AP Automation

Accounts Payable Automation has transformed the way enterprises process their vendor invoices. AP automation offers the digitisation of various processes in the supplier invoice management.

On a basic level, accounts payable may seem like a simple process. However, as the number of transactions and vendors increases, procedures get complicated. As a result, the number of errors and discrepancies will also increase.

Accounts payable automation is a significant game-changer in overcoming these challenges by establishing streamlined processes and minimised human intervention.

What is AP Automation?

Accounts Payable Automation (AP Automation) is a technology used to automate and streamline different accounts payable processes that deliver enhanced visibility and more control over financial data.

Accounts payable automation can process a vendor invoice, without any human intervention. It is done by managing steps through a digital workflow, that is handled by an accounts payable staff member.

The entire process of accounts payable is a difficult and frustrating task for many businesses. Despite using different technologies like EPR, OCR, EDI document management and e-invoices, fundamental challenges remain unsolved.

Challenges of Manual Accounts Payable Process

Lengthy Cycle Time and Late Payments

When you're managing a paper invoice and additionally a manual workflow for invoice handling, generally there are long processing cycles that delay payments. Your full-time workers are covered in tasks with no ideal opportunity to learn other strategic business responsibilities.

You might face:

• Frequent blunders that lead to more exemptions.
• Ceaseless inquires from providers into accounts payable, concerning payment status.
• Late payment expenses and stressful vendor relationships.

Unstructured Data

In the manual process, the accounts payable staff physically moves data from the different invoice formats into the organisation's standard configuration. This tedious task is slow and inclined to mistakes.

What at first appears to be a series of simple and clear accounts payable tasks later uncovers to be a complicated and inefficient process. Enhancing it would result in financial and organisational profit.

High Processing Costs

Manual processing of invoices can cause issues because of errors, but more concerning is its high operations cost.

You're facing the loss of money with each invoice if:

• Your accounts payable team is pursuing approvals managers.
• Accounts payable team is manually coordinating invoices to buy orders, contracts, merchandise receipts, and quality checks.
• Each month the team is processing recurring invoices.

Approvals

The manual procedure stretches out to getting approvals, such as "Have the necessary reports been gathered and lined for authorisation?" and resolving inconsistencies such as, "Is there an invoice for replenishing for the PO? Does the invoice value match the PO?".

Poor Visibility

In a manual situation, you're creating insights that are based entirely on assumptions. Poor quality of invoice and managing heaps of paper leads to missing data, which means more intervention, increased risk, and zero visibility into the entire accounts payable process.

This implies:

• Forecasting will be difficult as the management team has no visibility.
• You can't give reasons or blame process bottlenecks for high exception rates.
• Absence of performance data and analytics makes setting KPIs and targets very difficult.

Non-standard Invoice

By far, most of the invoices are in the form of paper records, fax documents or PDF email documents. Few are similar, so manual handling is time-consuming. The accounts payable team has to view and find answers to questions such - “Is it from an approved seller?” and “Does the PO match the ERP system?”

Why AP Automation?

Many companies have started to realize accounts payable plays a significant role in business operations. It is not merely the recording of transactions and sending invoices. In today’s businesses, it is more than that. It directly affects your cash flow management, security against fraud and relationships with vendors across the company.

However, whether its impact on these key functions is positive or negative, relies heavily on how an accounts payable team approaches their work. The sad truth is that most accounts payable teams hardly have time to view things like cash flow optimization and fraud prevention.

The reason behind this is the manual accounts payable procedures. Such manual processes restrain accounts payable teams from getting to learn about more than just paying the bills.

Across the entire lifecycle of an invoice, from its initial stage until payment, there are many points to consider within the accounts payable processes. Eventually, there arises a need for an account payable team to intervene.

Each of these manual intervention points will create hurdles in processing an invoice for weeks, when in reality it is a process that can be completed in a day or two. Further, every manual intervention will invite errors that will cost time to resolve, during the month-end closing. This isn’t how it should be and accounts payable teams deserve to be able to learn more.

Advanced technology has empowered accounting teams to view and take out all the unnecessary manual interventions that bring down operational productivity. To achieve optimal efficiency, the goal of the accounts payable team should be to automate as many steps as possible.

How Accounts Payable Automation Works?

The essential prerequisite to work with accounts payable automation is to convert vendor invoices like PDF, e-receipt, XML, etc. into one standard digital format. This change is possible either by data capture and invoice scan or by data transfer through digital e-invoices.

One of the essential highlights of the accounts payable automation is that it can process both vendor-based invoices and expense-based invoices.

The automation solution can code and then assign the expense-based invoices to the appropriate individual for approval. For the task of invoice approval, the approval hierarchy of the organization should be set up in the automation software.

