Time is a valuable resource, and financial professionals understand that better than most.
Yet, team members in the accounting and finance industry spend several hours of their valuable time on menial tasks related to payment processing. These tasks include scanning and copying files to archives, fielding inquiry calls, and searching for misplaced or lost invoices.
In fact, Goldman Sachs’ equity research showed that the total headcount cost of manually processing one invoice alone was $20.79 for small businesses and $14.69 for medium-sized companies. These cost differences are even more significant the more invoices are processed. (1)
With automation, you can reallocate those headcount costs and wasted hours to important areas for greater strategic contribution to the company’s success and growth.
So, if you’re planning to automate AP integration in your company, here are 7 ways to do it to save time and money.
But before we delve deeper, let’s learn what an automated accounts payable system is to help you better understand the savings you’ll achieve.
What is an Automated Accounts Payable System?
Accounts payable (AP) automation refers to handling accounts payable processes digitally rather than manually. The manual AP process starts when the finance department receives the invoice for goods or services.
Using an automated AP system minimizes human intervention and eliminates error-prone tasks. It has completely changed how companies process and pay their invoices.
Payvy is an accounts payable automation software that fits organizations of all sizes. It supports different invoice processing set-ups to ensure true accounts payable automation.
What are Accounts Payable?
Accounts Payable refers to the current liabilities on your company's balance sheet. It is any amount owed by the company. Accounts payable often fall into these categories: travel expenses, vendor payments, and internal finance.
Business Benefits of AP Automation
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Faster Invoice Approvals:
AP automation software speeds up invoice approvals. Errors are detected and fixed before submission, and invoice data will automatically be emailed to the approver’s inboxes. -
Greater Visibility:
AP tools with online networks allow suppliers to track invoice and payment status. A good AP system includes the necessary elements in an easy-to-access platform. Electronic and paper invoices can be immediately captured and uploaded directly into the system, so anyone with access can see any stage of the process. -
On-time Payments:
Another benefit of AP automation is recording payment information in a timely fashion, resulting in faster approvals. Payments will then be sent automatically on a specific date. -
Stronger Relationships with Suppliers:
Building professional relationships is the foundation of business building. However, poor payment practices can ruin them.
By tracking and paying invoices more efficiently, AP automation software can boost your “on-time” payment record with suppliers and build stronger relationships with them. -
Improved Working Capital Management:
Using an accounts payable tool makes it easier to improve working capital management, a business strategy designed to ensure that a business operates efficiently using its current assets and liabilities. Payments can be timed to better capture early-payment discounts and manage cash. -
Increased Accuracy:
Automating your company’s accounts payable eliminates the risk of human error and increases data accuracy. As a result, it helps reduce fraudulent and duplicate payments and other payment errors. -
Built-in Compliance:
Once your business uses an automated accounts payable process, compliance rules are often built into the platform. Such a tool leads to a fully transparent process, so fraud and common risks can be prevented and tracked.
For instance, the AP system can flag suspicious activity, additional charges, and duplicate invoices. -
Prevent Fraud:
Accounts payable fraud, which involves fraudulent disbursements, is common. A 2022 AFP report details that more than 71% of companies were victims of payment fraud attacks or attempts in 2021. (2)
Your company can avoid being one of these statistics by automating accounts payable. The software you choose may even have the capability to provide you with real-time visibility of your AP workflow and alert you of suspicious activities, including fraudulent payments, duplicate payments, unapproved vendors, inflated charges, and phishing scams. -
Reduced Costs:
With an automated accounts payable process in place, it saves the business money, resources, and time. It lessens labor costs since there is a reduction in data entry. It also eliminates traditional invoice production, postage, and document storage costs. Good automation software facilitates cash flow, leading to early payment discounts.
7 Ways to Automate Accounts Payable Processes
Here are some simple ways you can automate your company’s accounts payable process and grow your bottom line.
