The True Costs of Manual AR Processing

Eugene Vyborov

What is it costing your company right now to generate invoices and process payments?

This question is more complex than it seems, and chances are the number is higher than you think. Consider this: Expenses associated with a manual AR process are more than the direct costs of paper for invoices and postage that goes on the mailing envelopes. You have additional and often overlooked costs associated with errors (both in invoicing and in payment processing), and expenses that result from the collections process. Don’t forget about the time your management team has to spend on reviewing invoices and resolving disputes! Most CFOs are clear: Manual invoicing and payment application is notoriously slow, error-prone, and highly labor intensive.

Can your company make an old AR process work?

Could your company be an outlier that makes its legacy process work better than most? Perhaps. However, consider manual AR from the standpoint of process flow, and the problem quickly becomes clear. First, an invoice is generated for goods or services delivered. It must be prepared, reviewed, approved, printed, placed in an envelope with postage and prepared for mailing (in larger companies this step also involves a slow-moving interoffice mail cart). As payments come in, they must be manually processed and applied to the appropriate outstanding accounts.

The multi-step process we just described is the best case scenario because we assumed timely and accurate payment! It only gets more time-consuming and frustrating from there. If there is no payment, someone in the accounting department must place a phone call to the customer’s AP department to find out what’s going on. Sometimes, getting in touch with the right people can take several phone calls, even when they are not actively trying to avoid you. Playing phone-tag with multiple delinquent clients can become a full-time job – except it must be done in addition to the rest of accounting responsibilities.

If your accounting team has more than one person, there is the added complexity of having to coordinate multiple follow-up calls between team members. Did someone call Company X today? Who did they speak with? What was the outcome? What will happen next? How do you avoid having an out-of-the-loop team member call Company X again tomorrow to the wrath of the customer who now (understandably) feels annoyed?

Let’s not forget that the process snowballs when the invoice in question relates to a new customer. Manual data entry across multiple screens is notoriously error-prone, and if your AR module isn’t well integrated with your CRM you get to enter the data twice!

The awful truth about the manual AR process costs

With all the moving pieces and steps, it is no wonder that a manual invoicing process is costing your company both money and time. Research by Fidesic Corporation shows that 90% of the costs associated with invoicing and payment processing are labor costs. A study by nonprofit benchmarking and research firm APQC echoes those findings by placing the cost of a single manual invoice as high as $11.50. If your business is on the low end of the efficiency spectrum and you generate 1,000 invoices per month, you are looking at an $11,500 monthly expense.

Combine that expense with the fact that your accounting department comes to a virtual stand-still for the better portion of the month, and you see the full scope of the problem with manual AR. Who has the time to thoughtfully analyze results, work on strategic planning, or prepare projections for a promising new product bundle when there are outstanding invoices to chase?

Implementing a modern AR cycle: Best practices

If your company finds itself in this spiral of high costs and inefficiency, it is time to look at alternatives. In our experience of implementing automated AR solutions, we have found it best to begin with the big picture. Get your accounting staff in a room and map out the current process to identify bottlenecks. Take note of specific frustrations your team might have with the current procedures, systems, specific customers or third party service providers. Dig into trouble spots and look for alternatives.

Above all, know that there are modern AR automation solutions that will plug seamlessly into your existing technology stack, improve your process flow and boost your efficiency. Our team at YayPay is helping companies like yours save thousands of dollars on AR processing while giving you the luxury of renewed focus on what you do best – serve your clients.




Eugene Vyborov
About the Author

Eugene is the CTO and co-founder of YayPay, specializing in building enterprise applications for the financial industry. He is responsible for YayPay’s product delivery, strategic technology vision, and core product architecture. Previously, Eugene has founded two technology businesses, A2A and WebiNerds, and was Lead Technical Associate at TechStars Boston in 2016. He has a master’s degree in Computer Science from Dnipro National University, Ukraine.

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