Exploring the Invoice-to-Pay Process

Transcription

1 Exploring the Invoice-to-Pay Process research brief Sponsored by MineralTree

2 Overview Accounting technology is changing at a rapid pace as new advancements play a role in helping organizations operate more efficiently and securely. One of the most drastic areas of changes is the methods by which organizations process and pay invoices. Automation and electronic payments are beginning to replace the process of writing paper checks, physically passing them around for approval and signatures, and mailing them to billers. The objective of this research is to uncover attitudes and preferences of technology usage among accounting and accounts payable (AP) professionals, with a particular focus on invoice processing and payment. Between November 5 11, 2015, a total of 161 accounting and AP professionals completed a survey via SurveyMonkey, an online survey services provider. Key Findings Some of the most significant findings of the report include: Bill paying habits among accounting and accounts payable professionals are far more advanced at home, where they use a number of electronic payment methods, than at work, where they overwhelmingly rely on paper checks. The lack of advanced technology at work is cause for concern as many organizations demonstrate security and cash flow challenges with their current processes. Sensitive information such as bank account and routing numbers are often being stored in locations that lack proper security, and many organizations have experienced cash flow problems due to unclear settlement windows. Organizations are putting themselves at a disadvantage by severely underestimating their competitors adoption of AP automation. Respondents largely believe that their organization is more advanced, or will implement AP automation more quickly than their competition. 2

3 The Cost of Processing and Paying Most accounting professionals do not know how much it costs to process and pay an invoice, which typically averages in the $10 to $15 range, according to data from the Federal Reserve. Respondents were asked if they knew how much it costs their organization to process an invoice including materials, time, and processing fees and 75 percent of respondents stated that they did not know that cost. Do you know how much it costs your organizayon to process an invoice? (Including materials, Yme, processing fees, etc.) Yes 25% No 75% Respondents who signified they did not know the cost of processing and paying an invoice were asked to provide their best guess. Most people underestimated the average cost, with 53 percent guessing below the $10 to $15 range, and just 16 percent guessing within that range. 3

4 How much does it cost to process an invoice? (Including materials, Yme, processing fees, etc.) 33.30% 50% 16.60% <$10 $10-15 >$15 Respondents who said they knew the cost of processing and paying an invoice at their organization were asked to state that cost. In general, there was not much variation between those who said they knew the cost and those who did not know. Fifty percent of respondents who said they knew the cost of processing payments at their organization said it was below the $10 to $15 range, while 22 percent stated it was within that range. What s your best guess on how much it costs to process a single invoice? (Including materials, Yme, processing fees, etc.) 26% 22% 52% <$10 $10-15 >$15 In total, 20 percent of all respondents gave an answer within the $10- $15 range when either stating the cost of processing and paying an invoice, or providing their best guess. 4

5 Payment Methods Paper- check based payments are by far the most popular method used within organizations, with 81 percent of respondents saying that checks are used frequently (73.75 percent) or exclusively (7.5 percent). Electronic payment methods, such as credit cards, ACH, and EFT see moderate use. Credit cards are the second most popular method of payment, with 49 percent of respondents using them frequently and 31 percent using them occasionally. ACH and EFT are the next most popular forms of payment, being used frequently by 42 percent and 33 percent of respondents, respectively. Organizations almost never use virtual cards or debit cards to pay invoices, presenting a large opportunity to educate accounting professionals about when and why they might be useful. Sixty eight percent said they never use debit cards and 85 percent said they never use virtual cards. Please indicate how frequently your organizacon uses the following payment methods % 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Check Credit Card Debit Card ACH EFT Virtual Cards Not Sure Never Rarely Occasionally Frequently Exclusively Respondents were asked how frequently they use different payment options in their personal lives. In stark contrast to their professional lives where paper checks are used frequently, more than half said they are rarely (48 percent) or never (7 percent) used when handling personal finances. Only 23 percent said they use paper checks occasionally. Credit and debit cards are the most frequent form of payment for accounting and AP professionals to use in their personal lives, with 80 percent saying they use cards frequently (50 percent) or exclusively (30 percent). Online bill pay through a bank or a biller s website is somewhat popular, getting frequent use from 34 percent and 27 percent of respondents, respectively. Online bill pay through a third party service (such as Mint Bills) is not popular at all among accounting and AP professionals. Seventy five percent of respondents said they never use such services. 5

