Clunky payment practices are causing friction in U.S. business’ supply chain. The average U.S. business loses $171,340 per year.
This equates to almost 6,500 man hours chasing purchase order numbers, processing paper invoices and responding to supplier inquiries, according to a new study , Friction Index report, by Tungsten Network.
“Numerous processes in the financial world remain cumbersome and time-consuming when they needn’t be,” said Rick Hurwitz, CEO, Tungsten Network.
“Technology means we can do away with the tiresome and menial tasks that clog business work streams and instead boost productivity and efficiency. It is surprising that in this tech enabled day and age businesses are still spending so many hours per week managing a process that could be automated.”
Businesses estimate they spend on average per week around 55 hours doing manual, paper-based processes and checks; 39 hours chasing invoice exceptions, discrepancies and errors and 23 hours responding to supplier inquiries.
They also spend five hours on compliance-related challenges such as handling international taxes and three hours tackling invoice fraud.
The sources of friction identified by the report amount to 125 hours per business per week or 6,500 hours per year. When multiplied by the average hourly pay ($26.36) this means businesses are losing as much as $171,340 a year resolving payment issues.
When surveyed, the Top Five Friction factors were named as:
1. High proportion of paper invoices received
2. Too many non-PO based invoices
3. High volume of supplier inquiries regarding invoice or payment status
4. Lack of automated exceptions
5. Lack of automated approval
“If businesses aren’t tied up chasing invoices or receiving phone calls from suppliers doing the same, they have more time to explore opportunities for growth with existing customers and go after new ones,” Hurwitz added.
“If all the data from past invoices is easily accessible, opportunities to identify variances that will target inefficiencies are more visible. The technology exists to remove this supply chain friction, which can cause stress, waste time and ultimately impact the wider economy, and we want to challenge US businesses to embrace digitization and begin enjoying the benefits of a frictionless back office.”