Accounts payable form the core of the day-to-day tasks of the accounts department in any business. Traditional AP processes can drown your employees in endless paperwork and redundant manual invoice reconciliation tasks. The manual process is not only tedious, but it’s also prone to human errors, which can slow down business operations and hinder growth.
Unlike in the past, when automation was a reserve for the best-performing businesses, many companies are adopting AP automation to address accounts payable issues. The technology streamlines the entire process, enhances employee productivity, and fuels business growth.
What is Accounts Payable Automation?
Accounts payable automation is the process of using advanced software to automate repetitive invoicing tasks and eliminate human error for better accuracy and convenience. The software integrates with your accounting software to ensure a hands-free, paperless and efficient process.
There are numerous reasons why businesses are adopting accounts payable automation. The technology solution ensures higher productivity, time, and cost savings and eliminates inconvenient errors. Once you streamline and automate your AP process, you can ensure your business gets timely payments from creditors.
While automation is more prevalent in physical tasks at the industrial level, data-centric tasks can also become monotonous. Accounts payable automation can make the tasks more efficient and ensure reliable results. However, different organizations require a specific solution to address unique AP needs. While the technology has similar benefits to companies across different industries, there isn’t a universal solution.
How Accounts Payable Automation Works
AP automation software basically converts supplier invoices into digital images that can be processed with optical character recognition, pattern recognition, and machine learning to remit automatic payments to suppliers.
The AI-powered digital workflow improves accuracy over time. Various ledger codes and approval routing processes act as the benchmark for the AI tool to improve payments efficiency by pivoting on previous experience. The automation solution’s objective is to eliminate repetitive, manual, and tedious human involvement to facilitate a fully-automated payment process.
Benefits of Accounts Payable Automation
Invoice processing and supplier payments are vital business aspects that organizations seek to streamline. Automating the accounts payable process is a worthwhile decision for any business. Automation has become a top priority for business leaders across different industries in a digital-driven business landscape.
AP automation is transforming invoice handling, payment remission, and managing a surge in accounting backlog. While various businesses have different reasons for implementing AP automation, the benefits cut across the business landscape:
Conventional accounts payable processing is prone to human errors with negative financial and reputational consequences. When the process relies on a manual spreadsheet with multiple editors at different levels in the finance department, a mistake will likely occur.
Research shows that about 36% of organizations have misalignments in their accounting processes. The streamlined process eliminates most manual tasks in the accounts payable routine, leading to fewer errors to ensure smooth and efficient payments.
Speedy Invoice Approval and Payment
Errors can compromise the AP process and delay approval. But with the obstacle out of the way, the accounts payable process becomes shorter and seamless. Most importantly, automation makes detecting and correcting errors easy before sending invoices for approval. With quick approvals, you get faster payment cycles since payment details are automatically captured and sent to suppliers.
Better Control and Visibility
Automating the accounts payable workflow makes it possible for suppliers and vendors to track invoice and payment status at any time. This fosters a sense of transparency throughout the process, giving all stakeholders peace of mind.
The manual creation of spreadsheets and charts to grasp spending patterns and predict cash flow issues can be labor-intensive and uneconomical. On the other hand, automated processes offer real-time cash flow tracking for better decision-making.
Moreover, automation gives your finance department better visibility by providing a comprehensive view of outgoing payments, cash flow, and other vital data. As a result, financial officers can benefit from the systemic overview of business finances and insights on payment status.
Improved Productivity and Efficiency for Better Relationships with Vendors
Automated payables process means that your average invoices that take more time to receive, process, and file, can be handled by software instead of an employee. The scarce human resource can be left to handle other tasks that require human judgment and expertise, such as processing a problematic invoice or other improvement tasks.
Typically, it doesn’t make business sense to direct employee efforts towards routine tasks that can be left to an automatic invoice processing software solution. You can reserve the workforce to handle crises or other efforts that generate more business for the company.
Improved Record Keeping and Lower Operational Costs
Most organizations dread government audit notices since the process requires the management to gather, organize, and forward numerous documents to the editor. Unfortunately, it’s easy to be caught off-guard, especially when your accounting practices are prone to errors.
Automating your accounts payable processes can help you avoid ugly surprises and the nightmares that come with external audits. Good AP automation software can organize files and notify all stakeholders about transactions that need reviewing or approval.
Choosing the Best Accounts Payable Automation Solution
There are several vital aspects to consider when choosing the best business software to streamline your AP process.
Automatic Invoice Processing
When choosing AP automation software, it’s important to understand the distinct differences between robotic and traditional automation. Traditional automation uses digital tools to eliminate a proportion of human intervention when processing invoices. However, these systems still require some degree of human involvement throughout the process.
On the other hand, robotic automation eliminates any human intervention, thus ensuring a fully-automatic process. Software robots manage all the tools responsible for various tasks with zero human intervention. The software leverages machine learning technology to help the system learn from past experience to enhance future processes.
Typically, robotic AP solutions are more costly than their traditional counterparts. It’s best to review your business needs and determine whether the solution is worth the investment.
Simple and Seamless Onboarding Process
Employees tend to respond and perform better when working with software that offers a smooth onboarding process. Buying complex AP automation solutions can be futile unless your employees embrace the new software. When choosing payroll services for your business, it’s best to select a service provider who values the onboarding process and provides sufficient training for smooth employee transition.
Easy Customization and Integration with Existing Accounting Systems
Integrating the automation solution into your accounting system is vital for simplifying the AP processing of invoices and payments. In addition, it can streamline your bookkeeping process.
Any accounts payable automation software can only be as good as how it addresses your organization’s unique needs. A great solution should facilitate customizable and configurable options, including payment notifications, transaction approvals, and data analysis and imports. Ideally, your business needs should determine the number of customization options your software should have.
Every business should strive to study and understand the inherent strengths and weaknesses in its AP processes. You can then use this insight to choose a software solution that fills the deficiencies.
Accounts payable automation can be an effective tool for businesses seeking to enhance supplier payment processes and manage company finances better. However, business leaders should take a realistic approach by first understanding their unique needs. After understanding organizational strengths and weaknesses concerning AP processes, businesses can deploy the appropriate AP automation software.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.