What is the importance of accounts payable data analysis for your business?
Business in the modern world is driven by data. Yours is should be no exception. According to a study by the IBM Institute of Business Value, business leaders are 166% more likely to make decisions for their companies based on data.
This shows how important not only data is to your business, but also the ability to analyze that raw data. Modern businesses often rely on accounts payable (AP) automation software with analytics to process their businesses’ financial data.
Using an AP automation software to perform accounts payable data analysis for your business will not only save you time and money but also drive your business to become more data-driven.
While you could manually perform accounts payable data analysis and parse through your raw data, turning that raw data into some form of accounts payable data analytics can be quite painful.
Even more so to make it accurate and easy to comprehend. The first problem that comes with analyzing manually is that you will have to, first of all, compile your raw data manually.
This would mean that you would have to pull data from multiple spreadsheets and documents from many different sources, and it is only made worse if your company has paper invoices.
You will have to run around to collect all the paper invoices and ensure that none gets left behind.
It’s tiresome to do all this for what is only step one of the accounts payable data analysis process. It’s also a waste of time and resources to do all that manual work.
Not only that, no matter how much effort you put into chasing down all your raw data sources when you have hundreds of invoices and make thousands of payments, it is nearly impossible to collect everything manually.
You will end up with incomplete data, which will make accounts payable data analytics a challenging task.
There will be data that you will have to simply estimate or guess, essentially making your accounts payable predictive analysis based on predictions in themselves instead of real raw data.
This means that your accounts payable data analysis will unfortunately have low visibility, and is not likely to be accurate.
Nonetheless, accounts payable data analytics is an important part of the AP process as it helps business leaders both from the finance department and other departments make decisions and allocate time and resources more efficiently.
Accounts payable data analysis also can eliminate unnecessary costs. Hence, it is important to do, and it is important for you and your business to invest in the tools that could help you perform the task.
Ultimately, any business leader wants to be able to save time and cost for their business, making the business financially healthier and more profitable in the long run.
When you invest in tools to help you with accounts payable data analysis, you will gain access to some of the most important data analyses that could help you save costs in your business.
Some analyses that can help you cut down on costs include:
As the name states, spend data analysis refers to accounts payable data analytics surrounding how much you spend on what.
It includes seeing the top vendors that you spend from, how much you spend on each vendor, and any other data related to your spending.
What makes spend data valuable and important to analyze is that when you measure what you spend, you can then manage what you spend.
One thing that the accounts payable data analysis can compare is what the spending looks like in different departments or branches of your business.
If your two different departments of your business are spending on similar subscriptions but one costs more than the other, spend data analysis can help you pinpoint this.
Thus, you can simply switch from the more expensive subscription to the cheaper one and get better value.
Spend data analysis can also tell you how much you spend with a particular vendor. You can see which vendors are your top five vendors, and what kind of amount you spend with these top vendors.
This way, you can easily pinpoint vendors which you bulk buy from, giving you negotiation power for the possible bulk purchase price, volume or even terms discounts.
With accounts payable data analysis, it is easy to present your vendors with facts that will empower you.
On the other hand, the other side that spend data analysis can help you with is identifying purchases that don’t turn out to be profitable, such as inventory that has been overstocked and has low turnover rates.
Spend data analysis allows you to see not only the number of your purchases but also how often you purchase your inventory to determine what your turnover rate is.
Hence, if necessary, you can use accounts payable data analytics to determine which unprofitable purchases should be reduced or even discontinued.
Each time you receive an invoice from a vendor, there will be a process in which you go from receiving the invoice to making the payment. What payment data analysis can do is measure the speed of turning invoices into payments.
This means that payment data analysis will tell you when you receive an invoice, when the invoice is being checked and validated, and when a payment is scheduled, approved, and eventually received by your vendor.
With this type of accounts payable data analysis, you can monitor your payments to see if they’re being made on time.
You could even use it as a form of accounts payable predictive analysis, in which you can estimate how long invoice turnaround time will be for future purchases with both existing and new suppliers.
Knowing this information is valuable to your business because it gives you information that can be used for negotiations, too.
Say you know the invoice turnaround time for a particular vendor you have. You can then identify the bottlenecks in the process and where it is taking the most time to process your invoice and turn it into a payment.
