Accounts payable departments must manage high volumes of documents such as purchase order and non-purchase order invoices, each day. The American Institute of CPAs sponsored a study and found that, “the average billion-dollar company processes 12,500 invoices per accounts payable employee annually, at a cost of $3.55 per invoice”. That’s a lot of paper…and a lot of money!
So why should accounts payable departments bother implementing a document management system? Below, are 10 reasons why it’s a good idea to switch out paper-based processes to electronic form.
1. Easy to implement and manage
The process of a DMS is simple: Paper documents are generated or come into the office or department, and are scanned into the system. Each scanned document is indexed and attached to an either an existing electronic record, or a new one can be created.
2. Increased productivity
With a DMS, you can reduce the time to access files by simply keying in a search term. Each document that is converted to electronic form is given a unique identifier (usually an index number) and can be searched for through various search terms. Accountants, administrators and other end-users can search by any number of search queries, such as company name, P.O number, specific dates and amounts, and retrieve those files in mere seconds, leaving them more time to spend on value-added activities.
3. Eliminates human error
Mistakes are unavoidable when dealing with vast amounts of paper documents. Too much paper causes clutter, and clutter increases the occurrence of lost or misplaced files, invoices and other pertinent documents. A Document Management System aids in reducing errors, such as duplicate payments and failing to capture discounts. For instance, duplicate payments make up 0.5% of annual invoice payments, according to the Institute of Internal Affairs. That means that one in 1000 payments are duplicates, costing some companies over $50,000 a year! Some accounts payable departments fail to capture the discounts available to them through vendors simply because they are not able to process the invoices fast enough. This could be attributed to missing invoices or missing information, lengthy approval cycles, and manual routing of invoices. Document management solutions and workflow automation help reduce and even eliminate these issues.
4. Reduces costs
There are many cost-saving benefits of a DMS:
•Reduce the cost of physical storage space – An accounting department can spend large amounts of money each year on storage for invoices and various other files. On-site storage such as filing cabinets can take up a lot of room in an office, adding to the clutter. A DMS can eliminate the need for cabinets and banker’s boxes full of unorganized papers, giving office personnel an organized space to work in.
•Reduce the cost of paper – photocopying, faxing, printing, filing, etc. Research shows that it costs, on average, $20 in labour to file one document, $120 in labour to find a misfiled document and $220 in labour to reproduce a lost file. It also shows that one document will get photocopied an average of 19 times!
•Reduce the need for additional staff – Larger companies and extremely busy departments staff more administrators to deal with the large amounts of paper work coming into and generated by the office. A DMS can reduce the needs for extra staff, in turn, reducing operation costs.
5. Improves vendor relationships
Converting paper documents to electronic forms gives accountants and administrators more time to engage in value-added activities because they’re searching and retrieving documents faster and spending less time manually entering data. This, in turn, increases vendor satisfaction as it allows staff to respond to inquiries and make vendor payments at a faster rate.
6. Increases security through audit trails
An audit trail shows the date, time and username for each activity that takes place within a record. This allows administrators to monitor record activity and ensure security and compliance. A DMS can also be equipped with “rights management” which allows administrators to input who can do what with each document. This ensures that the proper business practices are followed and that content is properly captured, stored, managed, and disposed of at the appropriate and legal time in its lifecycle. Security such as this, aids in fraud detection and prevention.
7. Maintains regulatory compliance
Security control can be a regulatory requirement, depending on the nature of the business. PIPEDA mandates privacy and security of personal information. A Document Management System offers seamless conversion of paper documents into electronic files to control information access and increase confidentiality. Security features, disaster recovery and enhanced auditing ensure regulatory compliance.
8. Easily integrates with existing systems
A DMS can be easily integrated into most office systems. This means that doctors and administrators don’t need to spend valuable time on extensive training for a new system.
9. Reduces the risk of damage and loss
Storing paper documents on-site can be risky business. Documents can be destroyed by fire, flood, and natural disasters such as severe storms. In fact, studies show that the survival rate for small businesses that experience disasters is less than 10%!
10. Enhances collaboration
Documents can be retrieved and modified by a user while access is denied to others while that particular document is being used. This reduces duplicates and old versions of content to be kept in the system. Collaboration features can also allow multiple users to view and alter a document at the same time. Whether or not a document is available to only one user or many users at the same time will be specified by the administrator, depending on office needs.
Given all of these reasons, it makes sense for financial and accounting departments to start implementing a document management system to manage their invoices and other important business information. And if those 10 benefits aren’t reason enough, here’s a bonus: Document management systems are environmentally friendly. By reducing the use of paper, accounting offices can do their part to help save our forests and those animals that depend on them for survival. Just one more reason why switching to a DMS system makes good sense!