Introduction

As we continue to move into a paperless society, business accounting is on a transformative journey. Companies have begun to actively invest in software solutions that digitize their accounts payable workflows.

Source: esker

The introduction of automation into the accounts payable process minimizes the risk of manual intervention, accelerates operations, and helps maintain compliance. It plays a significant role in optimizing financial systems and the cross-collaboration of teams.

It’s a technology that integrates complex accounting functions and can form an integral part of your core operations. It has a multi-fold impact on all business units and greatly contributes to a company’s profitability.

So, what exactly is AP automation?


Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


Defining AP Automation

Accounts payable automation is a set of tools that are used to streamline the AP process, remove manual input, and provide better insight into financial data.

The technology is a specific SaaS that helps to manage large volumes of invoices and transactions between a business and its vendors.

AP automation software  improves the accuracy and efficiency of your AP department and helps with a variety of other business activities—many outside of accounting and finance.

How Does AP Automation Work?

Although you may think the AP automation process starts with invoice capture, digitization actually begins with the supplier relationship. Without establishing the groundwork for new vendors, you won’t have any invoices to process.

Supplier Portal

The best AP automation software comes with a self-service supplier portal. This eliminates most of the onboarding workload for the AP team and puts accountability into the hands of the vendor.

That means, when paperwork is missing, suppliers will not get paid. Not surprisingly, this keeps business records much more accurate and up-to-date.  

Once suppliers have entered their information, they can also submit invoices through a portal. When this happens, the system will track and notify the supplier of any bumps in the road or other documents required to process.

This real-time status viewing keeps your AP team from being interrupted with calls for invoice payment. It also helps to strengthen vendor trust as the payment process is transparent to all.

The supplier portal has a multitude of benefits for a business, including:

  • Tax data (including W-9 forms for U.S.)
  • Verify bank accounts
  • Automate approvals
  • Instant vendor notifications
  • Check against blacklists

OCR and Machine Learning

AI & OCR Technology in AP Automation
AI & OCR Technology in AP Automation

At the start of the invoice management cycle, documents must be scanned so the data can be captured and entered into the system. The process of digitally extracting information from invoices (or other paperwork like shipping receipts and purchase orders) is called optical character recognition— in short, OCR.

The umbrella term for all of this is robotic process automation (RPA) and it involves aspects of machine learning and artificial intelligence. This helps to improve accuracy and recognize patterns over time. It also allows you to easily screen and automate routine workflow processing and validation rules.

Artificial intelligence is used to learn from past experience and suggest specific general ledger (GL) codes or approval routing paths. Solutions like Nanonets employ deep learning powered by an algorithm that is the benchmark for invoice OCR.

The brand processes over 2 million images every month with GDPR compliance and on-premise hosting. If your business calls for it, you can even scan receipts, IDs, and passports.

The smartest thing about a platform like Nanonets is the ability to test the tool. Upload an invoice and extract data live, in just seconds.

Source: helpsystems

Invoice Matching

The next step is for the AP automation system to electronically compare supplier invoices with the proper documents. There are two main ways to do so:

  • Two-way Matching - Purchase orders and invoices
  • Three-way Matching - Shipping and receiving reports

The system will automatically compare data like line items, quantity, and price and look for any discrepancies. When there is a noted difference, the invoice is put on hold, and payment is delayed until it can be resolved. Automatic notifications will also be sent to the appropriate parties, requesting the specific data needed.


Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


Approval Process

The best AP automation software runs an efficient approval process from approval prediction to multi-tier approval management. This helps a business take advantage of the early payment cycle and cuts processing costs.

Machine learning and smart logic can assign business rules for bill-level coding (like accounts and departments), payer entity, and bill approvers. This minimizes the delays in obtaining approvals and improves efficiency.

An AP system must also allow for configurable workflows and unlimited invoice approvers. This strengthens an organization’s internal controls and eliminates the process of chasing approvers. They have access to pending invoice review, awaiting action, and anything outstanding.

