What is Accounts Payable (AP) Automation?
Accounts payable (AP) is a critical function for any business. If vendor payments are not made on time, the supply chain would be adversely affected by reducing the inventory available to the business and even preventing the business from servicing its customers. Despite playing such an important role in the functioning of a business, the AP process is inefficient and error-prone, with accounting teams wasting hours to process invoices and payments manually.
AP automation software aims to make AP teams more efficient by reducing manual tasks and freeing up cash flow. AP automation solutions enable invoices to be submitted and processed digitally eliminating the need for data entry, physical or email approvals.
10 Benefits of Accounts Payable (AP) Automation
1. Time and Effort Savings
Accounts payable automation software eliminates the manual and time-consuming activities from the payable process. OCR technology embedded in AP automation solutions eliminates invoice data entry. Automated approval workflows and integrations with accounting systems further reduce the time and effort required to route invoices for approval and record the liabilities and payments in the accounting system.
2. Cost Reduction
Modern accounts payable automation software utilize artificial intelligence to analyze trends in historical spending and thereby identify cost-saving opportunities. With deep insights into core drivers, AP solutions help you identify areas of overspending, and prevent invoice or payment discrepancies, directly impacting your organization’s bottom line.
3. Fraud Prevention
Automation solutions for accounts payable significantly reduce the risk of fraudulent invoices and payments. They facilitate the matching invoices against purchase orders and goods receipts to ensure only goods and services that have been received are being paid for and payments are made at the agreed-upon rate. Approval policies and workflows also prevent fraud by ensuring incoming invoices are reviewed and approved by appropriate stakeholders.
4. Simplified Audits and Compliance
AP automation software maintains comprehensive audit trails that record every transaction and payment. These audit trails also contain a complete history of every action taken on the invoice, simplifying audits and making it easier to trace any unauthorized or fraudulent transactions.
5. Greater Control
Compliance checks in accounts payable solutions help ensure that only invoices that adhere to internal spending policies and external laws or regulations are processed and paid. These checks prevent costly mistakes and ensure adherence to budgets. In addition, access controls in these solutions allow only authorized users to view information and take actions relevant to their job responsibilities.
6. Improved Collaboration
Traditionally, the invoice approval and payment process is plagued by ineffective communication, resulting in delays. AP automation software improve collaboration by automatically routing invoices to the right approvers who can also interact and share information in the context of invoices. This allows employees from different departments to collaborate effectively even while working remotely.
7. Integrate with Existing Accounting Systems
AP automation software integrate with an organization’s ERP or accounting system to sync invoice and payment information in near real-time. This eliminates the need for manual data entry and simplifies the process of reconciliation.
8. Reduced Errors and Overpayments
By eliminating manual data entry in the payables process, accounts payable (AP) automation solutions reduce human errors. This in turn saves costs and effort as such errors can prove to be costly and are also time-consuming to rectify.
9. Improved Supplier Relationships
AP automation software facilitate faster invoice processing that helps make supplier payments on time. This enhances trust with suppliers and companies are able to reap the benefits of this in the form of better payment terms or early-pay discounts.
10. Increased Transparency and Enhanced Insights
Digitizing and automating the payable processes with an AP automation software provides real-time visibility into the status of incoming invoices and payments. Finance teams are able to plan their cash flows and make data-driven investment and spending decisions.
Thus, businesses of all sizes can benefit from implementing an accounts payable (AP) automation solution. However, before you make the decision to implement any automation, it is important to understand the needs of your team since feature requirements and workflow complexities vary based on the scale of business operations.