Accounts payable (AP) automation technology is used by businesses to manage a vast number of invoices and financial transactions between a firm and its suppliers. While most accountancy solutions contain AP functions, many lack the skills to control complicated AP procedures. Organizations use AP software applications to decrease manual effort and eliminate human mistakes.
Touchless processing refers to automating payments without the need to manually input data at any point, though approved payments will still need to be reviewed and approved by your approver with a single click.
In addition to providing analytics and dashboards, application programming interfaces assist you in managing and diagnosing your accounting system. The data associated with accounts payable has been digitized and can be searched and audited through a single system.
Globalization and AP Automation
In an increasingly globalized business environment, collaboration has become essential for success. By collaborating, stakeholders establish trust between one another and can transact transparently.
P2P automation has enabled procurement and accounts payable to collaborate internally, leading to very positive results. Organizations rely on manual processes and manual paperwork for both functions, but these are prone to errors and delays. A robust automation solution enables finance departments to better manage cash flow and working capital because of its visibility, speed, accuracy, and transparency.
An accounts payable process that relies on manual tasks is often inefficient and error-prone. The process of going through piles of paper invoices, individually contacting approvers, and mailing checks are not only slow, but it also leaves the company open to fraud and makes auditing difficult.
The worldwide Accounts Payable Automation Market is predicted to increase at a Cumulative Yearly Growth Rate of 11.0 percent during the projected timeline, from USD 1.9 billion in 2019 to USD 3.1 billion through 2024.
Automating the accounts payable process will help organizations handle this process more economically and efficiently. The elimination of manual processes and stacks of paper with AP Automation will improve your relationships with suppliers and partners while reducing the days’ sales outstanding (DSO), improving cash flow. Streamlined processes and minimal human intervention can help eliminate these challenges through automated accounts payable processes.
How Does Automation Work?
AP automation requires converting vendor invoices – paper, PDF, electronic invoices, XML, etc.- into a standard digital format. This can be done either by scanning the invoices, capturing the data, or electronically transferring the data through electronic invoices. A notable feature of the AP invoice Using automation, both supplier-based invoices and expense-based invoices can be processed.
Codes and overseers can be assigned to expense-based invoices for approval by the application. The organization’s approval hierarchy configuration must be set up in the solution for the assignment of invoice approvals.
Invoices generated by suppliers can be matched with purchase orders and GDRs (Goods Delivery Receipts) without much or any manual intervention. After the invoice is verified, AP invoice automation should carry out a touchless process that approves payment automatically.
Why go for AP Automation?
The $22 trillion business-to-business payments sector in the United States is experiencing a dilemma. High invoicing volume and tiny divisions that still rely heavily on analogue processes are driving the need to digitize. There can be numerous reason for it, like:
- The return on investment is rapid and tangible.
- As a result, the production costs go down, and manual work is reduced.
- Business can grow financially as fewer employees need to be hired and managed.
- AP automation can also improve your control over payments and cash flow by making it faster and hassle-free, thereby enhancing your ability to gain discounts from suppliers.
- Audits will become more accessible.
- Fraud will be less prevalent.
A List of Tasks to do in AP Automation
Automation is most likely to generate savings by reducing AP effort, processing time, and increase accuracy. In comparison with manual processing, AP automation can significantly improve the following steps:
- Data entry: Entering data manually is slower and more prone to error than automating data capture of all source documents.
- Invoice matching: Purchase orders and receipt documents can be automatically matched to invoices (three-way matching). Businesses that might otherwise need to match documents stored at different locations can use this automatic matching faster and more accurately than manual matching.
- Coding invoices: By automating general ledger coding, you are eliminating the time and inconsistencies inherent in manual coding.
- Approval routing: A centralized electronic route to all necessary approvals is faster and provides better workflow tracking than manually delivering documents to each one of them.
How to Automate the System?
A company generally deploys AP automation software either as a cloud-based service or on-premise if they prefer to host and manage their system.
In addition to training your finance staff and approvers, it’s also worthwhile to set up your rules so that many steps can be automated. Even though the AP process is relatively standard, companies may have some unique workflows that require a solution that accommodates them. Return on investment will be highest with this approach.
Advantages in terms of Procurement
It can be invaluable to both AP and procurement to have a platform for AP automation. Through technology-enabled collaboration, these two teams can communicate and watch their performance better and save money and provide significant value to the organization.
Benefits of AP Automation and Procurement
By automating AP processes, complexity is reduced since manual tasks are eliminated. Using digital invoices instead of paper increases process efficiency as they can be automatically approved within minutes. This allows both teams to spend more time and resources on strategic work.
Automating invoice processing enables payments to be made on time and invoices to be processed faster. Timely payments facilitate building trust and improving relationships with vendors. According to Koufax, employing digital payable systems can result in 81 percent reduced processing costs and 73 percent quicker reaction cycle times.
- Control is Increased
Automating the processing of invoices could give you complete visibility into the entire process. As a result, they won’t be forgotten and won’t “disappear.” Every invoice’s status and location can be quickly pinpointed in a complete overview. When you automate accounts payable, you can find and connect with suppliers to receive e-invoices. AP integration can automatically match orders with supplier invoices, eliminating the need for human intervention.
- Cost is Reduced
Getting rid of manual invoice processing will instantly save you money. Concur recently released a report that estimates manual handling costs on average $12.90 for supplier invoices. The less paper in the process, the less it will cost.
- Processing Time is Reduced
With a solution that can accommodate remote working, you can access and approve invoices from your mobile device or via email, wherever you happen to be. Accessible from anywhere at any time, web-based solutions save travel time and money.
- Carbon Footprint is Reduced
Besides saving money and maintaining higher data quality standards, e-invoicing can also contribute to a healthier environment. We would reduce CO2 emissions by several thousand tons per year if all invoices in the country were paperless. Thus, AP automation reduces costs at the same rate that it increases control. As a result, it frees up resources that can be used for other tasks, such as analysis of spend and process improvement.
How does a Company select which Software to Use?
Choosing the right AP automation software for your business should include the following four steps:
- Prior to Planning: Establish a cross-functional team to define your company’s AP automation needs.
- Gathering the Requirements: In your accounts payable department, you document how accounts payable is currently processed. You compile a list of requirements for accounts payable automation solutions. A request for proposal (RFP) is created at the end of this phase and sent to vendors who meet the criteria.
- Evaluation of Vendor: A vendor that answers your RFP submits a proposal that you evaluate based on aspects such as features, price, and implementation approach.
- Selecting a Vendor: You investigate the most promising vendors in further detail, prepare detailed discovery documents, and request demos. After that, choose your supplier.
Why is Alignment of Procurement and AP Automation Important?
In comparison to areas like marketing, organizations tend to focus less on improving procurement and accounts payable. Consequently, many organizations do not realize the benefits of procurement and AP working together to achieve a common goal.
In each of their respective silos, procurement and accounting are working towards saving costs and improving efficiency in reducing costs. The benefits of proper alignment are far greater than the benefits of improving alignment.
Automating the account payable system has brought a massive change in the structure and eased the task for everyone, so it must be considered. Payable processes for any sort of spending may be automated utilizing accounts payable software connected with a digitalization system that allows business to all of the suppliers.
Errors may be remedied before invoicing reaches the current liabilities system by establishing wireless networks with AP information integration based on agreements, sales order, and reimbursement regulations.
