There’s a new reality in manufacturing. And to survive it, you’ve got to treat your suppliers like gold. Driving down costs through the supply chain is no longer an option, and paying invoices on time is non-negotiable. Combined, these changes could erode your profit margins and disrupt cash flow.
As a manufacturing finance leader, you’re likely under pressure to mitigate these risks by increasing financial control, boosting cost efficiency across the business, and supporting better supplier experiences. If you have a hunch that problems in your Accounts Payable function are hampering the success of these strategic initiatives, you’re probably right.
Inefficient processes create friction in supplier relationships
Manual AP processes are slow, prone to human error, and lack elasticity. In the new reality of manufacturing, these vulnerabilities can create major supplier experience problems. If, like many manufacturers, you’re expanding your supplier base to combat supply chain instability, your AP workload is rapidly growing. However, talent shortages are making it harder to scale the AP team appropriately. This is likely creating a vicious cycle of errors, late payments, and frustrated suppliers. And ultimately, it doesn’t matter how large your supplier network is if none of them want to prioritise working with you.
Lack of financial control increases costs
Manual Accounts Payable processes are expensive, with manufacturers paying an average of up to $21 to process each invoice according to the IOFM. But, the costs don’t end there. Despite your best efforts, if your business uses manual AP processes, it’s almost certainly haemorrhaging money due to a lack of adequate financial controls. Your AP team probably doesn’t have time to proactively reconcile statements. And your other financial controls are probably being sabotaged by data inaccuracies and human error.
The result is a mountain of unnecessary costs, including:
- inflated headcount costs;
- late payment fees;
- duplicate payments, and
- payment of fraudulent invoices
Limited visibility impairs decision-making and cash flow management
Your AP team processes vast volumes of supplier and invoice data daily, some of it in different currencies. If they’re using manual processes and spreadsheets, it’s likely that your AP data is siloed and you cannot get an end-end view of your processes. If you’ve ever tried to get critical insights from siloed data, you’ll know it’s like eating soup with a fork, but the problems don’t end there. Poor visibility and data silos also lead to:
- poor decision-making, particularly concerning budgeting, inventory, and supply chain management;
- impaired cash flow control which damages the financial health of your organisation, and
- black boxes between departments that vastly increase the risk of invoice fraud.
Solving with Automated AP Processes
By automating the AP process, manufacturing finance teams can solve three big challenges that compromise financial performance. In doing so, they can transform the AP function from an expensive and inefficient cost center into a
critical value driver that boosts resilience and powers success.
Automated AP processes eliminate inefficiency
Next-generation AP software automates the end-end process, including matching invoices to POs, identifying and preventing fraud, eliminating manual data entry into back-end systems, electronic approval routing, and sending digital payments to suppliers. By minimising reliance on human effort, manufacturers benefit from three positive outcomes:
- data quality is vastly enhanced, as opportunities for human error are minimised;
- AP cycle times are accelerated and more invoices are paid on time, enhancing the supplier relationship and reducing the risk of production and cash flow disruption and,
- AP departments gain the elasticity to cope with volatile workloads without increasing headcount, giving the business greater agility and resilience.
Take back control and drive cost efficiency
Automated AP departments spend far less to process an invoice due to reduced human input and more efficient processes. Plus, they’re less likely to incur late payment penalties.
Whats more, next-generation solutions that include automated statement reconciliation are a real game changer for AP departments that know all too well the pain of completing statement recs manually. Rather than pawing through reams of paperwork to identify discrepancies, AP teams get a list of issues that they can jump straight into resolving. As a result, your team can carry out routine, proactive statement recs on every supplier, resolve issues when they occur, and prevent vast sums of financial losses.
Interested? Discover how Xelix customer, McBride, used automated statement reconciliation to identify 0.4% of annual spending as erroneous postings and prevented 7 x annual contract value in duplicate payments from leaving the business.
Get end-end visibility and powerful insights
Automated AP processes give manufacturing finance teams complete visibility of the end-end process and a single source of truth.
End-end AP automation provides finance teams with real-time visibility by unifying data into a single source of truth that’s accessible across the business. With quality data at their fingertips, AP teams can swiftly handle exceptions, resolve disputes, and respond to supplier payment status queries.
Plus, with better data and powerful analytics, you get the foundations you need to make optimal decisions. Whether you want to improve cash flow management or identify how to best fund growth, with robust data and insights, you can confidently and quickly make better quality decisions that move the entire business forwards faster.
