Insight & Analysis

Why manual invoicing doesn’t pay

Published: May 2018

Manually processed invoices are a source of error. Invoice errors are costly. Automation is the logical response. Why is it not happening?

Improving productivity, identifying cost savings, removing paper; these are all common commercial cues for automation. Of course, finance departments, including treasury, are well-versed in what can be achieved in this area.

And yet, according to a new survey of 200 senior managers with a responsibility for finance in medium to large enterprises, theirs is the department that most struggles to keep pace with the digital advances made in other parts of the business. Curiously, it is also the function that is seen as being in greatest need of digital transformation.

The research, conducted on behalf of eProcurement and spend management technology vendor, Wax Digital, focuses on the perils of manual invoicing, taking into account the views of Accounts Payable (AP) staff. Their views highlight just how far many businesses have to travel before they can achieve the ideal of fully connected cash and liquidity management.

Specifically, and as a topic often talked about within Treasury Today articles and Insights, the capacity for treasurers to know precisely what cash should be coming in, and when, is key to accurate working capital management. With AP processes mired in error-strewn manual interventions, the call for automation should be heard loud and clear across the organisation.

Burden of paper

The survey highlights some of the main AP complaints, starting with the top three types of invoice error. This reveals that 51% are due to incorrect amounts stated, 37% are due to incorrect PO numbers, and 37% for line items not matching. It further exposes the fact that manual invoice processing takes up around 30% of AP time.

If manual processing is an issue, then invoice delivery compounds the misery. Some 45% of invoices are still received through manual channels. Some 10% arrive by fax, 20% by post, and 15% by hand. Little wonder then that most respondents see paper invoice processing as a burden.

Indeed, according to Daniel Ball, Wax Digital’s Director, given that the survey shows that 80% of finance departments struggle to keep pace with digital transformation compared to the rest of the business, “it’s perhaps no surprise that invoice processing remains a mainly manual procedure for many organisations”.

Time to add value

It is a familiar argument – and one that treasurers will know well – but Ball notes that the time taken on manual processes prevents finance teams from performing other tasks that could otherwise provide greater value to the business.

Furthermore, with any manual process comes user error. In the case of the invoice, this could be a mistake by the supplier who sent it, or AP personnel at the data entry stage. Whoever is at fault, these everyday errors “not only come at a cost to productivity but also often prevent invoices being paid on time,” notes Ball.

Late payments can mean unhappy suppliers, some of whom will impose late payment fines or even refuse to honour pre-agreed discounts, all of which has a potential impact upstream. A significant issue in this respect could skew cash flow forecasting and budgeting figures.

Business case

Manual invoice processing may not be a direct concern for treasurers but it is causing businesses unnecessary costs. The upstream impact it can have on treasury should at least trigger a broader finance function discussion on automation and how it can improve efficiencies not only in finance, but for the wider business too.

A recent discussion on how to kick-start the debate and build a robust business case for investment in technology can be found in the lastest edition of Treasury Today.

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