You don’t need a finance professional to tell you that paying the bills means money coming out of your pocket, that’s just common sense. Still, many small and medium-sized business (SMB) owners fail to realize just how much more, on top of the amount due, they are spending on simply making these payments happen, especially if they do so manually, as Tofi Stoler of Melio (a US B2B bill payments company focused on SMBs) explains.
According to a 2018 study by accounting firm PayStream and consulting company Levvel, the average cost of processing a single invoice for novice businesses is $15. This means that if your business has, say, 20 bills to pay each month, just the cost of processing them adds up to $300 a month or $3,600 a year. Earlier data from enterprise information management company Iron Mountain indicates the cost of the non-digitized processing of a single paper invoice could even be as high as $25.
The good news is that much of these sums can be saved by making smart payment management decisions and switching to a digital accounts payable (AP) tool, like Melio.
Below are five ways in which not digitizing your business’ AP may have cost your business thousands of dollars in 2020.
Processing payments manually can take an overwhelming amount of time for you and your staff. Consider, for example, the fact that each vendor typically has their own accepted payment method, which forces you to alternate between making transfers on your bank’s website, using a vendor’s dedicated platform or phoning in to pay via credit card, and manually writing and mailing out paper checks.
Keeping track of payments, each made on a different platform, for accounting and tax purposes, takes additional time and is also prone to error.
Iron Mountain estimated that the shift to digital AP solutions could boost labor productivity by up to 25%. Just imagine how you could better spend the money you save on salaries to develop your business or what your staff could otherwise accomplish in these salvaged hours.
With digital AP solutions, you save staff-hours by automating recurring payments, scheduling all your transactions to go out exactly when they need to, and eliminating human error.
Best of all, you can take care of all of your due bills in one session on a single platform, regardless of what payment or delivery methods you choose.
Penalties and late fees
Whether it’s in an effort to maximize cash flow or simply due to poor task management, or lack of time, many businesses tend to put payments off to the last minute. This poses the risk of payments arriving too late, resulting in penalties, additional fees, and, sometimes, irreparable damage to their relationship with vendors.
Using a digital AP tool, you can get a clear picture of all of your due bills and schedule them in one sitting to make sure they leave your account and arrive at your vendor’s hands at just the right time for both parties.
And, if you still need more float, some digital AP solutions, including Melio, allow you to pay with a credit card even if your vendor doesn’t accept cards. This way, you can defer payments until your next billing cycle, which can make a huge difference if, like many other business owners, you’re still waiting for a check that’s “in the mail.”
There is no way around it, manual payment processing methods can be risky. Checks can get lost in the mail or stolen, and making credit card payments over the phone or on various websites could make you vulnerable to fraud and phishing attacks.
Online AP tools are far safer and provide a clear record of when and how a payment was sent, as well as its current status. Additionally, these systems have layers of security protocols and encryptions and you always have someone to call in the unlikely scenario something goes wrong.
To error is human, and when humans are manually processing bills and payments, it is also quite common. According to a 2010 survey by software company Sterling Commerce, each paper invoice error costs companies an average of $53.5 to rectify. This alone can easily amount to hundreds of dollars a year.
With digital AP solutions, you reduce the need to manually and repeatedly type or write addresses and account numbers, as the system automatically saves these. All of your transactions are well documented, and any errors are easier to spot and fix before the funds leave your account.
This may sound like small change, but the cost of the physical goods required for manual invoice processing adds up. Consider envelopes, stamps, ink cartridges, printing paper, file folders, file cabinets, and even the physical space they take up in terms of rent. With a digital AP service, you can significantly reduce these expenses.
To conclude, processing invoices manually costs more than most business owners realize, and digital AP tools can not only make your life easier, they can also save a hefty sum. So, don’t make the same mistake in 2021 and join SMBs across the country who are already managing their payments online the smart, secure, and cost-effective way. Start now with Melio. It’s simple, fast, and free.
For more information visit: www.meliopayments.com