SMEs in Australia have struggled in the face of challenges presented by COVID-19, with Treasury figures revealing more than 910,000 organisations have applied for the JobKeeper scheme. This number doesn’t account for the small businesses that have elected not to apply for JobKeeper, possibly because of the need to have a strong cashflow to pay their staff members upfront while waiting for the JobKeeper reimbursements. The challenges facing SMEs right now mean that cashflow is one of the most important factors for businesses to emerge from COVID-19 strongly.
Businesses need to work together to help each other as they emerge from COVID-19. This includes building stronger relationships with suppliers to keep the economy moving. Being able to do this, and to pay staff members, depends on strong, well-managed cashflow. This, in turn, depends on the business’s ability to stay on top of its accounts payable.
In 28 per cent of small businesses, more than 60 per cent of their invoices are paid late. This has a knock-on effect on cashflow and can also damage supplier relationships. In many small businesses, accounts payable (AP) processes are managed manually, which contributes to the late invoice payment and also creates additional work for employees. These manual processes are error-prone as well as time-consuming.
Manual processes make it hard for decision-makers to see where the money is going and when, and to determine whether the business is getting maximum value from its suppliers. This murkiness also makes it more likely that SMEs will accidentally pay invoices twice, or fall victim to phishing scams using fake invoices or fake account details, leading to further losses. Correcting errors takes more time away from building the business.
Research reveals that Australian SMEs could be suffering as a result of not automating their AP processes. For example, 24 per cent of organisations don’t have sufficient visibility into spending. Half (51 per cent) of businesses say invoice payment approvals take too long, and 62 per cent say they have to deal with a high percentage of exceptions. By contrast, research has shown that the top 20 per cent of organisations with AP automation have reduced their invoice processing costs by five times and can process invoices 2.5 times faster than businesses with manual processes.
There are five key benefits of AP automation that can help businesses emerge from COVID-19 in a stronger position:
- Fewer errors and, therefore, lower costs.
- Increased ability to detect fraudulent or scam invoices.
- On-time payments that let you leverage discounts, avoid late-payment penalties and build stronger supplier relationships.
- Reduced need for employees to intervene in automated AP processes, freeing them up to focus on business-building activities.
- Insights into spending patterns that facilitate smarter decisions about which suppliers to do business with and power negotiations around better terms, lower prices, or priority access to products.
No business operates in a vacuum and the COVID-19 recovery will be stronger if businesses keep cashflow moving by paying invoices on time. This will result in stronger supplier relationships and better economic recovery. Automating AP processes can help this happen, while also reducing costs and increasing visibility for SMEs. For businesses looking to emerge from COVID-19 in a position to grow, AP automation can prove invaluable.
Seth Butcher, national manager – IT solutions sales, Konica Minolta