Getting to Faster (and Cheaper) AP Processing Times with Automation

AP Processing Times

Small businesses, mid-size firms, and enterprise-level companies have something in common: All can need more time than they should from when they receive an invoice to when they pay it.

As Stampli and Treasury Webinars found in a 2021 survey report, “AP Today: Bottlenecks, Benchmarks & Best Practices” small businesses need an average of 15 days, mid-size firms need 17 days, and enterprise-level companies need 20 days. Some companies take even longer, with the same report noting 5% of businesses need more than 30 days to approve a payment.

Today, we’ll look at some metrics related to AP processing times, how automation can improve them, and how Stampli helps its partners nail their AP benchmarks.

Relevant AP Benchmarks: How Your Company Compares

Relevant AP Benchmarks: How Your Company Compares

Whether through using outdated technology or stubbornly sticking to manual accounts payable practices, companies can spend far more time and money than should be necessary just to pay their bills.

Here’s how we know.

Average AP Processing Times

Companies are up against a lot when it comes to accounts payable. Stampli found in the report on AP processing times that 31% of companies process more than 1,000 invoices a month. The same percentage have at least 500 unique vendor relationships. Meanwhile, 40% are still getting paper invoices with excessive paper not surprisingly tied for the second-largest AP headache at 15%.

Amidst these factors, AP processing times can lag. First, the report looked at the time needed from invoice receipt to payment. The averages for this were eight days for small businesses, nine days for midsize companies, and 11 days for enterprise-level firms.

It’d be one thing if companies had smooth sailing once they could get invoices entered and complete three-way matching. Still, data shows this is only half the battle, with small businesses needing an average of seven days to get an invoice through their payment queue, mid-size companies needing eight days, and enterprise-level firms needing nine days.

While the B2B payments process seems to be accelerating, with 35% of companies in Stampli’s AP processing time study able to approve a payment in two days or less, others are taking far longer than they should, with 18% needing 11 days or more.

Typical AP Processing Costs

An invoice never just costs what’s on the bill. Indirect costs like staff time can drive processing costs up, even for cost-effective payment methods like the automated clearing house.

Another 2021 survey report from Stampli and Treasury Webinars, “How & Why Companies Choose Payment Types” found that for companies that paid by ACH, approximately 31% had processing costs under $5, 24% were between $5 and $10, 10% were between $10 and $15, 27% were between $15 and $20, and 5% were over $20. Costs tend to be higher with credit cards and checks.

It’s worth adding that costs can vary wildly depending on staff competency, company dynamics, and if the businesses are using tools like AP automation that can slash costs.

Standard Number of AP Workflow Steps

In yet another 2021 survey Stampli worked on with Treasury Webinars (we’re into this stuff), “The How, the Why & the ROI of AP Automation” 33% of companies noted that their reason for investing in AP automation was due to workflow bottlenecks.

For context, an average AP workflow may look something like this:

  1. A company agrees to make a purchase;
  2. An invoice is received from a vendor;
  3. Someone either 10-keys the invoice into an accounting system, uses OCR scanning software, or has AP automation software that can do it with artificial intelligence;
  4. Invoice exceptions — anomalies or errors that require staff attention — are resolved;
  5. Three-way matching occurs with the invoice, purchase order, and receipt report;
  6. The invoice enters the payment queue, where it awaits approval from higher-ups like CFOs, controllers, and owners;
  7. The invoice gets paid;
  8. Reconciliation and other follow-up work occurs.

Of course, that’s just one workflow. Precise accounts payable workflows can vary depending on purchasing departments, invoice amounts, and any number of other factors. And without automation, workflows (and AP processing times) can quickly become nightmarish.

How Automation Helps Companies Improve AP Benchmarks

How Automation Helps Companies Improve AP Benchmarks

For companies that might be depressed about their AP processing times and related metrics, the good news is that automation can lead to dramatic savings. Here’s a breakdown for each key area.

Time Savings from AP Automation

Take the 3-4 weeks that a small, mid-sized, or enterprise company might need to manually process an invoice and it’s more than likely to drop significantly with AP. Stampli and Treasury Webinars’ ROI report found that a staggering 57% of companies surveyed were able to process their invoices faster with AP automation.

