Accounts payable plays a critical part in day-to-day business operations. It has a direct impact on cash flow management, maintains vendor relationships, and provides security against fraud. However, from receipt to payment, several account processes require manual intervention.
Manual AP processes limit teams from using their time optimally and restrict them to bill payments or records collection of outstanding receipts. Therefore, relying on manual account payable processes can slow the entire workflow of your business.
Nevertheless, disruptive technologies such as Accounts Payable Automation have enabled accounting teams to reduce unnecessary manual intervention; consequently, these teams have been able to maximize operational efficiency.
While automating as many steps as possible should be the goal for teams seeking optimal efficiency, automating these three steps in the accounts payable process provides far-reaching benefits. In this article, we will discuss why Accounts Payable Automation is necessary for an optimized workflow in 2020.
Approval and Routing
Before payment, invoices need to go through a series of approvals. These approvals are necessary to ensure the accuracy and validity of invoices. Since the validation and approval process requires various stages, the manual routing of these invoices increases the chances of these invoices getting lost.
At the same time, the time it takes for invoices to travel from desk to desk causes unnecessary delays, which result in late payments and even payment penalties. Automating these processes through software can significantly simplify the routing process and accelerate invoice approvals.
Once the software captures an invoice and validates it, the invoice is automatically routed to the manager who is responsible for approval. The invoice is forwarded with customized notifications and workflows that ensure that no invoice is missed. At the same time, if your AP automation software uses a cloud-based system, managers can access the system and approve invoices regardless of where they are.
Manual scanning of documents and data entry is a tedious, time-consuming process. These tasks not only take hours of intensive labor but are prone to various input mistakes and data entry duplication.
On the other hand, AP automation uses powerful capture features, such as optical character recognition (OCR) to extract both digital and handwritten data automatically. The automatic procedure ensures that the captured invoice data is input accurately. As a result, businesses can enjoy greater productivity and reduced invoice cycle times.
Aside from reducing the overall invoice cycle time, automated data capture can combine with advanced analytics to give businesses an overview of their total costs. Therefore, businesses can understand their profit and loss margins clearly and make accurate financial predictions.
Typically, businesses need to rebalance books after finding last-minute errors at month-end closes. However, AP automation software eliminates duplicate payments and invoice errors, helping businesses to avoid the painful process of rebalancing books.
Lastly, all of the data captured from invoices is transferrable and is automatically synced across your accounting records without any delay. Since your record is available to your entire accounting department, anyone with authorized access can utilize and analyze new transactions.
Invoices generated by vendors are complex documents distributed through different mediums and are available in various formats. Vendors send these documents in both electrical (images, Word docs, fax, or PDFs) and paper formats, which makes it difficult to sort, categorize, and input them manually. Manual invoice processing is not only complex but also consumes a significant amount of time.
By automating every procedure from invoice collection and sorting to data input, an AP automation software can simplify the AP workflow. Since the software completes these processes upon arrival, it significantly reduces the time for invoice processing. When we send invoices electronically, the software processes them in real-time and extracts data error-free.
At the same time, the software lets businesses automate recurring invoices. You can set an interval for recurring invoices in AP automation software and configure templates for them. Doing so helps businesses match received invoices against templates and report if there is a discrepancy in their formatting.
Lastly, automating the AP process enable you to eliminate duplicate invoices and identify due dates for each of the invoices. If you have not paid a pending invoice, the system will alert you about the approaching due date. Therefore, you’ll never have to worry about making late or duplicate payments.
Purchase Order Matching
The accounts payable process requires your staff to review each invoice individually and then match it against relevant documents, such as purchase orders line by line. The process is manual and laborious, putting a significant dent in the organization’s efficiency.
However, automated accounts payable solutions can streamline these processes. By storing all necessary documents and capturing data, AP software converts data into digital format. Therefore, the software can extract and verify information such as amounts, line item information, GL codes, and terms according to configured workflow rules.
Furthermore, the automated process can also match invoices to their corresponding product order and alerts managers if it finds any mismatches. Automatic comparison of invoices eliminates bottlenecks, enhances accuracy, and allows your employees to focus on other high-priority objectives.
When a business authorizes hundreds of payments every month, employees need to have complete knowledge of all payment due dates and discount opportunities.
If you burden your staff with invoice approval and other manual processes, it’s easy for them to miss payment deadlines. Missing critical deadlines can upset your suppliers and ruin your business relationship with longstanding partners.
Accounts payable automation allows you to streamline payment execution. Users can schedule approved payments to be delivered on or before their due date. At the same time, AP automation helps make e-payments simple by giving the business a central location to choose their preferred payment method.
The typical AP workflow is filled with manual, time-consuming, and tedious tasks. Using AP automation software can help your organization monitor and amplify AP performance while optimizing existing workflows. At the same time, application businesses can cut operational costs, ensures regulatory compliance, and delivers high data quality by leveraging the cloud-based AP automation.