Few things are more important for a hospitality business than proper management of its accounts payable. After all, hotels and businesses work with a large number of suppliers to deliver a quality experience to their own customers.
Sound oversight of necessary hospitality expenses is key to maintaining positive cash flow and good relationships with your vendors. But manual tracking of accounts payable can be time-consuming and rife with inefficiencies. In today’s fast-paced business environment, accounts payable automation is key to keeping everything running smoothly.
While the concept of automation may feel like you’re giving up control, the opposite is true. Using accounts payable automation will give you greater financial control over your hospitality business by providing several valuable benefits.
1. Eliminate Human Error
One of the most immediately obvious benefits of any type of automation system is that it reduces the risk of human error. Even with a highly trained and experienced team, manual processing will often result in mistakes.
You might think that tools like Microsoft Excel spreadsheets are already helping your team be more efficient and less error-prone. But even with these technology resources, human error is still quite common.
In fact, a survey of 1,000 office workers in the U.K. found that 98 percent had seen an error in Microsoft Excel causing their company to lose money. Other studies have determined that 88 percent of such spreadsheets contained “significant errors.”
Like it or not, it is all too easy for incorrect data input to throw off your accounts payable. A simple typo can get copied and pasted until it becomes nearly impossible to find where things went wrong.
With accounts payable automation, invoices are digitized. You don’t have to rely on manual data entry, which ensures that the information that has been put into your system is accurate and truly reflects the invoice you received. Granular invoice data can even help you create analytical reports based on invoice details to help inform decision-making regarding future vendor orders.
2. Greater Transparency
One key reason why accounts payable automation helps eliminate human error is that it introduces greater transparency throughout the entire process. Because everything is managed digitally, the data is readily accessible to everyone who might need to review payment and invoice data. Rather than spending time inputting data, finance team members can focus their energy on reviewing it.
With more of your staff able to look at invoice and payment data, they will be better equipped to verify information and identify any potential errors or anomalies that need to be corrected.
Accounts payable automation gives you clear insight into every step of the process. You gain complete visibility of payment status. You can double check when a payment was sent, and how much money was sent. You can see where your money is going, and potentially identify cost-cutting opportunities. Automated systems can send alerts and verifications when payments are completed or when a digital signature needs to be filled out.
Accounts payable automation can even increase transparency for your suppliers. By simply providing an option for them to view the status of their invoices, suppliers can have confidence that their invoice has been processed and that payment is on the way. This level of transparency can increase trust and ensure that suppliers won’t need to hound your team for payment status updates.
3. Increase Productivity
Accounts payable automation can dramatically increase the efficiency and productivity of your entire team. When your finance team doesn’t have to spend time on manual data entry, they can focus on higher-level tasks. A slow, repetitive and error-prone job is now taken care of in an instant by your accounts payable software.
This can also enhance productivity for other teams within your business that need help filing purchase orders. Automation simplifies these processes for those with less finance experience, so the finance department doesn’t have to spend so much time guiding others through the basics.
Increased productivity for your back-office team will enable them to do more work that directly contributes to your bottom line — in part by helping you save money. Even the simple fact that automation will ensure supplier invoices are paid on time can lead to major cost savings.
Consider these data points from the Institute of Finance & Management’s 2021 World Class AP Performance report: among businesses that manually process fewer than 20,000 payments per year, only 24 percent pay all purchase order invoices on time. For non-purchase order-based payments, the numbers aren’t much better: only 26 percent pay on time.
Many vendors and suppliers tack on late fees and other charges when an invoice isn’t paid on time. The study found that the cost per invoice for manually processed payments was $15.97, while companies that used accounts payable automation reduced that amount to $12.98. Savings of $2.99 per invoice results in savings of nearly $30,000 for every 10,000 invoices a business processes.
4. Better Manage Exceptions
Unusual payment situations may not occur all the time in accounts payable, but they occur often enough to be a potential cause for financial loss. For example, one common example of an exception is a duplicate payment, when a supplier sends a second invoice because the first invoice wasn’t paid on time. It is all too easy for both invoices to get paid to the supplier — meaning you essentially pay double for a single order.
Other exceptions include premature payments, when a payment is going to be made before a product or service has been delivered. Finally, invoice exceptions may occur when invoice information does not match the purchase order or other supporting documents. This could involve a mismatch on the number of items ordered, or a discrepancy in the previously quoted price.
These exceptions require additional attention beyond the typical processing for most invoices. However, with so many invoices that need to be paid, it can be easy for such issues to slip through the cracks when accounts payable is performed manually. While some deviations may fall within previously determined “acceptable limits,” letting large exceptions slip through the cracks can become a major source of loss.
Accounts payable automation leaves your team better equipped to identify these and other exceptions with customized matching rules that compare receipts and other documentation. This allows for quick and accurate flagging of exceptions that fall outside previously established acceptable limits. Your team can quickly assess the discrepancy and make corrections so that your business doesn’t overpay.
5. Checks and Balances
Checks and balances are vital for preventing fraud and other losses in accounts payable. With an accounts payable automation solution, it becomes much easier to increase the security of your payments and prevent financial losses.
This begins with the basics: verifying that there is indeed an obligation to pay. Accounts payable automation helps you establish greater control over payment requests (including ensuring that appropriate approvals are given) before a payment is sent out. Segregation of duties holds the entire department accountable, ensuring that the obligation of approving payments doesn’t fall under just one person.
When accounts payable actions must be viewed by multiple people (including by getting digital signatures), it greatly reduces the risk of fraud taking place. This also creates a digital “trail” for each payment that will streamline the investigative process if a payment comes into question after the fact.
With real-time reporting, you gain a better view into other, less nefarious issues. This system allows you to identify who is responsible for various stages of the approval process, helping you spot delays in payment processing.
Addressing these issues can help ensure that more invoices are paid on-time. You could even improve your processes to the point where you are able to make payments before their due date, giving you the ability to potentially negotiate early payment discounts. This is much more efficient than requiring employees to sift through stacks of paper to confirm and verify payment activities.
Take Control With BirchStreet’s Accounts Payable Automation
Accounts payable automation can dramatically improve how you control your hospitality business’s finances. With greater visibility into purchases and digitization of receipts, you can eliminate errors and other risks that could cause you lose money.
BirchStreet’s AP 3-Way Auto-Match is uniquely suited to help you automate invoice processing to reduce costs and improve accuracy. Customized PO, invoice and receipt matching allows you to set customized matching rules to automatically compare receipts, making it easier for your staff to address exceptions.
Electronic invoices, digital signatures and direct integration with your existing ERP/accounting systems provide complete visibility of payment status. Our accounts payable automation even enables a tax calculator to help you maintain international compliance.
Users of the AP 3-Way Auto-Match have experienced a 90 percent decrease in manual processes while cutting accounts payable labor costs in half — all while successfully processing 100 percent of supplier payments.
With full visibility and control over your accounts payable, you will have true control over your finances and be better positioned to increase your profit margins.