AP automation for manufacturing industry in the US – Challenges & Solutions 2023
Published on:5 May 2023
In 2023, the manufacturing industry is facing an unprecedented level of uncertainty. Economic instability, characterized by rising costs and interest rates, is a major contributing factor. This unpredictable economic climate may also result in a shift in consumer purchasing behaviours. Furthermore, the effects of the global pandemic are still apparent, and may result in a shortage of the raw materials and components required for manufacturing. The need to find good tools for approved efficiency and minimizing cost is very important.
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AP automation for manufacturing industry is one of the key finance processes where companies can find cost and time savings. Research companies have found that manually processed invoices cost, on average, is $12 to $30 per invoice, considering salary costs. Most companies that automated their AP process showed a savings of 40% to 60%. The big change happens in time spent on processing invoices, but there are other benefits as well:
• Decreased in time spent by AP department (up to 80%)
• Shortened turnaround times from days to minutes
• Up to 97% less errors
• Cost savings from 40% up to 60%
Manufacturing companies work with multiple challenges when it comes to invoice processing and accounts payable. First, the sheer volume of invoices that manufacturing companies receive can be overwhelming. Accounts payable teams may struggle to keep up with the number invoices and may risk falling behind on payments or making errors. Checking and approving invoices does not only create work hours for the finance team, as approvers also spend a considerable amount of time checking and approving invoices.
Second, manufacturing companies deal with many suppliers, vendors, and contractors. Managing accounts payable for all these entities can be complicated as each may have different payment terms, invoicing requirements, and delivery schedules.
To build and create, manufacturing companies order a lot of materials. These interactions usually create a purchase order – which is key for accounts payable automation. For the manufacturing industry, the percentage of invoices based on purchase orders can climb up to a staggering 90% of all invoices received. As they say, prioritize the low-hanging fruit. By automating purchase order invoices, manufacturing companies can get a good ROI in their investment.
The route to automating invoices based on purchase orders is called purchase order matching (or PO-matching or 2-way matching) and in simplified terms, it means comparing PO’s and incoming invoices and adding correct posting and workflow information on the invoice automatically. Purchase Orders are generated within the ERP-system, an external requisitioning system or a blend of both. This PO-data is imported into Rillion.
When the invoices start to arrive, the system automatically matches the invoice against the corresponding purchase order according to predefined business rules and tolerances and adds the needed coding from the purchase order data. If everything is correct, the invoice can be sent forward to accounting system for recording and payment immediately – without manual handling whatsoever. It doesn’t get any easier than that!
If any information is missing or incorrect, the invoice will be sent into an approval workflow, where an employee can check and add information. Watch a 3-minute video: Automated PO Matching in Accounts Payable.
3-way match verifies the invoice against its corresponding purchase order and goods receipt whereas PO-matching (or 2-way matching) only verifies the invoice against the corresponding PO. Watch a video: 3 Way Matching in Accounts Payable.
Is your company receiving many pdf and paper invoices? To get to the efficient AP process, the first step is making sure your AP department does not need to waste time manually coding in invoice data to the ERP. This is where invoice capture software is your best friend. The solution reads and extracts all the important data from the invoice using OCR technology and populates the data fields inside Rillion’s central dashboard.
Rillion’s invoice data capture solution processes invoices in any format including paper or email. File formats include PDF, EDI, XML and more. Watch a video: Invoice Capture
One of the major challenges facing the manufacturing industry in terms of accounts payable (AP) automation is managing the complexity of their supply chains. With multiple vendors, distributors, and suppliers involved, the process of tracking and reconciling invoices and different contracts can become quite daunting. Suppliers may be in different countries and use different languages and have different invoice information.
Keep track of all vendor contracts in a centralized way. Store documents in Rillion and make them searchable to the right people at the right time. Link documents to invoices in order to see needed information before payment. You can also set up automatic reminders when a contract is about to expire to make sure new negotiations can take place.
No matter where in the world the vendor is, it’s crucial to provide vendors with clear instructions regarding the required information to be included on the invoice. This information is essential for automatic handling to work seamlessly. To facilitate this, it’s advisable to provide vendors with these instructions during the early stages of the negotiation phase, to simplify the automation process later on. By prioritizing clear and thorough communication with vendors, organizations can ensure the success of their AP automation efforts.
We call ourselves AP Automation experts, providing the proper tools to allow finance professionals to transform accounts payable processes – from invoice capture to approval workflow, PO matching, invoice matching and seamless integration to your ERPs and/or Purchasing systems.
We come from over 25 years of experience providing the best customer service in the industry resulting in a more efficient invoice process and peace of mind to Accounts Payable. To date, Rillion has supported over 3,000 companies across 50 countries.
For more information visit https://www.rillion.com