Accounts Payable Automation
Accounts payable (AP) automation is a process that uses technology to manage and streamline the accounts payable function of an organization. AP automation involves the use of software and electronic systems to automate invoicing, payment approvals, and vendor communication processes. The purpose of AP automation is to reduce manual labor, minimize mistakes, and ultimately save time and money for the organization.
The AP process involves digitizing invoices when they are first received from vendors and automatically routing them through an electronic workflow, which enables automated reviews and approvals as well as prioritization if necessary. Automated payment approvals are then made and recorded in the system, making it easy to track and manage payment schedules. Furthermore, this technology enables companies to communicate with vendors through a centralized platform, allowing for more efficient and effective communication regarding payment statuses and outstanding invoices.
The Basic Features Of AP Automation
The basic features of AP automation solutions can vary depending on the specific software or platform, but typically they include:
- Invoice capture: AP automation software can capture invoices in various formats, such as paper, PDF, or electronic invoices, and convert them into digital format for further processing.
- Invoice validation: AP automation solutions often include validation features that automatically validate invoices against pre-defined business rules, like verifying invoice amounts, vendor details, and purchase order matching. This helps to identify discrepancies or exceptions early in the process.
- Workflow automation: AP automation solutions typically provide workflow automation capabilities that automate the routing of invoices for approvals, coding, and payment authorization. The streamlined approval process ensures that invoices are routed to the right approvers based on the organization’s hierarchy and rules.
- Electronic approvals: AP automation solutions may include electronic approvals features that allow approvers to review and approve invoices electronically, either through a web-based portal, email, or mobile app.
- Payment processing: Automated payment initiation can be done through different electronic payment methods such as wire transfers or virtual credit cards using AP automation solutions. This simplifies the payment process and ensures timely payments to vendors.
- Reporting and analytics: AP automation solutions offer reporting and analytics features that provide insights into the AP process, such as tracking invoice status, payment status, vendor performance, and cash flow analysis. This helps organizations gain visibility into their AP operations and make data-driven decisions.
- Integration with ERP and accounting systems: AP automation solutions may offer integration capabilities with the organization’s existing ERP or accounting systems, allowing for seamless data flow between different systems and eliminating manual data entry or reconciliation errors.
- Vendor self-service portal: Some AP automation solutions also include a vendor self-service portal that allows vendors to submit invoices, track payment status, and communicate with the AP team. The vendor portal can reduce vendor inquiries and enhance collaboration between vendors and the AP team.
The Biggest Benefits Of AP Automation
- Improved efficiency: AP automation eliminates manual and time-consuming tasks such as data entry, paper-based invoice handling, and manual approvals, which leads to faster processing times, reduces the risk of errors, and improves overall process efficiency. It also enables organizations to handle a higher volume of invoices without increasing the headcount.
- Cost savings: AP automation can result in cost savings by reducing the need for manual labour, paper-based processes, and costs associated with printing, mailing, and storage. It can also help avoid late payment fees and take advantage of early payment discounts by optimizing payment processes. Additionally, AP automation can help identify and prevent duplicate payments, overpayments, and other errors, further reducing costs.
- Enhanced accuracy and visibility: AP automation reduces the risk of errors that can occur during manual data entry or invoice validation, resulting in improved accuracy in the AP process. It also provides better visibility into the AP process, with real-time tracking of invoices, approvals, and payments, enabling organizations to have better control and visibility over their financial operations.
- Faster approvals and payments: AP automation streamlines the invoice approval process, automating routing and approvals based on predefined rules, and providing electronic approvals. This accelerates the approval cycle and allows for faster payments to vendors, improving vendor relationships and potentially leading to better terms, discounts, and improved cash flow management.
- Enhanced compliance and security: AP automation solutions often include features to enforce compliance with internal policies, such as matching invoices with purchase orders and contracts, and verifying vendor details. This helps to reduce the risk of fraud, non-compliance, and other financial risks. AP automation also provides enhanced security with encrypted data storage and access controls, reducing the risk of data breaches and unauthorized access.
Accounts payable automation has become increasingly popular in recent years due to its proven benefits: reduced errors, increased efficiency, simplification of the payment process, and the ability to reduce late payments and associated fees. By providing a more transparent view of an organization’s outstanding invoices and payment schedules, AP teams can make more informed decisions and take advantage of early payment discounts.