Automatic for the people

The benefits to SMEs of automated accounts payable at EOFY.

The end of financial year (EOFY) can be a real pain point for SMEs, with late June often attracting a last-minute scramble to consolidate payments. The typical SME works with 190 suppliers and vendors throughout the year. While this may not seem like much at first glance, if the accounts team checks in with each vendor once a month, that adds up to 2280 checks annually.

For SMEs still relying on manual or partially manual accounts payable (AP) processes, the total time, effort and cost involved may severely impact their productivity. Accounting and finance teams spend, on average, just less than one day (14 per cent) of their working week processing invoices. Moreover, with 42 per cent of SMEs acknowledging that they’ve found errors when collating information at tax time, the time investment from accounting teams increases, as reconciliation is given priority.

As SMEs across Australia and New Zealand approach the EOFY reconciliation rush, accounting teams should look to an automated AP and broader invoice and expense management solutions to help accurately lodge tax returns and declare incomes, saving significant business time and resources.

Beyond this, cloud-based and automated AP solutions can help SMEs use EOFY as a time to review payment data. The insights businesses can gain from this data can help them make critical decisions about expenses to cut and areas to invest in more heavily.

With AP cloud solutions being delivered over the internet as a service, SMEs benefit from easy deployment, affordable, pay-per-use pricing, and no onsite IT management requirements.

Automated invoice and expense management systems can help SMEs fulfil their tax duties and report accurately. This saves time, boosts compliance, and provides a tool to help budget more effectively coming into the new financial year. Additionally, submitting accurate tax documents means that businesses won’t be liable to pay more tax than they need to, which leaves more cash flow to invest back into the business.

By using an automated invoice and expense management system, SMEs can benefit from these five key benefits:

1. Improved efficiency and visibility

An automated invoice and expense management system ensures a paperless process. It gives businesses flexible ways to automatically capture and store all invoices electronically, supporting all approvals-related communications in the system. By automating the entire invoice management process from purchase request to payment, businesses gain full visibility and control at every step. Visibility helps ensure compliance, track processes and spend, and identify revenue and savings opportunities for the following year.

2. Increased accuracy

Manual processing is mundane, time consuming and error-prone. Automation provides businesses with increased financial visibility and accuracy, helping to ensure compliance and avoid risk.

An automated system can capture invoices electronically using optical character recognition (OCR) technology, use two- and three-way matching to pair the invoice to its associated purchase order (PO), and then accurately record it in the AP system, which then flows through to the accounting system used by the business. This eliminates the need for manual processing, meaning the risk of human error is immediately eliminated. The system only requires manual input for verification if an invoice is flagged as not matching any POs or approved suppliers, or if the amount is higher than the approved purchase amount, for example.

Increased accuracy during the AP process means that businesses can feel confident submitting their tax documents year on year, while also enhancing the accuracy of financial forecasts. This positions businesses to improve their liquidity, eliminate excess spending, and mitigate potential funding gaps to ultimately generate higher profits.

3. Increased mobile accessibility

Implementing good tax reporting processes from the start of the financial year makes lodging tax returns seamless. All information is generated accurately and automatically, saving time and costly mistakes. To facilitate this, employees need access to smart expense-management tools to record data regardless of their location. Employees can instantly capture, record and upload financial data to the automated system, providing businesses with real-time visibility into employee spend, while also eliminating the chore of expense reporting for employees at month end. This is particularly useful for travelling employees or remote workers whose expense claims, payment data and finance activity will need to be accurately accounted for.

4. Boost in compliance

Most SMEs can’t afford the fines and penalties that result from inaccurate tax returns. Likewise, incomplete or late tax returns can set small businesses back by more than $100 for each month after the reporting deadline. It’s essential that SMEs abide by finance reporting regulations and can provide evidence to support claims made in tax returns. Automation helps SMEs better consolidate evidence in the form of receipts, invoices, payslips, income data and expenses, to ensure the information they provide in their tax returns is correct and up to date, which lets them confidently answer any inquiries from the Australian Taxation Office (ATO).

5. Data-informed decisions

While the EOFY can be perceived as a headache for many SMEs, it forces businesses to consolidate spend. Instant reporting capabilities deliver strong ROI in terms of accuracy and time saved, allowing finance teams to easily establish and track key metrics. Once analysed, these metrics inform payment decisions to optimise company cash flow, and make forward-looking, real-time strategic decisions. This type of visibility into finance data can deliver a more cost-effective and rewarding future for SMEs.

Rather than viewing tax requirements as an obstacle, SMEs can leverage automated invoice and expense management systems to ensure they’re prepared for EOFY duties by managing vendors and responsibly storing all financial data in the system. SMEs can further use this collated tax-time data, and the subsequent reports, to inform future budgeting and strategic decisions..

Fabian Calle, managing director – small to medium business ANZ, SAP Concur

This story first appeared in issue 29 of the Inside Small Business quarterly magazine