Accounts Payable (AP) automation is becoming increasingly popular among businesses of all sizes, and there is a good reason for this: it holds many benefits that improve accounting work. It can help streamline the process of paying suppliers and vendors, reduce manual labor, minimize errors and help companies become more efficient and productive.
Automating any aspect of your AP process is a great way to save both time and money. To get the most out of accounts payable automation, there are several best practices that you should keep in mind. These include choosing a software platform that fits your business needs, designing a workflow that reflects the sophistication of your team or organization, setting realistic expectations for implementation and adoption, and properly monitoring and managing data.
In this blog post, we’ll cover the top 11 best practices for optimizing AP automation and explain how they can help to improve process efficiency. We’ll cover topics such as choosing an automated AP system, setting up a policies and procedures framework, and increasing visibility into payments. With the right strategies in place, you can make sure your AP process is as efficient and risk-free as possible.
What Is Accounts Payable (AP) Automation?
Accounts payable (AP) automation offers organizations an effective means of streamlining their accounts payable process, ultimately saving time and money. It eliminates the time-consuming manual tasks associated with this process, like handling paperwork and chasing down late payments.
Automation includes features that allow for faster and more accurate data entry, approvals, and payment processing. It provides numerous benefits, such as improved accuracy and security, expedited payments, and reduced manual labor. With AP automation, organizations gain access to detailed data about their accounts payable activities, which ultimately enables them to manage their finances more efficiently while decreasing costs and freeing up valuable resources for the organization.
Best Practices For Implementing AP Automation
Whether you’re already using software to handle accounts payable or just thinking about implementing one, we bring you a list of best practices to follow in order to make the most out of AP automation.
- Split Automation Into Phases
- Integrate With Accounting Systems
- Centralize Document Management
- Strategically Define Workflows
- Stay Up-to-Date on Tax Changes
- Monitor Vendor Relationships
- Profit From Early-Payment Discounts
- Enter New Invoices Instantly
- Create An Effective Approval Process
- Monitor Invoice and Payment Data
- Use Analytics To Improve Processes
1) Split Automation Into Phases
Implementing AP automation in phases is a great practice because it allows the AP team to gradually adopt the technology and become accustomed to the changes it brings. By introducing new components of an automated system in stages, the team can learn how to use each piece of software or process one at a time, rather than being overwhelmed by a new system all at once. This approach can help avoid frustration and confusion, allowing for a smoother implementation of the AP automation solution.
The phased approach also helps ensure that any issues that arise are addressed promptly before they become more widespread problems. A gradual implementation of AP automation gives the team time to test each feature and make sure there are no bugs or glitches before releasing it into full operation. This extra period of testing ensures optimal performance, thereby avoiding costly errors down the line.
2) Integrate With Accounting Systems
One important thing to keep in mind when choosing AP software is how it relates to your existing ERP accounting system. Integration of AP software with an ERP allows for better visibility into financial operations. By connecting data across an organization’s accounting ledger, ERPs enable businesses to track expenses more easily, creating timely records of all transactions while automating reconciliations and simplifying reporting.
Linking accounts payable to other areas of the business can reduce errors caused by manually entering duplicate information across different departments or systems. Automation also provides improved fraud protection by eliminating manual processes that are subject to errors or manipulation. In many cases, the AP software speeds up the processes that are time-consuming within regular ERPs.
3) Centralize Document Management
Most AP automation solutions provide you with a centralized dashboard, which increases visibility into payments and makes it easier to stay organized. When you centralize your documents into one system, it makes searching for and retrieving your invoices much more efficient.
Centralizing document management can help improve document control, reduce the risk of data loss, increase efficiency, enhance security, and provide better analytics. It also makes it easier for teams to collaborate on invoices and payments. With all documents stored in one central location, multiple team members can access the information they need, collaborate on approvals, and ensure that invoices are processed quickly and accurately.
4) Strategically Define Workflows
Implementing a workflow in AP process is an essential strategy for businesses to maximize their efficiency and optimize productivity. Strategically defining and setting up workflows in AP automation can help businesses streamline the AP process, increase productivity, ensure compliance, provide greater visibility, and control costs. Automated workflows can be easily designed to match your business’s existing policies and procedures, making it easy for you to manage payments quickly and efficiently.