Accounts payable automation software can match the supplier-based invoices with the GDRs (Goods Delivery Receipt) or purchase orders with zero manual processing. Nonetheless, accounts payable automation can conduct a touchless process automatically by approving payments once the invoice is verified.

Different Applications of an AP Automation Software

Invoice Processing

Accounts payable automation software will streamline invoice processing to wipe out manual process inefficiencies. This is achieved through automated approval workflows, review trails, exception handling, matching of the invoice to purchase order and strictly adhering to SOX regulatory requirements.

Automated settings guarantee that the invoices are either matched or steered for approval as per company guidelines and then automatically forwarded for payment.

Dynamic Discounting

Companies can increase their financial savings by efficiently utilizing on-contract discount terms. Accounts payable automation software provides better visibility of accounts payable workflow processes. This allows businesses to grab early payment discounts.

AP automation software allows on-time payments, thereby fostering strong vendor relationships.

Vendor Management

Accounts payable automation software stores and maintains a single source of all vendor data. This helps in reducing obsolete and incomplete data for maximum compliance. Further, it enhances data visibility, which helps in better evaluation of vendor performance.

Electronic Purchase Orders

Paper records and manually taking care of them slows down the process of the purchase order. Accounts payable automation software removes both by electronically making POs, consequently sending them for approval and to the vendors. If you’re currently not using accounts payable automation software, you’re relinquishing cost-saving benefits.

E-invoicing

The AP automation solution facilitates electronic invoicing that saves cost, time and paper-based processes. The software further enables you to create a solution that fits your business including setup of rules, parameter and threshold definitions, and online vendor portals that convert paper invoices into e-invoices.

Approval Workflow

Automating the approval process can save invoice processing time by up to 70% and dispose of any possibility of duplicate payments. The accounts payable automation solution guarantees on-time payments and accuracy, without needing human intervention.

ERP Integration

With regards to enterprise resource planning (ERP), it's important to break down barriers between business units. This ensures cash flow visibility and process efficiency in the entire organization.

One key battle that organizations face, is to integrate their ERP systems with other company systems. Accounts payable automation solution makes this possible seamlessly.

Automated B2B Payments

AP automation software provides automation of payments which can save the cost of manual processes. Also, you will significantly minimize the risks of check fraud.

Global Compliance

Accounts payable automation solution provides global compliance for tax requirements and invoice regulations automatically. You can get access to relevant tax rates from tax tables in your ERP or accounting systems.

AP automation software will help you in performing tax calculations automatically or manually, and pass the data back to your ERP with the necessary GL coding. It will even help you to identify when the tax on an invoice is less than your tax liability. To rule out the differentiation, you can assign GL coding, as this will help you accumulate funds to pay to the correct taxing authority.

Smart Coding

Accounts payable automation solution’s smart coding helps you to automate some of your exception processing. The smart code uses coding templates and machine learning algorithms to evaluate previous coding data in the system.

Further, it suggests proper cost allocations for invoices that lack such data.

Payment

Automated transactions don't require a PO or invoice, similar to rent and utility payments, and hence, are recurring in nature. AP automation solution eliminates manual intervention with a pattern-detection engine.

This engine notifies clients when invoices meet the standards for payment plans, accelerating adoption and making more transactions touchless.

Benefits of AP Automation

Cost Saving

Accounts payable automation software will empower businesses to achieve faster invoice processing resulting in lower operational costs and enhanced productivity. Businesses can eliminate paper and manual tasks, avoid late payment fees by being punctual and also grab early payment discounts.

Accounts payable automation will streamline processes like invoice coding, invoice workflow, invoice matching, dispute resolution, global tax compliance, etc.

Enhanced Productivity

With a touchless process, accounts payable teams can completely focus on exception handling or be involved in value-addition tasks. By increasing the speed of invoice processing by 71%, the accounts payable automation solution enhances productivity and provides results for a well-defined workflow.

Analytics and Insights

AP automation will make the accounts payable team insight-driven, as it offers actionable data and built-in analytics. Accounts payable software will help you in identifying process bottlenecks, predict and prevent late payments, effectively set up KPIs and in monitoring progress.

Fraud Prevention

In a manual process, there is a lack of visibility which increases risk and potential for fraud. Accounts payable automation solution will safeguard the business against duplicate payments, lost invoices and erroneous payments.

It ensures that approvals are properly documented and secured for audits. Moreover, businesses can keep their budgets in check and avoid overages.

Improved Vendor Relationship

Accounts payable automation solution provides vendors with different options to send and receive invoices. It also provides them with a free portal, particularly to track orders, invoices and payments with automated invoice processing. This helps in boosting vendor relationships by ensuring on-time payments.