6 Please indicate how frequently you use each of the following methods to pay bills in your personal life % 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Paper check Credit or debit card AutomaYc withdrawal from bank Online bill pay through my bank Online bill pay directly through the biller s web site Online bill pay through a third- party service (ex. Mint Bills) Never Rarely Occasionally Frequently Almost exclusively Exclusively Nearly a quarter (24 percent) of companies have experienced cash flow problems because of unclear settlement windows with the payment methods they use. Eleven percent of respondents said they experience these problems occasionally, while 13 percent said these challenges occur infrequently. Has your company experienced cash flow problems because of unclear sehlement windows? I don t know 6% Yes, infrequently 13% No 70% Other 24% Yes, occasionally 11% 6

7 Security A large portion of respondents who pay invoices electronically (via ACH or EFT) store the bank account numbers of their billers in places that likely lack proper security. Seventeen percent said they store this sensitive information in a word processing document or a spreadsheet, and 11 percent weren t sure where it was stored. Forty five percent of respondents said they store this information in a banking application, 38 percent said accounting application, and 12 percent said another application specifically for this purpose. If your organizayon uses ACH or EFT, where do you store the payment informayon (such as account and rouyng numbers) for the counter- paryes you re paying? Select all the apply. I m not sure 10.6% All different places Database Another applicayon specifically for this purpose 5.6% 8.7% 11.8% Banking applicayon 44.7% AccounYng applicayon 37.9% Word processing document or spreadsheet 17.4% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Most respondents see the security risks in moving their funds to an intermediary account before payments are made, a practice that occurs in some popular business bill pay solutions. Seventy one percent of respondents said they are not open to using a payment solution that requires funds to be transferred to an intermediary account before a payment is executed on their behalf. 7

8 Would you be open to using payment soluyons from a company that required funds to be transferred from your financial accounts to its own accounts before finally execuyng a payment on your behalf? Yes 29% No 71% The Pace of Technology Adoption Many respondents (20 percent) said that they have already transitioned to a paperless accounts payable and payment automation solution. Among those who have not yet transitioned, 49 percent say they will do so in less than a year (19 percent) or between one and two years (30 percent). The 15 percent of respondents who said their organization would not implement paperless accounts payable solutions were asked to provide a reason why. Common answers included, too expensive, no budget, or their organization is too small. When will your company transiyon to paperless accounts payable and payment automayon soluyons? We won't make any changes 15.5% 7+ years 5-6 years 1.9% 3.1% 3-4 years 10.6% 1-2 years 29.8% Less than a year We already have 19.3% 19.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 8

9 Respondents were asked when they thought their peers or competitors would implement paperless accounts payable and payment automation technology. In general, people exhibited a false sense that their organization is more advanced than their competition, and they believe that it will take their competitors longer to implement this type of technology. Nearly half (45 percent) of respondents believe it would take their competitors three years or more to implement paperless AP and payment technology, in stark contrast to the 15 percent who said it would take their organization that long. In addition, only 15 percent of respondents thought their competitors had already made the transition, compared to 20 percent who stated that they already had. When do you think most of your company s peers or compeytors will transiyon to paperless bill pay? I don t think they ll make any changes 7+ years 6.2% 7.5% 5-6 years 9.9% 3-4 years 24.8% 1-2 years 28.0% Less than a year 8.7% They already have 14.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% When segmented by the type of accounting / ERP system they use, organizations using Microsoft Dynamics GP are much slower to adopt paperless AP than others. Only 11 percent of Microsoft Dynamics users said they had already adopted paperless AP, compared to 19 percent of NetSuite users, 25 percent of QuickBooks users, and 30 percent of Intacct users. Integrating with Accounting / ERP Systems & Banks A significant majority of respondents realize the value in having their bill pay solution integrate with their accounting / ERP system and their bank. Ninety three percent of respondents believe it is extremely important (72 percent) or important (21 percent) for a bill pay solution to synchronize with their accounting / ERP system. 9