1. Map Your Accounts Payable Workflows
Start by mapping out your existing accounts payable workflows, procurement activities, internal controls, and payment processes from beginning to end. This will help you understand your company’s workflows and determine areas of risk, inefficiencies, and bottlenecks.
The easiest way to achieve this is to gather your relevant team members in a meeting and map the process on a whiteboard. This ensures that everything is covered.
2. Switch to Paperless Invoice Processing
Receiving and recording supplier invoices is the first step in the accounts payable payment process. A tiny mistake in this part of the AP workflow can snowball into a big problem later.
Use e-invoicing to lessen the amount of manual work involved. Doing so replaces the need for submitting and collating paper invoices. Employees can simply use an app, take a photo of the invoice, and the software converts that paper document into a digital format. This also reduces the risk of lost or misplaced invoices.
3. Improve Invoice Management Communications
Communication is essential in mastering invoice management. Improve your invoice communications by ensuring that everyone in the workflow can see field updates, comments, questions, approvals, and rejections. The system could involve managers, purchase requesters, approvers, vendors, contributors, and receivers.
4. Adapt an Easy-to-Complete Approval Workflow
Invoices can cause bottlenecks in the accounts payable process when held up within the approval workflow. If you don’t adapt business visibility, you won’t know why or where the invoice is stuck in the approval process.
With AP automation software, invoices can be seamlessly routed to the appropriate individuals. You and your workers can easily view the invoice status through a dashboard and quickly pass the task to the next approver. No lost time, no lost paperwork.
5. Capture Expense Data Digitally
Paper-based and manual accounts payable processes can create data silos that are not fully accessible by other groups. This can lead to challenges in tracking and evaluating expenses.
To avoid this, capture expense data digitally and store it in a centralized location for easy access and updates. Many AP and accounting systems have built-in data-gathering and analysis capabilities that help users make better business decisions.
6. Automate Coding and Classification
Payables go through General Ledger (GL) coding, a classification process. The bigger the business, the more invoices they receive, and thus the amount of GL coding grows.
An AP automation solution that automates GL coding saves your company time and money, as everything is already classified when it’s time to assemble data for taxes.
7. Create Compliance Guidelines
Implement automated accounts payable procedures and protocols to categorize and approve specific requests made by certain people. Doing so helps streamline the approval process while ensuring compliance with financial, legal regulations, and documented business policies.
Using accounts payable software solutions helps confirm industry regulatory and IRS tax compliance. It also reduces erroneous transactions and improves fraud detection.
How to Choose the Right AP Automation Software For Your Business
Choosing the right software can increase your team’s productivity, lead to better cash flow visibility, and improve overall operations.
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Understand Your Existing AP Invoice Process:
Understand how your AP workflow currently functions and what needs improvement. This will help you select the right software. -
Compare Pricing and Features:
AP automation tools often come with a monthly subscription. Be mindful of costs and ensure you choose a plan that offers the features your business requires. -
Look for Accounting Software Integration:
Choose software that integrates with your existing accounting tools like FreshBooks, Xero, or QuickBooks. -
Ease of Use:
Ensure the software is user-friendly for both basic users and advanced users, such as invoice approvers.
FAQs About Accounts Payable Automation
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Can AP be done remotely?
Yes, accounts payable can be done remotely with an automated workflow that allows workers to work efficiently from anywhere. -
How do I automate invoice payments?
Use software that processes invoices for accounts payable and automates invoice creation and billing reminders. -
Is automating AP worth it?
Yes, automating your accounts payable process boosts productivity, reduces costs, and enhances compliance.
Automate Your Accounts Payable Today
Almost every facet of a company’s health—from growth potential to profitability—is influenced by the inflow and outflow of capital.
Interrupted or delayed payments can harm businesses, especially SMEs, as they are more vulnerable to cash flow challenges. You can solve this by implementing AP automation in your business.
Automate your accounts payable with Payvy today. It’s one of the best AP automation software products to help scale your business and take on competitors.