Regardless of size, all businesses share a common theme: they hate to spend more for services than necessary. The fact is, there are many hidden costs in the back office that businesses, including trucking carriers, owner-operators, brokers and shippers, have that just don’t show up on the budget as line items. These costs include money spent preparing and sending out invoices among other expenses.
The reason is simple: many businesses still use manual processes. For smaller operations, the idea of switching to an automated process initially appears too expensive. After all, adding technology is rarely cheap, right?
According to the Institute of Finance and Management (IOFM), 39% of businesses spend more than $6 to process a single invoice. That can rise dramatically, though, thanks to hidden costs that most businesses don’t calculate. These include costs related to:
- Manual processes
- Processing errors
- Poor cash flow visibility
- Poor spend management
- Too many exceptions
- Onerous regulatory compliance
- Risk of fraud
- Fragmented systems
IOFM found that accounts payable was the most time-consuming and paper-intensive administrative function. The Association for Image and Information Management (AIIM) determined it costs $12.90 to process each invoice, with a median cost of $7.90. The size of the company did not matter in the research, it found. So, a one-truck operation or a 1,000-truck operation is going to pay the same to process an invoice.
Except, in some cases, that 1,000-truck operation has already automated the process, saving it time and money that helps it offer lower rates. The good news, though, is that even many of these larger fleets, and brokers and shippers, have not fully automated their processes. IOFM found that only 25% of surveyed businesses (across all sectors) had a “high level” of automation. One-third of businesses that process more than 25,000 invoices per month had no automation.
So, there is still time.
Automating processes can not only reduce costs, but it can also help any company improve its cash flow – that vital link to maintaining operations.
In the survey, 27% of businesses expected to deploy automated data capture and workflow processes for both invoice approval and exception reporting. These kinds of processes can also lead to electronic payments, which for fleets could mean quicker payments and more cash on hand.
AIIM says that automation reduces invoice processing costs 29.2%. Again, size of the company does not matter, but the firm notes that a company processing 10,000 invoices per month would save approximately $300,000 per year.
And it’s not just accounts payable that can be automated. AIIM reports that a company that moves to an automated travel & expense reporting system can pay an average of $6.86 to process each report versus $12.19 per report for a company that does not have automation.
Among the benefits identified are:
- Streamlined processes
- Improved accuracy
- Enhanced cash flow visibility
- Better spend management
- Fewer exceptions
- Streamlined compliance
- Less chance of fraud
- Better integration of systems and processes
Speaking strictly from a cash flow perspective – something that is so vital to trucking fleets working on thin margins in particular – there are many advantages to all involved in moving goods.
“Automation provides decision-makers with a range of metrics required for cash management, including: on-time payment percentage, enterprise spend and trends, category spend and volume, spend-to-supplier ratios, supplier performance, accounts payable value and volumes, accounts payable process metrics, available early-payment discounts, percentage of early-payment discounts captured, and payments metrics,” writes Concur in a report on automation.
The report goes on to note that companies that more accurately track their cash flow through automation are better positioned to utilize their cash on hand, including “greater assurance when it is best to release cash (in turn, reducing borrowing costs and opening the door to capture more early payment discounts).”
AIIM says that businesses that switch to automation see a payback in 9 months or less.
Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.