STAMFORD, Connecticut, July 7, 2010 /PRNewswire/ -- Weaknesses in financial processes are resulting in additional costs for businesses and even causing invoices to go unpaid, according to a new report released today by Basware (http://www.basware.com/). Surveying 550 Accounts Payable (AP) departments around the world, the Lost in Transaction report discovered that 35% of respondents have not paid suppliers due to invoice and cross-departmental errors, and 24% of the companies know that they haven't received payment for their own invoices for the same reasons. Additionally, more than a quarter (26%) of participating AP departments have paid the wrong supplier when processing an invoice. With AP department inefficiencies largely attributable to human error, there is a clear need for appropriate controls and automation improvements.
Processing an average of 93,000 invoices per year, participants state that 7% of invoices contain errors, equating to more than 6,000 erroneous invoices per year for the typical enterprise taking part in the study. Lack of communications between AP and procurement departments is highlighted in the report as a cause of AP errors in one-quarter (24%) of companies. Just 40% of invoices are based on purchase orders (POs), and where POs are used, one-third (32%) of finance departments have difficulty reconciling invoices against them.
When it comes to payment, in the last 12 months, 30% of respondents have missed early payment discounts and 27% have incurred late payment fees. Despite this, 59% believe that the AP department has a positive effect on profitability.
"The Lost in Transaction survey shows that the engine room of corporate cash flow - the Accounts Payable department - is still far from the automated, error-free operation it desires to be," said Ari Salonen, Basware general manager, North America. "According to our research, it takes companies 18 days on average to process an invoice through the AP department, but by automating the process, this can be cut to a fraction of the time. Long processing times prevent companies from reaping the benefits of early payment discounts and from driving cost savings across the business. Companies cannot afford to leave these processes out in the wild. They should consider system and process improvements as an ongoing evolutionary investment that brings order to chaos, and helps ensure that finance is concerned with profit margins instead of being inhibited by avoidable margins of error."
With direct control over cash flow, finance professionals are under growing pressure to strengthen controls, drive down costs and increase process efficiency. However, while 60% of AP survey participants think that increasing automation removes payment and accounting errors from the business, and 62% of respondents believe that automation can improve profitability, purchase-to-pay process automation tends to be partial and is not integrated. Automating finance and procurement processes not only results in reduced processing times and subsequent cost savings, it also provides improved control over who spends money and what they can buy -ultimately leading to improved business processes and capital management.
The report highlights the key steps still needed to achieve the vision of a modern and efficient AP department. Forty-four percent of respondents believe that e-invoices will fully replace manual paper-based invoice handling in the next five years. With so many AP departments still relying on manual, paper-based processes, much work needs to be done.
For a full copy of the Lost In Transaction insight study, please visit http://www.basware.com/transaction.
About the research:
The Lost In Transaction study was conducted for Basware by independent research company Loudhouse ( http://www.loudhouse.co.uk/loudhouse.swf) during May and June 2010. The study polled 550 Heads of Accounts Payable from organizations with between 1,000 to 50,000 employees.
Telephone interviews were conducted to present a proportional picture from across the globe, with 100 respondents surveyed each from the U.S., UK, Scandinavia and Germany, and with 50 responses each from Australia, Benelux and France, completing the total of 550.
A typical enterprise in the Lost in Transaction study: - Has 11 full time employees involved in AP invoice processing - Processes 93,000 invoices per year - Takes 18 days to process an invoice (receipt to payment) - 12% of invoice handling time is spent managing exceptions - 1 in 5 (19%) of incoming invoices are e-invoices - 7% of incoming invoices contain errors - 58% of incoming invoices are based on POs
Basware is the global leader in purchase-to-pay solutions with more than 1,500 customers and 1,000,000 users in over 50 countries around the world. With Basware, organizations can reduce the cost of buying and paying for goods and services and gain visibility and control of their entire spending process by automating manual processes, from sourcing, contract management, purchasing and supplier collaboration to invoice automation. Basware solutions and services enable substantial cost reductions across businesses and deliver value by providing compliance and control, as well as fast return on investment. The solutions are distributed and implemented, either on site or as a service, in Europe, the U.S., and Asia-Pacific through an extensive network of Basware offices and business partners. The company's U.S. business, Basware, Inc., is headquartered in Stamford, Conn. More information can be found at http://www.basware.com/us.
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SOURCE Basware Corporation