Reconciliation

At the end of the invoice payment process, a business needs to record what happened. AP automation software offers instant payment reconciliation that speeds up financial close.

No more stitching together spreadsheets or reports. All payment remittance advice is rolled up into one clear report.

In-Depth Reporting

AP automation software should end the entire process with in-depth reporting. It should help a business create an ongoing audit trail that can be managed and accessed at any time.

Reports should have transaction-level details including all rejected payments. For a swift close, a company can export all reports to Excel, a .CSV file, or a third-party platform.

ERP Integration

Whatever solution you choose, it should also give you the option to integrate all the legacy systems already in place. This includes operations like:

  • Inventory management
  • Analytics and reporting
  • Project management
  • Employee performance
  • CRM - customer relationship management

Source: compact.nl

Top Tasks to Automate

Although AP automation is responsible for handling a variety of business tasks, there are some in which it is particularly efficient. Some of these are:

Data Entry

A huge time-consuming task for the accounts payable department is manually inputting all invoice data, receipt information, purchase orders, and any other paper document that must be processed to make payments.

Automating the data capture process not only saves time, it’s a paperless system that’s more accurate and less prone to human error. There’s no typos with OCR!

Invoice Matching

Rather than pairing paper invoices with supporting documents, they are matched automatically; including purchase orders and shipping receipts. This is particularly helpful for an AP department that needs to match documents across multiple locations.

Coding Invoices

AP automation helps a company establish rules that will choose the correct general ledger (GL) code for each invoice. This eliminates both the time it takes to do it by hand, as well as the mistakes that can be made in manual coding.

Approval Routing

Accounts payable automation technology facilitates the approval process from start to finish. No more waiting for an invoice while it sits on someone’s desk. Or worse, an invoice that is misplaced in a stack of papers.

Automating approvals means electronic routing to all necessary parties in the approval chain. This leads to faster invoice processing and happier suppliers that offer early payment discounts.

Batched Payments

Automating multiple payments at the same time eliminates a huge workload for the AP team. Especially if these are recurring payments, like payroll or bills. The best AP software allows you to do this on a global basis.


Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


Key Benefits of AP Automation

When it comes to automating the accounts payable process, there are a multitude of benefits for a business of any size. Consider some of these:

Benefits of AP Automation
Benefits of AP Automation

Streamline Operations

Automation helps to streamline the end-to-end AP process and simplify complex systems with little human intervention. It also works to reduce paper waste and requires less manual labor.

Increase Visibility

Real-time monitoring helps to establish clear communication channels and gives a business direct access to invoice data. A company can make more informed, data-driven decisions to establish definitive business intelligence.

Improved Accuracy and Efficiency

AP automation helps to eliminate bottlenecks and identify inconsistencies in data. If there is an issue, the system is designed to notify the proper parties immediately. This makes the entire process more accurate and efficient.

Minimize Costs

AP software has lower overhead than labor costs. A company can reduce hiring and lessen the time it takes to process invoices, with fewer errors.

Additionally, without the need for paper, there are no costs associated with printing checks, purchasing postage, entering data, and other traditional paper-related office expenses.

Enhanced Staff Performance

The right AP tools give your staff more time to focus on business growth and work that drives value. You can use data from the AP system to set and revisit productivity metrics (like Key Performance Indicators (KPI)).

Develop Business Relationships

When your accounting operations are streamlined, invoices are paid faster. This helps to further brand trust and strengthen supplier relationships. In turn, vendors will typically offer some sort of payment discount to reward early payers. It also ensures a positive flow of inventory.

AP automation tools also offer a level of autonomy for vendors. Self-service supplier portals take the work away from your AP team and give the responsibility of onboarding back to the vendor. They have to enter their own documents and manage any updates.

The portal also opens a clearer line of communication with invoice status updates and instant notifications.

Compliance and Auditing

If your company does a lot of global business, having tools that help you stay in compliance are critical. AP automation software creates an indestructible audit trail of the entire accounting process.

