Weaknesses in finance processes are resulting in additional costs for businesses and even causing invoices to go wholly unpaid, according to a new report by Basware. Speaking to 550 accounts payable (A/P) departments worldwide, the report discovered that invoice and cross-departmental errors have caused 35% to leave suppliers unpaid, and 24% know that their own invoices have not been settled for the same reasons. Over a quarter (26%) of participating A/P departments have even paid the wrong supplier when processing an invoice. With A/P department inefficiencies largely attributable to human error, there is a clear need for appropriate controls and automation improvements.
Processing an average of 93,000 invoices per year, participants state that 7% of invoices contain errors, equating to more than 6,000 erroneous invoices per year for a typical enterprise taking part in the study. Lack of communication between A/P and procurement departments is highlighted in the report as a cause of A/P errors in a quarter (24%) of companies. Just 40% of invoices are based on purchase orders (POs), and where POs do exist, a third (32%) of finance departments have difficulty reconciling invoices against them.
When it comes to payment, in the last 12 months 30% of respondents have missed early payment discounts and 27% have incurred late payment fees. Despite this, 59% believe that the A/P department has a positive effect on profitability.
With direct control over cash flow, finance professionals are under growing pressure to strengthen controls, drive out costs and to increase process efficiency. However, while 60% of A/P survey participants think that increasing automation removes payment and accounting errors from the business, and 62% of respondents believe that automation can improve profitability, purchase-to-pay (P2P) process automation tends to be partial and is not integrated. Automating finance and procurement processes not only results in reduced processing times and subsequent cost savings, it also provides improved control over who spends money and what they can buy – leading ultimately to improved business processes and capital management.
The report highlights the ‘distance left to run’ in achieving this vision of a modern and efficient A/P department. Forty-four percent of respondents believe that e-invoices will fully replace manual paper-based invoice handling in the next five years. With so many still relying on manual, paper-based processes, much work needs to be done.
Basware’s senior vice president (SVP) of global marketing, Steve Muddiman, said: “The ‘Lost in Transaction’ survey shows that the engine room of corporate cashflow – the accounts payable department – is still far from the automated, error-free status it desires. According to our research, it takes companies 18 days on average to process an invoice through the A/P department, by automating the process, this can be cut to a fraction of the time. Long processing times prevent companies from reaping the benefits of early payment discounts, and driving cost savings across the business. Companies cannot afford to leave these processes out in the wild but should consider system and process improvements as an ongoing evolutionary investment that bring order to chaos, and ensures finance is concerned with profit margins and not inhibited by avoidable margins of error.”
A report by broking group Marsh examines the repercussions from the administration of the South Korean company, which filed for bankruptcy protection at the end of August.
Global research by C2FO suggests that smaller businesses are less concerned with the repercussions of Brexit and the upcoming US presidential election.
A squeeze on skilled talent means it now takes an average of seven weeks to fill open permanent roles in finance in the UK according to new research from financial services recruitment firm Robert Half.
Early-stage merger and acquisition deals in Asia-Pacific show nearly 10% year-on-year growth in recent months.