The AP Automation Myth – Do You Have To Reduce Headcount?
The Middle Market
I was recently reminded by a friend in the industry that most of the work that I do appeals to the middle market. I am not ashamed of helping middle market companies automate. I know it’s sexy to have big name logos on your website, but the middle market is where all the opportunities is. The reason for this small rant is to set the proper stage for a headcount reduction article.
The Combo Role
As I go through my business day, I interact with anywhere from 5 to 20 different organizations and their automation needs. What I have found are the larger companies (my definition of large is 30k invoices a month or more) have a greater desire to use headcount reduction as the main motivator, whereas middle to small companies won’t. The reason has to do with what I call the “combo” role. The combo role is where an accountant serves in different areas of the accounting department, Meaning they may do some AP, or AR and may help close the books for the quarter and provide the board with financial reports. That’s a combo role. In larger companies those task are more specialized because of volume.
Here is my point (you are welcome) – headcount reduction greatly benefits the larger company because of specialization. I worked with an organization in Atlanta that employed 42 accounts payable entry clerks. The return on investment was simple – Average AP Entry Clerk salary X 39 (because they had to keep a few people for emergency checks and other projects) = ROI. In contrast, working with a company that had 1000 invoices per month was going to free up ½ of an AP Entry Clerk (I will remain grown up here and not make a joke about which ½).
Really – Now My Point
Here is my real point (you are welcome again) – there is a myth that automation is only good for and can only be justified if someone losses their job. NOT TRUE. Take a look at the two companies in the previous paragraph; the large company with the big ROI has done nothing… they are having trouble getting out of their own way to make a decision on automation. The 1000 invoice per month company once automated took that over 1000 additional hours and applied it to contract and vendor discount administration and is happily without paper invoices. The moral of the story is anyone can get a return on investment for automation; you just have to know what to do and where to look.
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