SMEs, or Small and Medium Enterprises, are a large group of businesses and companies that have just started their business journey or are in the middle of becoming a large business. Such businesses are not usually made for remote working or inefficient work because they need to increase their revenue to reach the status of a large corporation. During the pandemic, SMEs have greatly suffered due to the lack of workforce. However, now that the brunt of it is over, SMEs are getting revived through various means.
Accounts payable is an integral part of any business, be it small, medium, or large. How you manage your AP department in your business dramatically affects how your business will perform in the market. Automating the AP workflow is one of the best ways to make sure that you make the most of your resources. This article will highlight the effects of AP automation on SMEs and convince you to automate your AP workflow if you are an owner of an SME.
Digitalization
If you automate the entire AP workflow of your business, it is the first step to the digitalization of your company. Once the workflow can happen on software, it is easy to convert the rest of the business towards something that can be accessed remotely. This is very similar to large companies and is a step forward in the progress of an SME who has a good AP manager.
Good software does not just work on the niche AP management as it is supposed to. It also helps out in the management of various aspects of your company. SMEs have this advantage over large businesses; they can use simple software to achieve greater efficiency. Once this efficiency has been completed, you can work towards bettering the rest of your business.
Prediction
Another essential part of any business is what the future holds for them. The sales, the requirement of raw materials, and the production capacity, all need to be considered to find the perfect mix for a good AP prediction. Then, you need to set aside a budget for the same; this is not easy if your market demand is highly variable. This is often the case for SMEs; their demand is highly unpredictable; they might sell a couple of thousand products one month and might struggle to reach their monthly quota the next.
Automation of the accounts payable department uses specific software that helps predict the fluctuation in these demands. This allows the owners of the enterprises to plan their budget accordingly. This is a blessing for SMEs as this helps them set aside money for other essential jobs such as expansion, marketing, and sales.
Clear business case
AP automation has enormous effects on the cost per invoice of the business. Leaving a paper trail has multiple effects, from an environmental impact to costing a fortune for a small business. For large companies, amounts in five digits don’t matter as much, but for SMEs, optimization of their budget is the focus of their business. This means they need to earn the most profit while spending the least. Automating makes this feasible by cutting the cost of invoices from $15 to $2 (taking an example). If the company generates 1000 invoices a month, a physical copy would cost them $15,000, while the digital copy would just cost them $2,000.
There needs to be an upfront investment in many businesses; SMEs are often investment heavy for their owners. However, they need to be careful of the value of the money they get out of their assets. This is the case the business makes for itself; why is it worth investing in the industry.
Automation’s effects
A manual accounts payable system is very inefficient. In addition, there can be duplication of invoices which can cost you at least a couple of thousand dollars. This might seem like a small number if you are a part of a large enterprise, but this is the primary source of income for small enterprises. Automation completely negates these errors because all these calculations are being done by the software you are using. Therefore, the invoices generated won’t have any mistakes (until there might be a fraudulent vendor).
You need to be aware of the fraud that can occur in the case of accounts payable automation; if you can sort that out, no force can stop your business from prospering.
Conclusion
It is just a matter of how soon you can crack the way to work around the bottlenecks you face in your AP department. Once you figure it out, your business will flourish in all its aspects. Digitalization, predictions, and making a clear case for your business are significant advantages of AP automation that you should look into if you are an owner of an SME.