Are your traditional accounts payable operations rife with complex processes and inefficiencies that slow business growth? If so, it's time to consider upgrading your accounts payable workflow.
AP automation may feel like an impossible task due to a lack of knowledge around requisite softwares and resources, employee resistance, and the general fear of change. Unfortunately, rejecting automation not only affects your progress but also opens you to fraud and reduced profits. With the right knowledge, you can prepare and implement a plan for AP automation, improve employee workflow and satisfaction by reducing redundant tasks, and keep the end-customer happy.
Accounts payable automation reduces your AP department's workload and streamlines processes such as data entry, invoice processing, and real-time approval of purchase orders. With automated processes, you can scale your AP department without increasing staff, eliminate errors by reducing manual tasks, and accelerate your financial operation, approval process, and payable process.
To help you understand AP automation, this article will address the following questions:
- What is accounts payable automation?
- How does AP automation software work?
- Why should you automate your accounts payable?
Accounts Payable Automation
A smooth accounts payable process ensures that you stay on top of your debts by paying the right vendors at the right time. AP automation software streamlines your invoice management, payment process, approval workflow, accounting process, and procurement operations.
Traditional AP Workflow Versus Automated Accounts Payable
In a traditional workflow, your AP department handles various business operations on different systems and separate occasions. There is no continuous flow of information or a centralized AP data source for easy visibility, verification, and audits.
One of the challenges is the manual tabulation of transaction fees, which results in late payments. The tax department also suffers since transaction details aren't readily available. Manual invoicing and reconciliation consumes time and delays multi-level approvals. Due to manual data entry, willful errors and mistakes happen, resulting in overpayment and fraud. Consequently, slow payments frustrate vendors, and profits decrease.
AP automation software provides a single platform for your AP department and the rest of the organization. All supplier and vendor information is automatically collected. When invoices are transmitted, the intelligent OCR matches them to the purchase order and detects any mistakes.
The system also automatically routes payments to the right approvers and provides access to bank accounts for fast payment processing. All taxation and payment details are also collected for easy tax documentation and auditing. You also enjoy automatic payment scheduling to avoid cash flow deficits and ensure early payments.
Why Accounts Payable Automation Is Vital
A traditional AP workflow is complicated and lacks automated checks that prevent overpayment. Without checks for supplier invoice duplicates, changes in suppliers, or details in purchase orders, your AP department will likely overpay its vendors, resulting in losses. Your business loses critical cash for business expansion and timely payments, which is essential in retaining vendor relationships.
A software solution introduces e-invoicing and digital purchase orders, all available on a single platform to the AP team. With fewer paper invoices and manual processes, your AP department can retain a positive cash flow, reduce fraud attempts, and avoid late payment fees.
Improving Your Business’s Credit Score
Early payments indicate that your business is capable of handling its finances and is likely to repay future debts. Both vendors and financial institutions look to your finances to determine their likelihood of extending credit and continuing business with you.
A streamlined payment process reduces late payments, which boosts your creditworthiness. When it's time to change suppliers, request credit, or ask for a business loan, a good credit score helps you access the necessary credit at low-interest rates.
Reducing Financial Fraud
AP fraud schemes are challenging to detect if you don't have adequate data or don't know what to look for. In the 2020 AFP Payments Fraud & Control Survey, 81% of companies admitted that they were AP fraud targets. Even large companies such as Google and Facebook have fallen victim to AP fraud scams and paid millions to individuals.
Fraud happens through false billing, fraudulent checks, overpayments, and wrongful manual data entry. Automating your AP tasks helps you fight AP fraud at various levels, with processes such as:
- Setting budgets and administering approvals through automatically routed invoice approvals
- Automated invoicing through intelligent optical character recognition (OCR) powered by artificial intelligence (AI) and machine learning (ML) to capture and match invoices to purchase orders
- Electronic audit trails for your accounting team and external auditors
In the 2020 AFP Payments Fraud & Control Survey, 81% of companies admitted that they were AP fraud targets.
Creating Positive Vendor Relationships
Your business relies on suppliers to process purchase orders and deliver goods promptly, in the agreed volume and condition. If you pay late or have outstanding debts, vendors may be less willing to deliver and may terminate business altogether. Early payments motivate vendors and encourage discounts.
Automated AP systems help you track all your invoices, as well as schedule and approve payments on one interface. You can also check if you're paying for goods supplied as ordered or withhold payment if necessary.
Creating Better Audit Processes
Audits are never pleasant, but they can be easier with a reliable AP platform and accurate data. Without paper systems, auditors can track invoice data to the right purchase orders, approvers, and payments. You can avoid bottlenecks from manual data entry and reviewing paperwork for months. With accounts payable automation, everyone in the organization benefits, including the procurement team, accounting teams, approvers, AP staff, auditors, and CFO.
Ensuring Better Profitability
When your AP workflow is automated, you pay your bills on time and enjoy early payment discounts, which boosts your overall profit. Your business also avoids late payment penalties and canceled orders for late deliveries.
As your payment process improves, you boost your credit score, which gives you access to credit at a lower interest rate. Additionally, an automated system requires less AP staff, which reduces your hiring costs while scaling your operations.
How to Streamline Your AP Workflow
Are your employees wasting time perusing different paper invoices, looking for lost invoices, or delivering bills for approval? Reduce their workload by investing in an automated AP system that eliminates redundancies and improves their workflow. Automated AP software provides standard invoices and purchase orders, with digital entries, approval routing, and payment processing.
An intelligent system matches your invoices to purchase orders to check for mistakes and alerts staff if there’s cause for immediate attention. You can reduce errors during manual processes while enjoying cost savings since your AP staff can catch mistakes early.
You can map your AP data to identify billing patterns and use them to your advantage. For example, if a vendor sends a consistent invoice on the 15th of every month, you can anticipate the amount and set a budget that ensures payment of the bill on time. Preparing vendor billing data graphs can also help you identify sudden changes in their invoices and purchase orders to fight fraud.
Establish a Checks and Balances System
Manual tasks and paper invoices reduce your audit trail efficiency and open your business to accounts payable fraud. AP automation software enables three-way matching from invoice, payment, and reconciliation. You can easily monitor and track the cash flow to check for suspicious behavior alone or with an audit team.
Accounts payable software also creates automatic routing to the right approvers after integrating with your ERP. You can track each invoice and purchase order to the approver during audits. What's more, you can separate those that write and approve checks and monitor their approvals. Lastly, you can suspend, authorize, or delay payments depending on your budget and demand.
Running AP, monitoring data, and approving invoices are time-consuming tasks. Even as the CFO, you may not always be in a position to stay in charge. If your AP processes are automated, you can delegate them to your subordinates and review them on your own time. Since you have an electronic trail, you can easily find the responsible party when a mistake occurs.
Increase Cost Savings
AP automation eliminates redundant work, such as invoice matching, payment processing, and checking for duplicates, which optimizes your AP staff's workflow. Time is money, and if your workers are focusing on high-level tasks, they're making you money. By eliminating manual data entry and paper invoices, you reduce invoice processing costs.
The AP Automation Solution for Businesses
Many business owners and senior officials think of sales and capital for operational efficiency and business growth. However, the key could be in the automation of your AP processes.
An automated AP software such as Order optimizes your AP processes and improves cost savings. Contact us today for more information.