“Best-in-Class enterprises focus on core processes and leverage ePayables solutions at a very high rate which results in invoice processing costs that are 80% lower”, states Ardent Partners’ 2021 AP Metrics report.
In our previous blog, we discussed how eProcurement technology is the essential building block of effective supply chain management. Today, we’ll focus on the next step in the P2P process, Invoice Processing.
Industry surveys show that finance and operations leaders know there are significant efficiencies to be gained from digitizing invoices. To illustrate the bottom-line cost savings related to invoice processing automation, let’s use as an example a full service 250 room hotel that is managing 6,500 incoming invoices per year.
Assuming a conservative average cost of $12.50 per invoice, the total cost for processing invoices for our example hotel is $81,250 per year. If this property is part of a management company with 20 similar-sized hotels, the resulting costs comes to an eye-watering $1,625,000. By adopting Best-in- Class tools and aligning to invoice processing best practice, that number can be reduced by 80% or more. Using our example above, that means $68,250 in savings per property, and $1,365,000 across the management company’s portfolio.
How is this possible? By digitizing the entire P2P process, many labor and time intensive tasks are automated, and better visibility and control also eliminates leakage from overpayment of invoices. Best-in-Class P2P software, coupled with strong corporate leadership, can drive straight-through invoice processing rates to 80%+. That means four out of five invoices do not require any manual intervention by a staff member because the purchase order, invoice, and receiving record all matched within pre-set tolerances on the quantity, price, and other header-level details. Recently, Northwood Hospitality, whose portfolio includes 10 full service hotels and resorts, saved over 2,000 back office hours by digitizing their P2P process.
Additionally, by employing an invoice management solution that does the job of digitizing invoices for you, there is no longer a need for property or corporate resources to manually key in information and handle large quantities of paper. In this digitized and automated environment, staff only need to review exceptions. With tools like an automated invoice exception report, AP teams can quickly identify why the documents are not matching, whether it’s because of a price discrepancy, over/under received items, or substitutions. With all these tools in place, time spent processing invoices can be cut from days to hours, and invoice processing costs can conservatively be reduced to $2/invoice. Ultimately, automation in the back-office lowers cost, enables teams to do more with less, and allows resources to focus on the guest experience rather than the unnecessary paperwork of processing AP.
Insight: An average 250 room hotel can realize a $68,250 net cost savings by adopting Best-in-Class invoice automation processes and technology.