Rising inflation is pressing businesses to adopt cost-effective operating procedures. The Office for Budget Responsibility (OBR) in its recent report indicated that Consumer Prices Index (CPI) inflation to reach 8.7 per cent in the fourth quarter of 2022. Also, it forecasted that the inflation rate of the UK would remain above 7 per cent in each quarter starting from the Q2 of 2022, until Q1 of 2023.
The CPI including housing costs (CPIH) hiked by 7.8 per cent in April 2022, higher than the 6.2-per cent figure of March. Ever since the National Statistics series started in January 2006, this is the highest recorded 12-month inflation rate that the Office for National Statistics has witnessed.
With such staggering inflation numbers, it’s apparent that businesses have to take active measures to slash costs. While certain expenditures are inevitable, the focus now should be on conducting intelligent, cost-efficient operations that also boost the business’ bottom line. Accounts payable (AP) is one bolt of a business’ accounting machinery that can be tightened to cut down operating expenses. Let’s give you clarity on how this can be achieved.
Adopt paperless payments
The truth is paper isn’t always a very sustainable option and can prove economically and environmentally expensive for your business. But perhaps your accounts payable (AP) department has always found it challenging to let it go, at least to a reasonable limit if not completely.
The use of printed financial reports, paper checks, and paper invoices are used widely by traditional businesses, but it’s time to realise the maintenance costs associated with them. The space requirements for storage and labour required for processing can be a huge drain on the valuable time and money of your business.
This is where digitisation and AP automation can come in to save the day. By computerizing the invoice generation and distribution process, your business can save a huge amount of paper and cost. You can eliminate expenses on paper, printers, and ink and get rid of manual ways of doing invoice verifications and reporting.
Go for end-to-end invoice automation
Budgetary constraints often keep businesses from investing in full-blown automation of business processes. Although partial automation saves costs now, it paves the way for more costly errors in the future. The human error typical in manual invoice processing is one of the main reasons why many businesses end up losing money every year. Let’s not forget that repeated errors can negatively impact relationships with suppliers, thereby damaging your brand. It’s only through complete AP automation that these errors can be eliminated.
Complete automation streamlines the invoicing process, making it highly transparent and efficient. It fosters meaningful supplier relationships by aiding negotiations based on transparent terms and payment history. From the elimination of late payments to the detection of potential fraud to real-time decision-making, AP automation can prove a great business initiative to save costs and achieve the bottom line.
Establish self-service portals for your suppliers
Dealing with suppliers isn’t a piece of cake for the accounts payable department. A lot of time goes into it.
The manual nature of vendor relationship management can further add to the cost of accounts payable because the business has to employ manpower to manually deal with supplier queries. That’s not something very feasible during these times of rising inflation. The strategy now should be to eliminate such manual tasks and utilise resources more effectively.
Vendor self-service portals certainly deserve a mention in this context. When coupled with AP automation, these online platforms can be a great boon to your business. These portals allow your suppliers to view, update and maintain information online—something that simplifies your vendor relationships. From providing real-time accounts payable status to boosting payment efficiency, self-service portals have a lot to offer to businesses seeking to slash their costs.
Renegotiate discounts
Last but not the least, you should take the opportunity during these times of rising inflation to renegotiate discounts with your suppliers. Increased access to real-time AP data streamlines operations to simplify payment processes and vendor onboarding. In addition, vendor relationships improve with better AP automation, ultimately leading to timely production. As a result, AP professionals can do away with reputational and financial losses of late payments and negotiate money-saving discounts with your suppliers for making early payments.
Imagine how time-consuming tasks such as invoice processing and reporting would have been if they were completely manual. With AP automation, you can easily and quickly generate monthly and yearly reports to make crucial financial decisions. Customised workflows and more efficiency allow AP teams to assume a more strategic role in your business’s financial management.
With these four strategies, you can cut down AP costs greatly as inflation rises. If you are looking for a free calculation of your current invoice process, head over to our ROI calculator Kefron.
