Automating accounts payable enables companies to optimize their workflows—like invoice processing, communication touchpoints, and automatic approvals
The accounts payable process is notorious for being paperwork-heavy, requiring multiple steps and any number of stakeholder approvals. From a vendor issuing an invoice to your team ensuring it’s the correct amount, getting sign-off and issuing payment, the end-to-end accounts payable process is rife with bottlenecks, lag time, errors and failed handoffs, and inaccurate reporting.
This can cause any number of problems, like budget issues, creating an inaccurate picture of your company’s financial position or cash flow, and straining the relationships with suppliers and vendors due to failed, delayed, or incorrect payments.
Automating accounts payable and accounts receivable processes enables companies to optimize their workflows—like invoice processing, communication touchpoints, and automatic approvals—so they can pay suppliers and vendors quickly and accurately, without placing extra strain on the team.
Let’s explore some of the capabilities of accounts payable automation, and how those capabilities can benefit your business.
Automated invoice management and payments
Whether your company works with five vendors or 500, each one has their own standard processes around issuing an invoice and sending it to get paid.
Electronic invoices are certainly more manageable than when they’re printed or faxed, but even emailed invoices come in different formats, whether it’s included in the body of the email, or as an attached Word document, PDF, spreadsheet, or other file type.
Managing the data from these different file formats often requires manual effort, which can be too great a time commitment for your team, can cause data entry errors, and adds to the lag time that can prevent your vendor from being paid on time.
Automated invoice processing uses optical character recognition (OCR) to pull the data from the document—regardless of the format—and organize it in tables. This prevents your team from tedious and error-prone data entry work and moves the payment process along more quickly.
Appropriate routing and faster approvals
Once the invoice is received, the next step includes routing the invoice to the appropriate person—or multiple people—for approval. Checking that the appropriate amount was billed, the services were completed on time and you were satisfied with the product or service are all factors that need to be approved by the appropriate stakeholders.
The approval stage is where bottlenecks can build up and delay the process for days, weeks, or longer, due to failed communication from the accounts payable department to the right person, emails getting lost in inboxes, or overwhelming workloads that push invoice tasks to the bottom of to-do lists.
This sequence is where accounts payable workflow automation can make its greatest impact to your business.
Completing the process manually can be a time-suck for your team, since often times each invoice is sent to a different department or role, based on vendor, billing amount, services provided, or other factors.
With automation, you can set certain requirements or filters to make sure the right invoice hits the right employee’s desk as soon as it’s submitted.
For example, products or services purchased for a certain department can be automatically routed to the department head who signed off on the order. Or an invoice over a certain amount may need multiple approvals, one from a manager or director, and the other from the CFO before payment gets issued.
Completing this process with an accounts payable automation solution enables routing to go immediately and accurately, to prevent the extra manual work for your team, and minimize bottlenecks.
Other benefits of automating accounts payable:
Integration with current accounting systems
A common fear around adding automation into your processes is the cost, risk and complexity of removing your current point solutions and replacing them with a more innovative system. Effective automation solution providers for accounts payable can sit directly on top of your current ERP and other systems, and make them work better. They optimize your end-to-end accounting process by consolidating data and enabling your systems to communicate, without having to build your department’s tech stack from scratch.
Reduce financial risk
Your accounting efforts are continuously at risk of fraud, compliance and regulation failures, as well as security breaches. When processing payments manually, it’s difficult to track these issues and identify potential red flags before they become a much bigger problem. With accounts payable automation, your team has far greater visibility into payment transactions company-wise, enabling greater control and governance.
Maintain stronger vendor relationships
The vendors and suppliers that you purchase products and services from are vital to the workflows and projects that make organizations function well. Failure to pay them, delaying payment, or paying them the incorrect amount can strain your relationships over time. Automation enables you to pay the right amount, on time, for everything you purchase, keeping your partnerships intact and helping you avoid penalties and late fees.