The Hidden Costs Of Accounts Payable Inaction


With the ubiquity of software solutions, the importance of accounts payable automation can no longer be ignored. The failure to implement an automated system carries an opportunity cost, often hidden and underestimated. For most corporate entities, the internal costs of manual system can be staggering.

Accounts payable teams should be empowered by executive leadership to reduce time spent on manual entry by streamlining into an automated system. An automated system can quickly identify discrepancies and streamline the documentation and payment process, ultimately improving accuracy and timeliness. While paper-based billing and invoicing may yield some initial cost savings, such system fails to take into account the opportunity costs of inefficient processing and mishandling of accounts payable.

The most obvious effect of failing to implement an automated accounts payable system is the impedance of cash flow. The longer the period between entering an invoice and payment, the longer working capital is tied up. Such delays add risk to both the credit profile of the organization and the potential to pass up discounts associated with prompt payment. Further, manual processes place drain on internal finance reserves as physical resources such as storage and labor are required to process invoices, whereas such requirements are negligible with an automated system.

It is essential to consider all of the tangible costs when deciding whether or not to embark on an automated accounts payable system. An automated system can not only reduce labor costs, but can also deliver immense savings in IT resources and time spent managing data. Such system can help to eliminate legacy processes and their associated costs, as well as the need for manual data entry into generic point-of-sale software suite.

The costs associated with failure to implement low-cost solution can be particularly significant for larger organizations. As the number of vendors actively engaged with the company increases, the difficulty associated with manual accounts payable processes rises as well. In addition to the risk of lost discounts, manual processing of accounts payable can lead to greater errors arising from human errors and omissions, which could cause delays in timely payment.

Above all, the costs of not automating accounts payable should not be underestimated. Companies that do not automate will face tangible and hidden costs, while those with automated systems will enjoy greater accuracy and faster payments, leading to improved working capital and corporate credit profiles. Implementing an automated accounts payable system is an essential strategy for ensuring an organization runs with precision and efficiency.