AP invoice automation insights by Medius

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The Manufacturing Process and AP Automation: Improve Supply Chain Management

Manufacturers are famous for ensuring that production process automation and lean manufacturing deliver to the bottom-line. However, the same continuous improvements in cost-saving should be applied in the back-office. Paperwork can bog down operations, delay just-in-time ordering, and lower organizational productivity. AP automation can achieve the opposite, speeding up operations, and boosting efficiency.

Manufacturers seem to be the worst in class for paying their suppliers. And, for manufacturers, the relation to their direct material/near material suppliers is of premium importance. It is crucial for manufacturers to keep their supply chain happy by making timely payments. If manufacturers don’t get their supplies in time, their production and overall manufacturing process stops versus being unable to pay an indirect materials supplier, which in the normal case cause less harm. 

Volume and Matching to POs

What separates  manufacturing from other industries is a) the direct nature of the invoices and b) the need for product profitability analysis. The procurement flow includes near-production material, such as MRO, which is neither indirect or direct materials. The impact direct- and near production material has on the supply chain require being able to pay suppliers fast and nurture relationships. The need for advanced product profitability analysis requires sophisticated AP tools that can do line level connections to multiple POs. 

Consider the significant volume of invoices in the manufacturing industry and the challenge of matching to POs when dealing with numerous invoices. The more invoices an AP team processes manually, the higher the risk for costly errors, omissions, and missed opportunities for savings. Think about the considerable time and effort line-by-line matching takes, and the extent of human resources involved when processing tens of thousands of invoices every month. The time it takes to process thousands of invoices manually, and the continuously mounting cost of human resources by using an outdated accounts payable workflow. AP automation provides a faster, more efficient process with solutions for the unique challenges manufacturers face to help improve overall supply chain management.

AP automation makes a measurable difference in how modern technology can improve operations for manufacturers. Vendor relationships and cash flow are enhanced by streamlining and automating invoice processing, maximizing discount opportunities by paying suppliers on time, and realizing the benefits of accurate cash management and financial reporting. For example, a matching engine enables dynamic matching of invoices to contracts, orders, or good receipts to make automatic invoice approval possible with no human intervention. Instead of waiting for a tedious manual approval process that could take days or weeks, invoices are instantly and touchlessly approved and processed to seamlessly stay on or ahead of schedule.

Product Cost Analysis for Profitability

Product cost analysis plays a crucial role in profitability. Costs to analyze include direct materials, direct labor, facility overhead, and consumable product supplies as well as the cost of labor needed to deliver a product or services to customers. Understanding these costs is the first step to finding ways to better serve customers and provide the highest level of service at the most competitive industry pricing. 

The intelligent use of AP automation helps the C-suite and financial team get essential updates and data in real-time. Harnessing the benefits of benchmarking and data analysis helps manufacturing management determine the company’s current progress in relation to its competitors, and make essential changes to boost profits.

Remember the Second “P” in P2P

It is critical to remember the second “p” in procure-to-pay (P2P) to remain on top of cost control, accuracy, and efficiency, as well as explore strategic opportunities with vendors. Areas of focus for manufacturing companies include building and nurturing supplier relationships and maintaining a trustworthy reputation in the industry. Manufacturers that work well with vendors and pay on time ensure supplies are always accessible and available to keep up with production and be profitable. 

AP and procurement are strategically linked in three significant ways. First, the liaison reduces risk as everyone analyzes the data provided by AP automation to find ways to protect the company, claim lost resources, and use human resources for supplier relations and business analysis instead of routine tasks. Secondly, the team can readily access essential data to determine account status in real-time, such as whether invoices were sent and pain, and how to improve supplier performance management. Finally, access to the latest data provides a golden opportunity to free up working capital for innovative opportunities and other business-building initiatives. 

Finding and maximizing these opportunities is only as effective as the data used to do it. Ultimately, bad data leads to bad decisions because these actions are not based on current facts. Cloud AP automation provides updates in real-time, to help the AP team and C-suite analyze vendor relationships based on the latest data. Plus, the expense and inaccuracies that occur with manual processes make it a poor choice in fast-paced, modern marketplace. In addition, it takes more time to correct these inevitable mistakes manually. 

The Changing Face of Supply Chain Management

Once focused on human interaction and ongoing systems of checks and balances, the face of supply chain management is rapidly changing. These changes have occurred and continued at breakneck speeds due to the intelligent use of technologies such as robots and drones in manufacturing and supply chain management. As the speed of production and business steadily increase, manufacturers must stay ahead of the curve to remain relevant, reliable, and trustworthy.

Touchlessly handling processes that were once manual enables manufacturers to harness the power of AP automation to keep up with the pace of ongoing vendor approvals and payments. Artificial intelligence (AI) and  AP automation are changing the way supply chain management is handled and processes. AP automation is the preferred choice for manufacturers when it comes to accuracy, simplicity, integration, ease of use, and integrity of data made available in real-time.

Including AP automation in the manufacturing process helps to build a culture of trust and collaboration with suppliers to increase profits, reinforce branding, and boost the bottom line.

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