How much is it costing to fix mistakes in a manual purchase order process?
The more customers you have, the more data you have to deal with. When a purchase order comes in - usually emailed in PDF format - someone has to read it, interpret it, and then enter the data into your ERP system. We call this 'swivel chair integration' which is exactly what it sounds like - swivelling between monitors to enter data from one system into another.
It's clunky. It's time-consuming. It's outdated. So why are companies still relying on manual data entry for their PO processes? Some of the most common reasons we've come across include:
- Unwillingness to fork out - this is especially true of small businesses, who find manual processes sufficient and believe they don't have the financial muscle needed to innovate
- Independence - manual processes don't rely on the internet or specialised software
- The need for control - some believe that human judgement is needed at all stages of the process; in other words, they don't trust technology to get it right
This last one is interesting. Because what we've learned over many years of experience in ecommerce is that the more a company utilises manual PO processes, the higher the risk of error.
But here's another way to look at it - what's it costing you if you don't innovate?
Human error - the true cost of manual PO processes
How often have you uttered these words? "That order processing mistake was caused by human error." Have you stopped to wonder how much it will cost your business to fix that error? The cost penalties that are often associated with manual processes are counterintuitive. As mentioned, companies that are reluctant to invest in innovation say it's because they can't afford it, but they're not taking into account the hidden costs that manual processes involve. Obviously, the cost of the customer service and sales team actually performing the data entry is one of them, but the cost of fixing mistakes is significant.
Research has shown that the mistakes caused by incorrect data entry are costing organisations at least 30% of their revenue. The time spent verifying data accuracy and error correction are cost components that are all too often overlooked.
As a general rule of thumb, the cost of manual data entry is defined by the 1-10-100 data entry rule. Simply put, this rule states that it costs more to identify and correct data entry errors the longer it takes to find them. This study found that errors due to manual, paper-based invoice processing costs $2.7 trillion for global businesses. How'd ya like those numbers?
The upshot is that the errors caused by manual PO processes will significantly affect your bottom line, meaning that hanging on to them as a means of saving money is, to put it bluntly, penny-wise-and-pound foolish.
Ditch swivel-chair integration for good and automate your PO process
When you automate your PO process, you'll realise significant cost reductions - up to 15%, according to McKinsey - especially around lowering your cost to serve. But that's far from the only benefit of automation. We've developed an eGuide that outlines what automated order processing is and how your business can benefit from investing in it. The idea is not to eliminate your sales team, but to set them free to focus on high value tasks that will grow your business. In it, we cover:
- The drawbacks of manual processing
- Automated PO processing - what exactly is it?
- The benefits of automated PO processing
- Meet Lucy - an automated order processing solution that's smart, and getting smarter
Automating your PO processes gives your sales team the freedom to really add value to your business. The time they would normally spend on data entry can now be spent on growth-driven tasks such as on-boarding new accounts and closing more sales.
Ready to set your sales team free? Download the eGuide today.