From Process to Profit: Calculating the ROI of AP Automation

Investing in software like an end-to-end AP automation solution is increasingly essential for companies looking to maximize efficiency, elevate their processes, and stand out in a fast-paced, competitive marketplace.  

Why? Eliminating repetitive work in accounting departments to free up staff members for more strategic tasks only becomes more important as an organization grows. According to a recent Gartner survey, 18% of accountants make financial errors at least daily, with over half making several errors per month. Unfortunately, those small mistakes can add up to a big dent in your bottom line over time. 

This is where automation comes in. While bringing in new software can be a daunting task, the potential ROI AP automation can bring to your business makes it a worthwhile investment. In this blog, we’ll examine how to calculate the value of AP automation in your organization.  

Why End-to-End Automation? 

A true end-to-end AP automation solution streamlines every step of the accounts payable workflow, handling many tasks that AP teams have historically dreaded, like invoice validation, approval routing, and check remittances.  

This is achieved by leveraging powerful tools within the automation platform, including: 

• Intelligent invoice and contract capture, boasting a 99.99% accuracy rate. 

• Automated 2 and 3-way matching of invoices, POs, and other receipts to ensure line-item quantities and invoice totals match their original orders.  

• Automated approval processes, which route invoices to the correct approvers based on custom-defined preferences. 

• Integrated vendor payments that provide visibility into cash flows and allow teams to maximize the benefits of early-pay discounts.  

These intuitive features reduce the time AP staff members spend on these tasks, freeing them up for more strategic initiatives and saving them—and your business at large—the valuable cost of their time.  

Estimating ROI 

Before the promise of increased productivity or cost savings can be realized, finance decision-makers need to establish how they are going to determine ROI on a new software system. 

Check out the following key factors to help evaluate the ROI of any potential end-to-end AP automation solution:  

Efficiency Gains 

An efficient, well-designed AP automation platform helps businesses eliminate revenue-wasting processes. How significant the savings are may vary from one business to the next, as AP teams that are still largely reliant on manual processes will likely experience the most impactful cost savings from turning to automation.  

To begin this assessment for your organization, look for expense categories that are easy to quantify and contribute to your team’s success. Examples include:  

• Cost per invoice 

• Number of invoices processed 

• Cost of paper-related processes 

• Unrealized savings from missed early vendor payment discounts 

Opportunity Costs 

The true price tag of investing in a new software solution isn’t limited to the cost of the software, employee training, or other related transitionary costs. You also need to evaluate the opportunity costs.  

Putting it simply: if you don’t invest in modernizing your back office now, how much will this delay cost you down the road? Outdated processes will only continue to age as more and more intuitive technologies are developed and implemented across your industry and others. Start by determining how much your organization is spending annually on fees and penalties due to inefficient back-office task management.  

Ineffectual accounts payable departments often face exorbitant costs stemming from delays in payment processing or easily avoidable document discrepancies. They also may struggle with a lack of compliance or fall short of industry-related audit requirements.  

In contrast, automating AP dramatically increases the likelihood of maintaining regulatory compliance standards and audit readiness by reducing data entry errors and providing transparency into the full lifecycle of every payment. 

Broader Automation Impact 

The ROI of adding AP automation into your back-office processes means more than financial savings—it can also impact your organization in widespread, positive ways.  

While lacking tangible dollar signs, these indicators of long-term success are well worth the financial investment. These include improved employee morale, increased productivity, and overall job satisfaction. 

Manual tasks like keying in and individually validating invoice line items and cost codes are tedious, repetitive, and mind-numbing. Continuing to let these functions consume most of your team’s time can quickly lead to burnout, and in the worst-case scenario, increased turnover rates.  

AP automation, on the other hand, can take these assignments and automatically complete them, freeing your team up for work that better fits their education and skill level. 

Better Cash Flow 

AP automation can also have a significant impact on your organization’s cash flow.  

The cost savings dividends from going from a traditional, manual method to an end-to-end AP automation solution are significant. It will likely result in more available cash that can be distributed throughout your company, boosting overall initiatives and funding. By automating the entire procure-to-pay lifecycle, your company also gains real-time visibility into its business processes, giving you better control and insight into the status of your cash flow.  

Total Cost of Ownership 

As previously touched on, the true measure of ROI is often a multifaceted one.  

When it comes to establishing the value of implementing an AP automated solution into your business, it’s important to remember that ROI serves as a stepping stone on the path of establishing total cost of ownership (TCO). This figure is essential to illustrate to your C-Suite why an investment in this solution is necessary, as well as laying out what the ongoing costs will be after the initial payment.  

A comprehensive TCO estimate will incorporate both the direct and indirect costs of a potential AP automation software. This means evaluating numbers beyond the purchasing or licensing price; you’ll need to include employee training costs, maintenance costs, and the potential costs associated with downtime during implementation.  

Investing in Efficiency and a Healthy ROI 

Forward-thinking businesses understand the value of implementing an end-to-end AP automation solution—and why it’s so important to estimate the ROI of such an imperative investment accurately. Ensuring that your business is on the right track from the beginning starts with choosing a proven, top-of-the-industry AP automation solution. 

DocuPhase’s AP automation software is designed to maximize back-office efficiency. To see how our AP automation solution can optimize your back office while delivering budget-friendly ROI, schedule a demo with us today!