Precisely how much time gets saved can vary across different sources. That said, one financial giant estimated in recent years that AP automation could offer 70-80% time savings. This means, if a hypothetical company needs 30 days to process an invoice manually, it might only need six to nine days to process it with AP automation. Times can be even quicker with regular and recurring vendors, with artificial intelligence and machine learning able to intuitively learn details about them..

The reduction can be this dramatic because AP automation takes over a number of tasks. Among other things, the software can automatically input invoices, perform three-way matching, and resolve basic invoice exceptions.

Cost Savings from AP Automation

In the same report, the financial giant suggested that small businesses were paying $16 to $22 to process invoices and that AP automation could bring the cost down to $6 or $7, suggesting a net savings of 60-70%. Some sources online suggest processing costs could drop as low as the $2 to $3 range.

While these aren’t necessarily hard figures to be applied to every transaction — there will always be outliers, such as six-figure wire transactions where the processing fee might be $50 and worth every penny — it’s clear that AP automation can save sizable amounts. For companies that process a large number of invoices, the software can more or less pay for itself.

Workflow Savings from AP Automation

For the most part, manual accounts payable operations aren’t time-consuming because it takes a lot of time to key one invoice into an accounting system or because it’s hard to schedule a payment. Heck, even three-way matching can be a painless enough manual process if a company is diligent about its record keeping (though automation makes it so that companies don’t even have to think.)

No, when it comes to accounts payable, the headaches mostly start to appear between the time an invoice arrives and when payment is made. The No. 1 AP headache in Stampli and Treasury Webinars’ report on AP processing time? Slow approvers. This can happen when an invoice languishes on a CFO’s desk, when they’re slow to respond to emails, or any number of other ways. Not every invoice approval will be the same either, with Stampli and Treasury Webinars noting in this report that 34% of companies have special approvals for certain vendors while 31% have them for particular spending thresholds.

AP automation solves these problems by providing customizable workflows that can allow invoices to automatically reroute when special conditions are triggered or approvers are unavailable. The customization also allows companies to reduce unnecessary workflow steps, tightening their AP process.

How Stampli Helps Companies Improve Their AP Benchmarks

How Stampli Helps Companies Improve Their AP Benchmarks

Ready to improve AP processing times and similar benchmarks? Here’s how Stampli can help.

Easy UX and Customizable Workflows Great for Teamwork

Some accounting software may as well be purchasable only after a person’s gone to computer programming school. The rule-based logic is clunky, hard to decipher, and harder to automate. Adoption rate is low among staff. Needless to say, AP processing times can languish with them.

Stampli makes it easy, however, with an average set-up time of under a day. Additionally, once a company’s been set-up, the UX is some of the cleanest on the market, allowing pretty much anyone at a company to be able to use it, no programming degree required. The cloud-based software isn’t a headache for IT staff to support either.

Stampli’s platform is also highly customizable. Workflows can be configured by authorized users within the system to route invoices in whatever manner they need to go or how invoices might need to reroute when the unexpected occurs (which is often in AP, where invoice exception rates can hover in the 25-30% range.)

Lower Cost Payments, No Matter How You Like to Pay

At no point has this been or will it become a diatribe against paper checks. While they’ve been an easy target in recent years, generally costing more than digital payment types, slower to process, and susceptible to fraud, just ditching checks doesn’t guarantee good AP processing times. If it did, there’d be no need for AP automation software.

By that same token, companies can also enjoy all the benefits of AP automation and still pay with paper checks. Checks have only a limited effect on AP processing times.

This is why Stampli’s software is payment agnostic, allowing companies to pay however they like. Payment preference is pretty split among companies these days with 30% opting for checks, 24% preferring the ACH, 36% choosing credit cards, 4% picking ghost cards, and 5% having no preference in Stampli’s recent payment study. The split’s fine by us. We’ll save our partners AP processing times and costs, no matter.

Invoice Processing in Hours or Days, Instead of Weeks or Months

At the end of the day, invoice processing and paying an invoice shouldn’t be a protracted ordeal that lasts for weeks or months. Cloud-based AP automation providers like Stampli make it so that invoices can be cleared in a matter of days, even hours sometimes.

We believe companies shouldn’t have to lag unnecessarily. We want their AP processing times and other metrics to be a point of pride.

Helping companies achieve faster, cheaper, and smarter AP processing times. Try Stampli today.

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