial to offer flexible payment terms that work for both parties.
Reduced Check Usage
By eliminating manual steps in the payment process, invoice automation reduces the time your staff spends writing checks and making bank transfers. It reduces the potential for human error and allows staff to focus on higher-value activities. AP automation also minimizes miscommunication and the need for back-and-forth emails or phone calls regarding payment amounts and information. It improves accuracy, enhancing financial reporting and making it easier to make data-driven decisions that support business cash flow. With a more efficient payment system, you can also take advantage of early payment discounts from suppliers. Many vendors offer these to encourage you to pay on time and build good relationships. It can help your company save money and boost profits when cash is tight.
Accounts payable automation also helps you save on labor costs. By automating the process, you can avoid costly mistakes during manual processing and data entry. For example, the streamlined workflow of invoice processing automation eliminates status updates, approval handoffs, and other manual tasks that add up quickly. Another way to improve cash flow is to diversify revenue streams by introducing new products or services, exploring different markets, or collaborating with other businesses. It lessens your dependency on a single source of income and raises your chances of having stable finances in an unforeseen circumstance.
