Accounts payable (AP) refers to a company’s short-term obligations owed to its creditors and suppliers. It’s critical for a business to run smoothly. However, there are different types of AP processes, and some are better than others.
In this article, we’ll explain what accounts payable automation is, why it’s superior to manual AP processes, the automated AP process, and more. Let’s get started!
Challenges of manual accounts payable
Traditionally, AP was done manually. This meant receiving paper invoices in the mail and processing them by hand. However, this method can be tedious and error-prone. Consider all of the following drawbacks of manual AP:
- Time-consuming. Manual data entry can take a lot of time, drain staff, and lead to delays in paying suppliers.
- Error-prone. Human errors are much more common when relying on staff to input and verify data.
- Fraud risk. Catching fraud can be harder when your AP department is busy trying to keep up with processing invoices manually.
- Delays and inefficiencies. It’s easy for AP to get backed up if papers get misplaced or someone goes on vacation. Such delays can result in missed deadlines and incurring late fee penalties.
In contrast, AP automation can streamline the AP process with dashboards, analytics tools, cloud storage, and more—all on one platform. AP automation uses “touchless” processing, meaning no paperwork or manual input is necessary. This helps reduce inefficiencies and human errors.
The accounts payable automation process
What exactly do accounts payable automation look like? It basically funnels suppliers through a digital workflow that consists of the following:
- Invoice capture. AP automation digitizes invoicing by scanning paper invoices or requiring vendors to send invoices by email.
- Matching and verification. Invoices are compared and matched against corresponding purchase orders and delivery receipts. This helps catch any errors before the invoices move on to the next step.
- Approval. Invoices are routed to the appropriate staff for approval. Digital routing helps ensure no invoices are overlooked or bypass the proper approval.
- Payment. Once approved, invoices are paid or scheduled for payment. Automating this helps ensure timely payment and avoids late payment fees.
- Reconciliation and reporting. Payment transactions are matched with bank statements. In addition, AP automation generates reports on metrics such as spending patterns, business performance, and cost-saving opportunities. These reports help eliminate manual cross-checking, reduce errors, and help you make more informed decisions.
- Archive and audit. Invoices and payment records are archived for safekeeping. Digital records create a clear audit trail so that your AP can be regularly audited.
Benefits of accounts payable automation
At this point, you may wonder if AP automation is really worth the transition. The short answer is yes. Here’s a list of all the benefits AP automation offers to modern businesses:
- Fewer processing costs. With AP automation comes less data entry, document storage, postage, invoice production, and other legacy AP costs.
- Scale AP and your business. Growing your business is much easier when you have automated AP processes in place—no need to hire more staff to take on more invoice volume.
- Improve financial accuracy. By significantly reducing the risk of human errors, you can improve the financial accuracy of your AP.
- Increased fraud prevention. Fraud is less likely when the AP process is automated. Bribing staff and exploiting human vulnerabilities, for example, is much more challenging.
- Time savings. With a faster and more efficient AP process, you can allocate more time to more critical business tasks.
- Built-in compliance. Automated AP processes are built to be compliant. For example, they often flag duplicate invoices, additional charges, or suspicious activity.
Other benefits that are less measurable include increased control, easy auditing, higher employee satisfaction, and better business relationships.
The bottom line
At the end of the day, the choice to transition to AP automation is yours. There may be some growing pains involved, but it’s well worth it in the end.
