Manual manpower in supply chain payments is costing businesses, and costing them a lot, Tungsten Network recently reported. Manually managing invoices, chasing down late payments and other tasks that could (and should) be automated are a waste of time and money, according to Tungsten’s Friction Index report, a new initiative that aims to quantify just how much time and money is lost when businesses are faced with payments friction in their supply chains.
The Friction Index report was released earlier this month and found U.S. businesses each spend an average of $171,340 a year handling procure-to-pay issues like invoice payments. Tungsten also calculated businesses each spent nearly 6,500 man hours each year on these tasks, averaging 55 hours a week spent on manual processes.
Nearly 40 hours a week are spent handling invoice exceptions, errors and discrepancies, while 23 hours are spent responding to supplier inquiries. Additionally, three hours per week are spent dealing with invoice fraud, the report noted. All of these hours add up to wages businesses have to pay to get these tasks done.
“Numerous processes in the financial world remain cumbersome and time consuming when they needn’t be,” said Tungsten Network CEO Rick Hurwitz in a statement. “Technology means we can do away with the tiresome and menial tasks that clog business work streams, and instead boost productivity and efficiency. It is surprising that, in this tech-enabled day and age, businesses are still spending so many hours per week managing processes that could be automated.”
According to Tungsten, the number-one reason companies are spending so much time on manual procure-to-pay processes is the high proportion of paper invoices they receive, while nearly the same number of survey respondents blamed most of the time crunch on the fact that they receive too many invoices not based on purchase orders. A high volume of inquiries from suppliers related to invoice or payment status came in at number three, while a lack of automated exceptions and a lack of automated approval rounded out the list.
The U.S. market saw the highest rate at which businesses experience this type of friction, closely followed by the U.K. market, but as a whole, Tungsten noted that this issue is a worldwide one.
Removing friction in the procure-to-pay process is a top priority for at least one-third of the survey respondents this year. Seventy-one percent of firms which prioritize this goal are larger companies with more than 1,000 employees.
Interestingly, researchers found those larger companies experience more friction when it comes to friction in procurement processes than their mid-sized and smaller counterparts.
“One reason may be that larger businesses are more likely to work with international suppliers,” Tungsten said in its report. “Working with more foreign suppliers may mean dealing with additional tariff and compliance issues. In the absence of automation, such demands add to the burden of AP departments.”
Perhaps the most concerning finding of the report, however, is that most companies (69 percent) are not moving in the right direction when it comes to addressing this problem. Less than one-third of surveyed firms said they feel their companies are “in a better place” in addressing friction in the procure-to-pay process than they were six months ago.
“If businesses aren’t tied up chasing invoices or receiving phone calls from suppliers doing the same, they have more time to explore opportunities for growth with existing customers and go after new ones,” continued Rick. “If all the data from past invoices is easily accessible, opportunities to identify variances that will target inefficiencies are more visible. The technology exists to remove this supply chain friction, which can cause stress, waste time and ultimately impact the wider economy, and we want to challenge U.K. businesses to seize the day, embrace digitization and begin enjoying the benefits of a frictionless back office.”