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Payables Automation Can Help You Weather the Storm of an Economic Downturn

lifesaverIn an economic downturn, it’s natural for companies to evaluate cost-cutting opportunities. Given the recent downturn in the oil and gas industry, with a significant drop in the price of crude oil1, it is not surprising that upstream oil and gas companies are scrutinizing internal business processes to identify areas where they can better manage costs and increase margins.

A recent study by global business advisory firm AlixPartners states that “with the recent fall-off in oil prices, companies in virtually all sectors of the oil, gas and chemicals (OGC) industry worldwide are going to have to plan and manage their projects for greater capital productivity, something they weren’t doing particularly well before the price-drop, and along the way create a “cost culture” inside their companies.”2

Automating the accounts payable process is one option that can help drive cost savings. It can also help substantially reduce or even virtually eliminate payment errors, duplicate payments and mismatched invoice information resulting from a manual process of excessive steps and calculations.

However, our experience shows that companies are often reluctant to adopt business process automation, even though it has the potential to deliver numerous benefits. It’s true that there is a cost to automating and this can be especially daunting for smaller organizations. Companies both large and small may be concerned that it’s too costly to invest in automation in an already tight economy.

While this may be a valid concern for the short term, if you consider the long term, it actually makes sense to automate to help you weather the storm of an economic downturn. Let’s take a look at how automation can make a difference.

Accounts payable automation helps staff process invoices in a faster, more efficient manner, which generally results in lower processing costs. A 2013 research report from Ardent Partners shows that the average processing cost per invoice decreases significantly as electronic invoice volume increases.  In fact, electronic invoicing can reduce processing costs by more than 66 percent3. This can have a direct impact on an organization’s cost-saving initiatives. Furthermore, electronic invoicing helps enable AP staff to move away from the tactical tasks of opening invoices and manually entering data to focus on more strategic activities such as supplier and spend management.

Another area for potential savings to consider in an economic slowdown is early payment discounts. Given that supplier companies could also be facing the same pressures around cash flows, they may be more likely to offer discounts in exchange for early payments. But paper-based payables processes tend to result in lengthy processing cycles and the inability to capture all available discounts4. Electronic invoicing helps accelerate the process and increase the rate of discount capture. Clients who are using ADP’s payable automation solution OpenInvoice®, on average, save $1.8 million for every $1 billion of spend processed – not a small amount, especially during times like these when every dollar counts5.

A further avenue for cost savings is around price compliance with negotiated contracts. With paper invoices, it can be a more cumbersome and labor-intensive process to manually look up pricing on contracts, match them up with invoices and ensure compliance. Electronic invoicing and workflow can help alleviate this problem by systemically matching the pricing and flagging any exceptions. Electronic invoicing can help enable you to validate invoices against a set of pre-defined criteria and determine whether or not a price complies with negotiated contract pricing.

Even with all the benefits of payables automation, some organizations may still be concerned about the upfront cost of investment. With the proliferation of cloud-based, software-as-a-service solutions, the upfront costs can be significantly minimized in favor of a transaction-based pricing model based on invoice volume, which can be deferred over a period of time. This can result in a lower total cost of ownership and a faster return on investment.

Overall, implementing automated solutions can help provide companies with the benefits of lower processing costs, increased visibility and greater control over their processes. In the end, the benefits of automation are likely to outweigh the upfront investment in time and cost.

 

Learn More About Electronic Invoicing Solutions from ADP

 

1 http://www.bbc.com/news/business-29643612

2http://www.alixpartners.com/en/MediaCenter/PressReleases/tabid/821/articleType/ArticleView/articleId/1548/With-Oil-Prices-Down-Energy-Companies-Need-to-Adopt-a-Cost-Culture-According-to-AlixPartners-Study.aspx#sthash.inDuLxOH.dpuf

3http://ardentpartners.com/2013/10/einvoicing-costs-less/

4 http://www.paystreamadvisors.com/resource/2014-invoice-workflow-automation-report/

5 Internal ADP OpenInvoice Metrics Report

 



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