Late payments are some of the most difficult challenges businesses face in day-to-day operations, and they can have wide-ranging implications if not tackled swiftly. Money not being where it is supposed to be can result in further delayed payments for vendors, especially in critical areas such as payroll or rent that can quickly spiral out of control and ruin businesses entirely. For buyers, late payments can result in costly fees, having a similar detrimental impact.
Streamlining the accounts payable (AP) process to reduce late payments is thus a top priority for businesses on both sides of the business-to-business (B2B) equation, but this is not a straightforward proposition if companies continue to rely on legacy payment methods. This month, PYMNTS describes how AP automation can reduce late payments and bolster businesses’ overall operations and financial health.
Late payments to vendors are not without consequence to buyers, as a recent study found that they resulted in late fees for 41% of buyers in the past year. A primary cause of late payments is data entry errors. Half of the respondents said that errors in data entry are a challenge for their firms, taking up about 17 hours each week in payments-management time.
The frustration of dealing with these mistakes is leading to the record adoption of AP automation. Nearly 90% of companies in a recent survey said that automating their AP systems can improve the visibility and transparency of payments and thus reduce errors, while 98% said that AP automation could improve the speed of their payments overall.
Upgrading to these automated solutions can help firms save approximately 11% of their wasted spend, which currently totals from 4.1% to 4.4% of all expenses, depending on the severity of the current mistakes. Firms using these automated AP solutions cite their increased transparency for solving errors as a top benefit.
More small-dollar-value payments mean more opportunities for errors, which can quickly multiply to cost companies massive sums of money and manpower to fix. Ninety-five percent of surveyed firms saw the volume of their average monthly payables increase over the past year, and 93% expect monthly payables to increase in the next three years.
Just 47% of these firms say they can handle 50% growth in their AP volume very or extremely well, however, indicating a significant capability gap that can be bridged only by implementing automated AP solutions. Nevertheless, only 31% plan to innovate their AP systems within six months, and those that do not could quickly find themselves overwhelmed if they let their payables errors get out of hand.