What is Accounts Payable (AP) Automation?

Entering and verifying data across accounts payable (AP) is tedious, as employees waste time waiting for approvals. Even though processing invoices manually is arduous and time-consuming, only 31% of companies leverage AP automation to expedite workflows. Recognizing the untapped potential of digitization is the first step toward getting a cutting edge and using the available resources effectively.

Due to the popularity of remote work, businesses are considering shrinking accounting departments to save expenses. Optimizing internal procedures facilitates establishing trusting relationships with suppliers and other stakeholders, increasing accuracy, minimizing Days Sales Outstanding (DSO), and saving funds.

What is Accounts Payable (AP) Automation?

The technology enables businesses to automate invoicing, sending documents for approval, finalizing payments, and performing reconciliation. Eliminating the need to enter data manually expedites operations. When integrated with the professional software, digital products enhance the functionality of legacy systems.

After choosing accounts payable automation, firms access an intuitive dashboard with advanced analytic tools. They speed up AP management and diagnostics, rendering them invaluable for risk mitigation purposes. As AP data is stored in the system, authorized users access it without delays.

Firms deploy algorithm-powered solutions based on artificial intelligence (AI) to optimize every stage. After receiving a digital invoice from a supplier or using optical character recognition (OCR) to digitize manual documents, an employee validates it utilizing a centralized dashboard and compares data across documents, including purchase orders and receipts.

As employees do not need to enter data manually, they make fewer mistakes, and the effectiveness increases. Upgraded AP automation systems analyze information, which enables companies to maintain a steady cash flow. Keeping documentation error-free facilitates strengthening ties with suppliers.

How to Process Invoices in AP Automation

Implementing an enterprise resource planning (ERP) strategy and making it sustainable involves integrating dedicated AP tools designed to speed up procedures. The approach is best suited for those who want to automate every step:

• Digitization: After getting an invoice from a third party and utilizing the OCR features of AP, the software extracts valuable data. Documents are typically saved in PDF format and contain info about the indicated amount, ledger code, and date. Due to machine learning (ML) support, specialized programs improve accuracy over time.
• Verifying data: The information in digital documents is automatically compared to the data in purchase orders and sent to authorized employees. Implementing a well-thought-out routing method ensures that managers get files in a fraction of a second. When they approve PDFs, payment is released.
• Storing invoices: The digital documents are saved to the central archive. In the future, authorized stakeholders can access them.

Each step is logged in the system. Date stamps facilitate a financial audit and make practices fully transparent. All the information about invoices is updated in the system.

Benefits of AP Automation

Organizations and enterprises utilize AI-driven AP programs to make processes efficient by minimizing mistakes. Let’s consider the main upsides to implementing such solutions:

• Saving time: AI tools extract data automatically, while three-way matching deems human supervision unnecessary. The accounting staff handles invoices without delays, expediting strategic goal achievement. Thus, employees can fully dedicate themselves to creative tasks and generate value.
• Extensive integration capabilities: AP software is an integral part of any ERP strategy, as it facilitates managing supplier data and making accurate cash flow predictions.
• Reduced number of mistakes: Accounts payable invoice automation makes error-free extraction easier and eliminates the risk of discrepancies.
• Diminished expenses: Small businesses and startups with small budgets scale up without significant investments and minimize operational costs. It allows them to adhere to sustainable development practices, reduce the amount of paperwork, and introduce a cashless paradigm, saving on paper and postage fees.

Establishing tight control over cash flows enables ventures to win investors’ trust and achieve ESG goals.

Implementing AP Automation

Choosing the right software to speed up the A/P process is the first step toward success. Such products have intuitive functionality, enabling users to manage invoices, communicate with suppliers, and improve transparency.

Companies typically rely on a software-as-a-service model and access accounts payable tools via the cloud or build custom systems from scratch to store data on-premises securely. After training the employees, a firm can configure the program’s settings to meet specific criteria and increase ROI.

Finding the right tool requires a meticulous approach comprising such steps:

• Setting the desired objectives: An enterprise should decide what goals it wants to achieve;
• Considering requirements: Depending on the area a firm wants to improve, a business should short-list service providers capable of building a custom invoice processing solution.
• Comparing vendors: A venture should check the features available and calculate the integration cost.
• Making the final choice: After testing out the demo versions and analyzing price quotas, firms select a service supplier.

To integrate a selected AP automation solution, utilize this guide:

• Train an AI model using large datasets to speed up operations;
• Integrate the system with the ERP software and platforms you use.
• Organize training sessions to teach employees how to leverage the upgraded system.
• Utilize the built-in features to make the most out of ML algorithms and AI-powered reporting features.
• Set guidelines to maintain regulatory compliance.

Remember the importance of upgrading your system when updates get released and customize it depending on the operational needs.

Challenges and Solutions in AP Automation

An experienced CFO recognizes the importance of predicting difficulties at the implementation stage and addresses them proactively. Automating the invoice-to-payment cycle may be accompanied by such issues:

• Slow adoption: Suppliers may not be aware of how to format documents in accordance with the requirements. Choose a provider offering continuous support to optimize onboarding.
• Change management problems: The reluctant position of the leadership may become the major obstacle. Frontline employees may also have concerns about automation.
• Integration with ERP and other systems: A provider should offer top-notch services to ensure seamless implementation.

Solving these issues in time allows ventures to set realistic expectations and integrate professional software.

Tips and Best Practices

Leveraging the advantages of e-invoicing requires embracing a result-yielding approach. Study these recommendations to succeed:

• Keep the employees updated at every stage of implementation;
• Take steps to assist supplies with adjusting their approaches and following consistent formatting.
• Set clear rules to ensure quick approval.
• Update vendors’ info to diminish the risk of suspicious activities and finalize payments free of any mistakes.

Using AP metrics enables companies to check whether invoices have the required format, calculate cost, estimate cycle time, and identify operations that require improvement. Besides, it is pivotal to create a backup to avoid data loss.

Future Trends in AP Automation

Developing a future-proof strategy requires considering edgy technologies and learning how to utilize them to upgrade daily practices. Using blockchain, ventures verify payments, track transactions, and eliminate inconsistencies. Decentralized ledgers are highly secure and transparent, enabling users to configure authorization settings and maintain high profitability.

Blockchain networks are instrumental in reducing the risk of fraud. Smart contracts add an extra layer of protection and allow for triggering actions when the conditions are right. However, as the technology requires regulation, it may be a wise choice to wait until worldwide adoption.

Deploying products based on ML and AI further contributes to enhancing transaction safety and boosting speed. Optimizing time-consuming procedures enables ventures to spend fewer resources on invoice processing.

As the existing systems get upgraded, employees will extract, analyze, and verify info in a moment. Thus, staff members won’t need to solve routine tasks anymore, which will boost satisfaction levels. Analyzing vendor behavior patterns and detecting issues will become easier.

Mobile apps users will deploy cloud-based tools and improve collaboration with colleagues when working remotely. Removing obstacles hindering cooperation and embracing time-tested data governance policies fosters progress achievement.

Authorized users with pre-established access rights will see and edit sensitive information following strict security guidelines. Moreover, finance team members will deploy innovative products to communicate with each other through protected channels.

Conclusion

Reaping the benefits of AP automation lets enterprises streamline procedures, save costs, reduce workload, and achieve financial health. Sustainable development practices require firms to learn how to deploy pro-level software to process invoices without human input. Nevertheless, it may be daunting to choose an authoritative provider. BooksTime assists clients with removing obstacles in the way of continuous development. Book an individual consultation with our team of experts and discover how to implement top-notch financial management practices and digitize your workflow.