The Power of Efficiency: Calculating Time and Cost Savings in the Accounts Payable Process with AP Automation
![]() In today's fast-paced business environment, time is of the essence, and efficiency is the driving force behind successful operations. The implementation of Accounts Payable (AP) automation offers a solution that not only accelerates the AP process but also results in substantial cost savings. This article provides an in-depth analysis of the time saved at each step of the accounts payable process with AP automation and calculates the dollar savings based on the salary of a full-time AP specialist.
I. Invoice Receipt and Capture: In a manual AP process, the initial step involves receiving invoices, whether they are in paper or digital format. This step often necessitates sorting through emails, handling paper invoices, and manually capturing data. Time Savings: AP automation significantly reduces the time required for invoice receipt and data capture. On average, this step can save 60% to 80% (or more) of the time typically spent in a manual process. Dollar Savings: To calculate the dollar savings, we'll consider the annual salary of an AP specialist. According to the U.S. Bureau of Labor Statistics, the median annual wage for financial clerks, which includes AP specialists, is approximately $41,230. Let's assume a full-time AP specialist's annual salary is $45,000. With AP automation, a conservative estimate of time savings in this step could amount to 65%. This results in an annual time savings of: $45,000 * 0.65 = $29,250 This means that, based on a full-time AP specialist's salary, the organization can save approximately $29,250 annually in time savings in this step alone. II. Invoice Verification and Approval: Manual verification and approval workflows often involve sending invoices from one department or individual to another, waiting for signatures, and reconciling discrepancies. This can lead to bottlenecks and inefficiencies. Time Savings: AP automation streamlines the verification and approval process, reducing the time required for approval by 60% to 80%. Dollar Savings: Using the same full-time AP specialist's annual salary of $45,000, if we assume a 70% time savings in this step, the organization can save approximately $31,500 annually. III. Data Entry and Matching: Matching invoices to purchase orders and receipts, as well as entering data into the Enterprise Resource Planning (ERP) system, is a time-consuming manual task. This often involves cross-referencing multiple documents. Time Savings: AP automation can save organizations approximately 60% to 80% of the time typically spent on data entry and matching. Dollar Savings: With a 70% time savings, based on the full-time AP specialist's annual salary, the organization can save approximately $31,500 annually in this step. IV. Payment Processing: Manually processing payments can be tedious, involving check printing, signing, and mailing. This process can lead to delays and missed early payment discounts. Time Savings: AP automation can reduce the time spent on payment processing by approximately 40% to 70%. Dollar Savings: Assuming a 55% time savings and a full-time AP specialist's annual salary of $45,000, the organization can save approximately $24,750 annually in this step. V. Document Storage and Retrieval: Storing and retrieving paper documents is time-consuming and requires physical space for storage. In a manual AP process, documents may be misfiled or lost, resulting in additional time spent on retrieval. Time Savings: AP automation can save organizations up to 70% of the time typically required for document management and retrieval. Dollar Savings: With a 65% time savings and a full-time AP specialist's annual salary of $45,000, the organization can save approximately $29,250 annually in this step. VI. Reporting and Analytics: Generating reports and analyzing financial data manually can be labor-intensive. In a manual AP process, it often requires compiling data from various sources and spreadsheets. Time Savings: AP automation can save approximately 60% to 80% of the time typically spent on reporting and analysis. Dollar Savings: Assuming a 70% time savings, based on the full-time AP specialist's annual salary of $45,000, the organization can save approximately $31,500 annually in this step. VII. Vendor Relations: Manual AP processes can lead to delays in payments, impacting vendor relations. Responding to vendor inquiries and resolving payment issues can consume valuable time. Time Savings: AP automation can save organizations approximately 30% to 50% of the time typically spent on vendor relations. Dollar Savings: Assuming a 40% time savings and a full-time AP specialist's annual salary of $45,000, the organization can save approximately $18,000 annually in this step. VIII. Compliance and Auditing: In manual processes, maintaining compliance with financial regulations and preparing for audits can be time-consuming. Gathering and organizing documents for compliance and audits can be a tedious task. Time Savings: AP automation can save organizations between 40% and 60% of the time typically spent on compliance and auditing. Dollar Savings: Assuming a 50% time savings and a full-time AP specialist's annual salary of $45,000, the organization can save approximately $22,500 annually in this step. IX. Real-World Total Dollar Savings: To calculate the overall annual dollar savings resulting from AP automation, we'll sum the savings from each step: $29,250 (Invoice Receipt and Capture) + $31,500 (Invoice Verification and Approval) + $31,500 (Data Entry and Matching) + $24,750 (Payment Processing) + $29,250 (Document Storage and Retrieval) + $31,500 (Reporting and Analytics) + $18,000 (Vendor Relations) + $22,500 (Compliance and Auditing) = $218,250 Therefore, based on a full-time AP specialist's annual salary of $45,000, implementing AP automation can result in approximately $218,250 in annual cost savings. Conclusion: AP automation offers not only significant time savings at each step of the AP process but also substantial cost savings when considering the salary of a full-time AP specialist. The ability to streamline workflows, reduce manual effort, and minimize errors is not just a theoretical benefit; it translates into practical and measurable savings. These savings allow organizations to allocate resources more strategically, improve efficiency, and ultimately enhance their financial operations. In a competitive business landscape, where efficiency is the key to success, AP automation is not just a solution; it's a strategic investment that delivers tangible benefits. |
Additional articles:
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