From the very beginning, the system is verifying vendor authenticity and requesting the proper tax documents. Not only does this reduce the risk of fraud, it keeps your company safe from any last-minute audits.


Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


How to Select the Best Accounts Payable Automation Software?

Once you have an understanding of how automation changes the Accounts Payable process, it’s time to arm yourself with the right tools.

So, where do you start?

Consider some of these factors when selecting the best AP automation software:

Data Security

AP software keeps all of your financial data safe and secure. The best systems provide encryption, two-factor authentication, and secure communication. Before you purchase anything, it’s important to know what security mechanisms the tool has in place to ensure it aligns with the data you need protected.

User-Friendly Interface

The ability for employees to easily navigate the dashboard is essential. A small learning curve lessens the need for training and facilitates the entire process. It should be uncluttered, neat, and point out any issues in seconds.

Dynamic Integrations

The AP solution you choose should be able to easily integrate with your entire tech stack. A business shouldn’t have to update the entire ERP to accommodate a new app. Integrations help maintain an uninterrupted workflow and enable companies to make better data-driven decisions.

Payment Methods

Any AP technology you purchase should have multiple payment methods. The more ways a company can accept and send payments, the more business they can accomplish.

There are a ton of payment gateways to choose from and each charges different transaction fees, so make sure you do your research in this area, before taking the plunge.

Reporting and Analytics

Tracking business performance is vital for success. The AP automation software you choose should automatically generate a variety of financial reports. This includes data like:

  • Income statements
  • Cash flow reports
  • Balance sheets

It should also generate reports based on department or category, like:

  • Taxes
  • Inventory
  • Projects
  • Accounts Payable and Receivable

Additional Considerations Include:

  • Project-based billing
  • Cash-based and accrual accounting
  • Bank reconciliation
  • Role-based permissions
  • Taxes
  • Mobility
  • Customer support
  • Cost

Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


Comparing the Top AP Automation Software

Once you’ve decided to purchase AP automation software, you may find the selection process daunting. There are so many solutions out there, it’s hard to choose. Here are a few of the top AP automation solutions and which types of business each suits best:

Stampli

Stampli is one of the highest-rated AP solutions for invoice processing, where approvals happen 5x faster. It easily integrates with your ERP or accounting system and learns the processes to automate GL-coding, spot duplicates, and avoid fraud.

Best For

Smaller businesses that need a straightforward approach, with little customization.

Sage Intacct

Sage is a cloud-based accounting system that offers real-time tracking and payment views. It includes AP automation software with automated payables workflows and in-depth reporting. The brand also has strong, third-party integrations that increase efficiency.

Best For

Small and mid-sized companies that need hefty integrations.

SAP

SAP is a high-end, cloud-based AP automation platform. It doubles as a comprehensive ERP system with a wide range of business processes that include invoice management, routing approvals, and vendor onboarding.

Best For

Large companies and corporations with a big budget for accounts payable operations.

Kofax

Kofax is an AP solution that automates how you capture invoice data, code, verify, and authorize for payment. It helps to streamline the high-touch transactional process with market-leading content capture capabilities.

Best For

Small to mid-sized companies that have a large array of accounting documents to organize.

Xero

Xero is a cloud-based accounting system that specializes in accounts payable automation and vendor management. Xero integrates easily with other platforms and can be used to streamline AP workflows, organize invoicing, and digitize the data capture process.

Best For

Startups and companies with a small budget.

Oracle ERP

Oracle AP automation is a high-end accounts payable solution that covers a comprehensive array of features. Much like SAP, it offers additional support for accounting, including customer and vendor relationship management, and in-depth reporting.

Best For

Enterprise corporations with a big budget for accounts payable operations.

Nanonets

Nanonets is state-of-the-art AP automation software that extracts data from your invoices intelligently. The automated invoice processing feature is accurate and scalable, saving time and money for your accounting department. They help to supercharge your procurement process and strengthen vendor relationships.