10 How important is it for a bill pay soluyon to synchronize with your accounyng / ERP system? Not important 7% Important 21% Extremely important 72% Similarly, 89 percent of respondents believe it is extremely important (58 percent) or important (31 percent) for a bill pay solution to synchronize with their bank. How important is it for a bill pay soluyon to synchronize with your bank? Not important 11% Extremely important 58% Important 31% When segmented by the type of accounting / ERP system they use, fewer QuickBooks users saw the importance of having a bill pay solution integrate with their accounting / ERP system. Only 62 percent of QuickBooks users said it was extremely important, compared to 70 percent of Intacct users, 75 percent of Microsoft Dynamics users, and 85 percent of NetSuite users. 10

11 More users of Microsoft Dynamics saw the importance of having a bill pay solution integrate with their bank, when compared to users of other systems. Sixty eight percent of Microsoft Dynamics users said it was extremely important, compared to 50 percent of Intacct users, 56 percent of NetSuite users, and 57 percent QuickBooks users. People in the Process More than half of all respondents (59 percent) reported that invoices touch 2 to 3 people while being processed within their organization. One quarter of organizations require 4 to 5 people to handle each invoice. On average, how many people touch an invoice at your organizayon from the Yme it s received through being processed, approved and paid? 0% 1% 4% 11% 25% 59% Unsurprisingly, the inefficiencies of manual AP are compounded at organizations that process a higher volume of invoices. Organizations that process more invoices tend to require more people involved in the process as well. At organizations that process more than 500 invoices per month, 42 percent said 2-3 people touch each invoice and 51 percent said the process includes 4-5 people. Saving Time Accounting professionals believe that automating bill pay will give them hours back in their day time that could be spent on more strategic tasks. More than a quarter of respondents (28 percent) said that an automated AP solution would save them an entire week s worth of work every year. 11

12 If your system automaycally captured invoices, routed them for electronic approval from the proper people and departments, reconciled with your accounyng/erp system and bank, and executed the payments, how much Yme do you think that would save? 8% 1% 4% 2% A few hours Enough take an extra week of vacayon 9% 48% Enough to take an extra two week of vacayon Enough to take a month off Enough to take a few months off Enough to work a half day, every day 28% I d barely have to show up for work Respondent Profile Between November 5 11, 2015, a total of 161 respondents completed the survey via SurveyMonkey, an online survey services provider. All respondents signified that they either handle or oversee a portion of the accounts payable process, and a wide majority (89 percent) said they do so within a company or non- profit organization. Eleven percent said they worked at an accounting firm or practice. 12

13 What best describes your employer? AccounYng firm/ pracyce 11% Company or non- profit 89% Respondents were asked to identify the following AP and accounting products in use at their organizations. QuickBooks was by far the most used tool. 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Please select any of the following technology products that are in use at your organizayon. 0.6% 4.3% 6.2% 17.4% 13.0% 16.8% 37.9% 1.9% 26.1% 13

14 Respondents were fairly balanced among companies of different sizes, based upon the volume of invoices they pay every month. How many invoices does your organizayon pay every month? 30.0% 26.7% 25.0% 20.0% 20.5% 21.1% 15.0% 14.3% 13.7% 10.0% 5.0% 3.7% 0.0% Less than Respondents were asked to provide the dollar amount of the average invoice that their organization pays. Once again, survey respondents represented a fairly evenly dispersed set of organizations based on the size of their invoices. The average amount was $4,681, and the median amount was $1,500. What's the size (dollar amount) of the average invoice that your organizayon pays? 25.00% 21.12% 20.00% 15.00% 17.39% 15.53% 11.80% 11.80% 14.91% 10.00% 5.00% 4.97% 2.48% 0.00% <$499 $ $ $ $ $ $ >$10000 Respondents represented a diverse age group, with most (81 percent) falling between the ages of 30 and

15 How old are you? 0.6% 0.6% 11.8% 6.2% 24.8% 29.2% 26.7% 19 or younger or older About MineralTree MineralTree provides the easiest to use Accounts Payable (AP) and Payment Automation solutions for finance professionals at growing organizations. MineralTree streamlines AP, giving customers unparalleled visibility and significant cost savings in an affordable, integrated platform that is guaranteed secure. For more information visit 15