When businesses are looking to cut costs, the AP department is often one of the first places they look. However, what many businesses don’t realize is that investing in AP automation can actually save them money in the long run. While companies aim to cut spending during poor economic times, investing in AP automation during a poor economic climate can result in a larger ROI than normal for many companies.
AP automation can help companies take advantage of early payment discounts, avoid late payment fees, and save on processing costs. In a downturn economy, AP automation makes sense for companies looking to improve their bottom line. In this blog, we’ll be delving into these overlooked issues.
How Inflation Generates Cost Savings in Accounts Payable
The current inflation rate as of June 2022, within the United States, is 9.06%. This means that companies are spending more on the same goods as opposed to around a year ago. Why this is relevant to cost savings, is that most supplier discounts are a set percentage. If a company is expending 9.06% more for the same goods and services, and suppliers are offering a set percentage discount, the company will save an additional 9.06% on early pay discounts.
This does not take into account the new early pay discounts customers would be able to capitalize on with a streamlined and autonomous AP process, and ultimately the savings would most likely be more.
Businesses Avoiding Long-Term Debts
As interest rates go up, businesses are less likely to take out long-term debts. In fact, several studies show that during periods of high and increasing interest rates, there is a large decrease in the amount of long-term debts businesses open and an increase in short-term debts.
As accounts payable deals strictly with paying short-term debts, most businesses can anticipate larger workloads in the AP department. Automating AP can assist in cutting down on the average invoice processing time for your accounting team, allowing your team to adjust to higher workloads without hiring new staff.
AP Automation Helps to Save on Late Payment Fees
According to a study done in 2016 by Billentis, the average cost of late payments was $25.6 billion USD. Inflated to 2020 prices, this number would be much higher. A large portion of these late payment fees could be saved if companies adopted an AP automation solution.
This is because with AP automation, companies can take advantage of early payment discounts more often, as well as avoid missing payment deadlines altogether.
AP Automation Helps Improve the Economy
As bold a statement as it is, AP automation can also help to improve the economy. When businesses are able to pay their invoices on time, it helps to support the vendors and suppliers that they work with. Also, when businesses are able to pay their invoices on time, they are more likely to have money available to reinvest in the business. This, in turn, can lead to new jobs and helps to keep the economy strong and healthy.
AP Automation Pays for Itself
AP automation aligns perfectly with the majority of businesses’ strategies right now in this economic climate. A 2010 survey conducted by IOMA reported that companies with no AP automation spent on average $15.70 per invoice. Companies with AP automation averaged $6.31.
In other words, companies with AP automation saved on average $9.39 per invoice. With the current average number of invoices processed per year being approximately 12,000, a company could save over $111,000 USD per year simply by automating their accounts payable processes!
With a flexible consumption-based solution like EZ Cloud, with rapid deployment and prebuilt integrations, companies can easily begin saving money post-implementation.
Is your company interested in cutting costs in this economic climate? While counterintuitive, implementing EZ Cloud into your organization’s tech could save you money from day 1. Schedule a demo with our team to understand how EZ Cloud integrates into your current business processes and can save you time and money.