When it comes to defining and setting up the appropriate AP workflow for your organization, you should definitely include your team in the process from the very beginning. Providing ongoing training and support helps to keep AP staff members motivated and informed. After all, who knows your organization’s AP process better than them?
5) Stay Up To Date On Tax Changes
Tax laws and regulations are constantly changing, and it’s important to stay up to date to ensure compliance. Failure to comply with tax laws can result in penalties, fines, or legal action, but it can also damage a business’s reputation. This can result in loss of trust from customers, vendors, and investors.
By staying up to date on tax changes, you can ensure that your accounting books are compliant with all tax laws and regulations and maintain a good business’s reputation. Automating processes reduces the manual workload of tracking and filing taxes; however, keeping up to date with the most recent updates is still a must.
6) Monitor Vendor Relationships
Automation can help keep you informed of all invoices, PO status updates, and payment frequencies so there is no surprise when it comes time to renew contracts or renegotiate rates.
AP automation software can help monitor vendor relationships by providing real-time visibility into invoice and payment status. With automated workflows and document management, AP staff can quickly access information related to vendor payments, track vendor performance, and monitor compliance with contractual agreements. This can help businesses build stronger relationships with their vendors, improve negotiation power, and identify opportunities for cost savings.
7) Profit From Early-Payment Discounts
Establishing consistent methods of approaching payments is extremely important when utilizing an automated AP solution, especially with regard to how discounts are taken from vendors or how interest charges are applied if payment terms are not met prior to the due date specified on the invoice.
AP automation software can help your organization to profit from early-payment discounts because many vendors allow this option if their invoices and processed and paid on time. So automated workflows and faster payments can result in significant cost savings.
8) Enter New Invoices Instantly
It is a good practice for AP teams to enter new invoices into the system as soon as they arrive because it ensures that invoices are processed quickly and accurately. Needless to say that this can help save the company time and money by avoiding late payments or lost invoices.
Having an automated system in place to record incoming invoices gives the team more insight into their accounts payable processes and helps them identify any potential issues or areas for improvement.
Additionally, entering data into the system early also enables AP team to have better visibility into their financial position and track spending more effectively. Finally, with early entry of new invoices, an AP team can proactively plan and forecast payments accurately in order to improve their bottom line savings.
9) Create An Effective Approval Process
An effective AP workflow should include an approval process that is easy to use, efficient at routing documents for review, and secure in protecting confidential information. Setting up rules for who needs to review which types of invoices will ensure compliance with internal regulations as well as external laws governing payments.
Multiple-level approvals are great to have in place because they provide detailed visibility into each transaction while allowing supervisors or managers to review invoices prior to payment being finalized. Having this kind of control over spending will help prevent unauthorized purchases or duplicate payments from being made, while ensuring that all invoices are approved according to company policy before they are paid out by AP staff.
10) Monitor Invoice and Payment Data
Invoice and payment data are essential for improving financial objectives and forecasting; however, managing them manually can be an incredibly time-consuming process. With AP software, you can more easily monitor overdue invoices and have better visibility into cash flow and accounts payable operations.
You can even gain insight into payment performance trends that can reduce costs and improve customer relationships. It also increases accuracy by keeping records securely in one central location, eliminating the need for double-checking information scattered across multiple Excel sheets or databases. Moreover, the reporting capabilities enable AP staff to analyze invoice submission and payment due dates more accurately than ever before while immediately alerting them of discrepancies and any risks of late payments.
11) Use Analytics To Improve Processes
Advanced analytics and reporting capabilities are some of the best features of modern AP automation software. With the right platform, any company can not only automate tedious manual processes but also utilize deep analytical insights to further inform their decisions.
Automation software typically offers the ability to analyze detailed spending data. This helps AP teams gain greater visibility into when and where money is being spent, allowing them to identify potential areas of fraud and inefficiency that could lead to cost savings.
By taking advantage of machine-learning platforms with powerful analysis capabilities, companies can boost productivity and optimize their processes for long-term success.