The back office is the portion of a company made up of administration and support personnel. These personnel do not usually interface with customers. Back-office functions include accounting, record maintenance, regulatory compliance, human resources and IT services. The back office can be thought of as the part of a company responsible for providing all business functions related to its operations. Even though they are "behind the scenes," back-office personnel provide essential functions to the business. The back office is an essential part of any organization. It is their roles that enable and equip front-office personnel to perform their customer-facing duties. The back-office is sometimes used to describe all jobs that do not directly generate revenue.
While the back-office doesn't generate revenue, it can and does generate costs. Therefore, it is in any business's best interest to reduce the cost of back-office operations as much as possible. Cost reduction starts with a good hard look at the work processes and functions going on in the back office. Process inefficiencies and human error cause the most back office malfunctions, and it's these malfunctions that increase operating costs.
When it comes to improving efficiency, follow the paper...
Start with A/P
Back-office functions keep your company operating, but add little or nothing to growing your business. However, when properly managed, these back-office functions can improve your bottom line – nowhere is that more evident than in the accounts payable department.
The reason is simple…no other department processes the volume of paper that accounts payable departments process. Daily, weekly and monthly, invoices arrive that must be approved, scheduled, signed and paid on time. These long, manual multi-touch payment cycles that require staff time, multiple copies, signature approvals, printing, postage, mailing and filing of paper documents and accompanying back-up add up to steep back-office costs.
As organizations grow and change, suppliers increase, resulting in more incoming invoices – and this is not a problem that is limited to large, multi-location companies. Even small businesses can get bogged down in outdated paper and processes.
The Problem with Paper-Based A/P
When a company grows, systems that once worked well and that were effective often become unwieldy, inefficient, and expensive. Because paper-based A/P can cost business in real terms, it’s good to look closely at these areas:
- Processing costs -- Can these costs be reduced by eliminating manual steps? Include the cost of staff required to perform manual processing as you add up total processing costs.
- Late payment penalties and interest – Consider not only the actual dollars and cents that are lost through late payments and penalties, also consider the loss of reputation and valued suppliers that can occur with consistently late payments.
- Duplicate payments – How fool-proof is your manual system for ensuring that invoices don’t get processed twice?
- Lost or misplace invoices – How much staff time is wasted tracking down invoices to answer questions? AIIM estimates that it costs an average of $120 to locate a lost invoice, $220 to replace it.
- Missed early payment discount – Even if your staff manages to avoid late payments, how often are they able to take advantage of early payment discounts?
- Fraud – Manual systems and paper files are far exposed to the possibility of misuse of information than are properly protected digital systems.
Affordable, Scalable Solutions for Small and Large Organizations
There was a time when only large organizations could afford to implement systems that could streamline paper processes by eliminating paper from the system. But cloud access has democratized access to technologies that make digital automation affordable for even small companies.
Have you tried to automate your A/P Processing in the past? Or perhaps you are currently examining options for “going digital.” IOFM reports that between 70 and 80% of invoices in the United States are still paper-based, and about 70% of invoice processing costs are related to document handling and manual data entry. This reliance on paper leads to slow processes, lower overall accuracy rates, and higher costs.
In the past, many AP professionals were scared away from automation, because they believed all of their suppliers would have to issue e-invoices in the same standard format in order to become fully digital. This approach can be overwhelming. What hope do we have of convincing hundreds or perhaps thousands or tens of thousands of suppliers to modify their processes to suit the needs of just one customer?
It doesn’t have to be so hard!
Scalable Technology/Knowledgeable Vendors
Fortunately, whether your company is large or small, there are scalable technologies and knowledgeable vendors who can provide cost-effective solutions that can improve your processes and bring digital workflows into your A/P department.
Though invoices may arrive in many different page layouts, paper forms and file formats, Enterprise Content Management (ECM) can handle them all. Most ECM systems will ingest almost any type of enterprise content and can then group similar items, like invoices, into categories that define processes and apply specialized security.
Digital invoices ensure better control of information and are easier to retain in compliance with regulations. Today’s scanning and imaging technologies have simplified AP automation. ECM and workflow applications allow the electronic invoices to be sorted, processed, and paid much more quickly. In fact, with today’s technologies, AP Automation can be accomplished with an eye toward five simple steps. Download our white paper to find out what they are.