7 Ways to Automate Accounts Payable
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 Sach’s 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 the 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 the 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
- 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 are the foundation of business building. However, poor payment practices 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.
The tool may also 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 the amount of data entry. It likewise eliminates traditional invoice production, postage, and document storage costs.
Good automation software facilitates cash flow, leading to early payment discounts.
Of course, there are many more benefits than listed here. And this brings us to the next question: how do you automate accounts payable processes?
7 Ways to Automate Accounts Payable Processes
Here are some simple things you can do to 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 process 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.
Implementing this solution in your accounting system lessens the risk of lost or misplaced invoices. It also makes it easy for AP professionals to access expense data.
3. Improve invoice management communications
Speaking of invoices, communication is essential in mastering invoice management. That’s why we suggest you improve your invoice communications as the third way to automate your AP processes.
Your invoice management system should ideally ensure 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 the use of AP automation software, it can seamlessly route invoices 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.
(Source)
5. Capture expense data digitally
Paper-based and manual accounts payable processes can create data silos - data that is not fully accessible by other groups - in your organization. So, expense data can quickly end up in a filing cabinet, email, or Excel spreadsheet.
This process makes it challenging to track and evaluate expenses. Eventually, the business grows, and so does the volume of data. This can leave the accounts payable department in the dark about the total expenses that the company is spending.
To avoid this from happening, you should capture expense data digitally. Then, store the data in a centralized location to easily access and update it. 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. It is an exhaustive process that identifies a range of values for invoices, including vendor, invoice category, product line, amount, country code, freight details, warehouse, department, and business unit.
The bigger the business is, the more invoices they receive. Thus, the amount of GL coding grows. It’s not an easy task for the accounting team to do manually. If they do work it manually, it opens up a door for error that may probably go unnoticed.
Hence, an AP automation solution that automates GL coding will likely make your accounting team happy. It saves your company time and money because everything is already classified when it’s time to assemble data for taxes.
7. Create compliance guidelines
Implement robot accounts payable procedures and protocols to categorize and approve specific requests made by certain people. Doing so helps streamline the approval process.
However, there is a potential for non-compliance with financial and legal regulations and documented business policies if there’s a lack of oversight.
Using accounts payable software solutions helps confirm industry regulatory and IRS tax compliance. The software likewise reduces erroneous transactions and improves the chances of fraud detection.
How to Choose the Right AP Automation Software For Your Business
Remember that all major AP automation tools are designed in different ways. Choosing the right software will enable your team to increase productivity and work smarter. It will also lead to cash flow visibility within the company as a whole.
- Understand your existing AP invoice process
To pick the best software for AP automation, you should first understand your existing accounts payable invoice process.
How long does it usually take for an invoice to be coded, approved, and processed for payment when it arrives at your desk? Think of the number of individuals involved with the process. By doing so, you’ll be able to piece how your AP workflow goes together and know what needs to be improved. Then, find software that can fill those business needs.
- Compare pricing and features carefully
It may take time to compare pricing and features and determine which is best for your business, but it’ll be worth it.
Regarding pricing, most AP automation tools are charged on a monthly subscription service or you can opt for an annual plan. You should also consider the less obvious cost. The most affordable plan may only permit you to process a certain number of invoices monthly and have limited features.
- Allows integration for your accounting software
When looking for the right AP automation software for your business, consider one that allows integration with your other accounting software.
A good example would be one that can connect to your general ledger directly with either FreshBooks, Xero, or QuickBooks.
- Ease of use/ simple approval process
Choose an AP software that’s easy to use and has a simple approval process. Is the software/app easy for each type of users, such as the invoice approvers and the advanced users?
FAQs About Accounts Payable Automation
Can accounts payable be done remotely?
Yes, accounts payable can be done remotely. As long as the accounting department has an automated workflow that enables workers to work anywhere - accurately, efficiently, and without interruption - the accounts payable job can be done remotely.
How do I automate an invoice payment?
To automate an invoice payment, you need to use software that processes invoices for accounts payable. You may also use forms to automate invoice creation and schedule billing reminders.
Should you invest in AP automation software?
Yes, automating your accounts payable process minimizes the paper your company uses, boosts your productivity, eliminates the chance for data input incorrectly, 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.
But interrupted or delayed payments can harm businesses, particularly SMEs, as they are more vulnerable to cash flow challenges. You can solve this by implementing AP automation in your business.
Follow the 7 ways to automate accounts payable we shared above so you’ll have better visibility and control over your financial data.
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.
Article sources:
1 - https://www.gspublishing.com/content/research
Try SaasBox Free for 7 days