Once you do that, you can tackle these pain points and in turn speed up the process. This way, you can guarantee that you process the payment on time and avoid any late fees incurred.
You might even be able to pay your vendor early, which will then give you chances to negotiate for an early payment discount.
When you have a history of early payments and can show newer vendors your payment data analysis, it also becomes easier to convince them that you won’t be making any late payments in the future.
Hence, empowering you when negotiating purchase terms with new or future vendors.
What's more is that when you invest in tools such as AP automation software to help you do your accounts payable data analysis, your payment data analysis will be able to show you how and where your automation software has sped up your invoice processing workflow.
It becomes a positive cycle that feeds on each other to optimize the speed of turning your invoices into payments.
The most sophisticated of accounts payable data analysis comes in the form of category AP data analysis. To put it simply, what this means is that this type of analysis lets you categorize your accounts payable data.
You can then look at your spending from many different perspectives, including through a matrix analysis where you can visualize future possible options using the data.
With the data that you have of current invoices, for example, you can sort your invoices by price range and see which purchases are of the highest value.
You can then turn this raw data into an accounts payable predictive analysis, and analyze your upcoming invoices based on your existing invoices.
You can also prioritize your invoices accordingly, and determine which payment processes need to be made sooner rather than later.
Category AP data analysis also allows you to analyze your payment trends at any given period of time.
For example, you can sort based on the due date category, and see what your payment trends look like for that particular due date.
Having this data at the tips of your fingers means that you will have plenty of analyses to back up your decision-making, especially if they are driven by data.
Using category AP data analysis as part of your accounts payable data analysis enables you to endlessly view your accounts payable data in as many strategic ways as you’d like, empowering you in your ability to make well-informed decisions.
Accounts payable data analysis is useful for just about any business, but without the correct tools, doing them can be painstakingly difficult and time-consuming.
This is where automated accounts payable systems come in handy. AP automation software can help you with:
Imagine having hundreds or even thousands of paper invoices per month. Accessing all of your data, let alone sorting through it would be such a tedious task.
Even worse, it would be impossible to access the paper invoices unless it’s kept somewhere near you. With the help of an automated system, you can archive and search making your accounts payable data analysis much easier to do.
With accounts payable data analysis, you can easily track the number of invoices you receive, meaning that you can better assess your inventory and resources and see if any should be allocated, added, or minimized.
You can also identify bottlenecks and busy times of the year, giving you a headstart in planning out how to allocate your resources for those busy times.
The data that you generate for accounts payable predictive analysis will be accurate in order to give you better forecasting.
As an added bonus, getting rid of manual work with an automated system also frees up your time, which means that you can use that time for something else that demands attention in your business.
Accounts payable systems allow you to review your invoice terms as well as transactions faster and easier. You not only have all your data in one place, but your records will be free of errors as the system will automatically review them.
Personnel who are in charge of approving transactions can also approve or reject transactions that are being proposed. This way, everything is controlled and saved in one system and will help you be audit-ready.
It ensures that you have all the necessary documents for audits and are in compliance with government or industry regulations.
You can track processed invoices in real-time to keep track of your cash flow. When you can use accounts payable data analytics to view and measure your cash flow, managing it becomes easier.
Thus, letting you improve your cash flow more efficiently. With the help of automation, you can also save time and money, which will lead to a more positive cash flow.
Processing your invoices faster and speeding up the payment cycle also means that you can negotiate and get early payment discounts with your vendors to improve your cash flow even further.
Automated accounts payable software offers you full visibility. You can see all the money that your business owes and all the transactions that you are making. With this kind of visibility, duplicate payments will no longer elude you.
You can view everything clearly, and can therefore pinpoint which costs are not necessary. Spend data analysis, for example, will allow you to use accounts payable data analysis to see which purchases are no longer necessary.
Overall, automated accounts payable system will simplify your entire expense analysis process.
Your AP data analysis will show you that automating your processes reduces your cost per invoice and speed up your invoice cycle times. You no longer need to worry about late payments or clerical errors, making the entire process smoother.
Automating your accounts payable processes will save you time and money, and allow you to perform better accounts payable data analysis.
This offers you a better overview of your existing processes and lets you forecast more accurately and efficiently.
With Volopay’s accounts payable automation, long gone are the days of tedious long hours of manual work riddled with errors. Empower your AP team with data and optimize your accounts payable processes for better financial results.