Invoice Processing - Latest Trends
Invoice Processing - Latest Trends

Best For

A business of any size that needs accurate data capture from a multitude of documents.

Oracle Netsuite

Netsuite AP automation, owned by Oracle, is a cloud ERP system with a wide range of Suites (modules) for different types of business functions. This includes invoice management, approval routing, payment, and reconciliation.

Best For

An enterprise corporation with a large variety of accounting tasks and business operations.

Tipalti

Tipalti AP automation is a cloud-based SaaS platform that is one of the best in the market for automation. This includes a self-service supplier portal with multiple payment methods. Tipalti helps make global mass payments in hundreds of currencies, including tax compliance.

Best For

Any company that wants to do business internationally and in bulk.

Yooz

Yooz AP automation provides a smart and powerful cloud-based invoice management system. It integrates seamlessly with more than 200 financial platforms and offers speed and security, with zero-risk subscriptions. It is said to reduce the cost per invoice by 84%.

Best For

Any business looking for a wide range of integration capabilities.

Additional Solutions Include:

  • Bill.com
  • Esker AP Automation
  • Inspyrus AP Automation
  • QuickBooks

Looking for an AI based AP Automation solution? Give Nanonetsa spin for higher accuracy, greater flexibility, post-processing, and a broad set of integrations with other Accounting, ERP systems & more!


How can SMBs  Embrace AP Automation?

Besides the obvious, there are some novel ways in which small and medium-sized businesses are embracing AP automation. It can integrate at business process points in the most innovative fashion and disrupt traditional processes.

Here are a few “outside-of-the-box” ways to use this technology:

Build Your Master List

The supplier portal is a great way to quickly build your vendor list without having to lift a finger. The system tabulates the data for you. Then, you can create a vendor master file with data supplied directly from the suppliers themselves.

Tax Reports

W-9 and other tax information collected can be used to generate periodic tax compliance reports. If your business is at a high risk for audits, this is an innovative way to use AP software to ensure you’re never caught off guard or in non-compliance.

Screening Vendors

AP automation means you no longer have to rely on human eyes to catch fraud. The system will use thousands of online validation rules and databases to screen outside vendors against things like:

  • Regulations
  • Blacklists
  • Tax databases

Routine Tasks

Although this certainly isn’t novel, using robotic process automation to eliminate routine accounting tasks gets easier with time.

That’s because, as you use your system, machine learning and artificial intelligence start to understand more complex patterns. Ultimately, the platform will perform routine payables tasks exactly to your liking.

Globalization

One of the most innovative ways in which businesses use AP automation is to expand into global territory. Just 15 years ago, doing international business for a small company seemed like a costly pipe dream.

New AP tools, however, make this a possibility for a business of any size. You can add functionality and payment choices in hundreds of local currencies.

Additional Uses Include:

  • Automatic payment reconciliation
  • Screening for duplicate payments and invoices
  • Improving real-time access to information for all parties
  • Mass payments to save on processing costs
  • Electronic purchase order creation

Conclusion

Kickstarting your AP automation journey starts with understanding exactly how modern accounts payable operations function and how those tasks can be automated.

What does digitizing your workflow look like today? Are there systems that need to be updated or accommodated with new technology?

How much is your budget? This will always come into play when procuring new equipment. Some AP automation platforms charge high upfront costs for the entire license. Others will charge a monthly subscription fee. A lot of that has to do with where your information is stored. It’s more costly to silo it on-site than to house it in the cloud.

Is your business mobile? In this new era, purchasing software with mobile functionality is critical to keeping business moving. As society evolves to a more remote-based work environment, the tech solutions you procure must follow suit. Therefore, looking at something that is cloud-based and allows for multiple users is a good match for the current economy.

Ultimately, the AP solution you choose will best align with needs if you do your research. This guide is a good start to understanding exactly what this type of software can do and how it can suit your business best. Ask the right questions now, and you’ll find the perfect platform that will leverage AP operations and grow with your business.

You might be interested in our latest posts on: