Every business has an accounts payable process. Many mid-sized companies still handle this process manually, leading to inefficiencies and security risks. Manual accounts payable processes involve dealing with piles of paperwork and navigating complex approval processes, making them prone to security risks and payment fraud. Beyond being a matter of convenience, automating accounts payable has become a necessity for maintaining business integrity.
According to a recent global study by the Institute of Financial Operations and Leadership, only 9% of accounts payable teams worldwide are fully automated, while 54% are only partially automated.
Choosing the right accounts payable software is challenging, but understanding what are the benefits of accounts payable automation is crucial. In this blog, we’ll explore how accounts payable automation works and its benefits for mid-sized businesses.
What is Accounts Payable Automation?
Accounts Payable automation is a digital solution aimed at minimizing repetitive manual tasks like data entry and bill payment. The system enables companies to electronically submit invoices, handle approvals, and process payments through a centralized cloud-based platform.
By automating accounts payable processes, teams are relieved from monotonous manual tasks, and the organization’s risk of fraud is reduced. It is achieved through enhanced insights and oversight at each stage of the AP workflow. Additionally, accounts payable automation facilitates integration with existing ERPs and accounting software such as Xero, Netsuite, Quickbooks, MS Dynamics, and others for seamless data flow.
Pitfalls of Manual Accounts Payable Process
The manual accounts payable process may seem simple at a glance, but in reality, it is overwhelming with piles of receipts, paperwork, and lost records. Tasks include receiving, sorting, and manually entering invoices into accounting software, tracking for timely payments, obtaining approvals, and maintaining records. As a mid-sized business grows, the time and effort invested in accounts payable increase. Continuing to rely on manual processes can have detrimental effects on your business in various ways:
Processing Delays: Manual processing and approval of invoices pose a risk of misplacement or loss, leading to delays and an increased likelihood of late payments. Additionally, the inability to promptly capitalize on offered discounts becomes a concern.
Invoice Processing Costs: Every hour spent on manual invoice entry, matching them to purchase orders, and traditional check processing contributes to higher processing costs. Current estimates indicate that manually handling a single invoice is a financial burden that many mid-sized businesses may find challenging.
Limited Access to Real-Time Reporting: Manual processing creates obstacles in accessing real-time data. In situations where invoices await approval on a manager’s desk, the expenses involved may not reflect in reports, hindering the ability to make informed financial decisions.
Error Prone Processes: Manual accounts payable processes are susceptible to human errors in data entry, calculations, and documentation, leading to inaccuracies in financial records. The manual handling of invoices, approvals, and disbursements is time-consuming, prone to delays, and potentially causes late fees.
Increased Fraud Risk: Managing physical documents and financial data manually increases the likelihood of data breaches, fraudulent activities, and unauthorized transactions due to a lack of built-in security measures and comprehensive oversight.
Limited Scalability: As businesses grow, manual accounts payable processes become increasingly complex and resource-intensive, hindering scalability and potentially impacting the ability to manage a higher volume of transactions efficiently.
Space Constraints: Physical filing of purchase orders and invoices often leads to clutter and inefficiencies. Retrieving lost or misplaced documents becomes a time-consuming task for staff. Businesses with limited space may incur additional costs for off-site document storage.
Unentered Invoices: Manual processing increases the likelihood of invoices being lost, misrouted, or overlooked. This oversight can result in late payments, penalties, and strained relationships with suppliers. Moreover, businesses may face challenges in managing invoices that were never entered into the system.
Mid-sized businesses must consider these drawbacks and explore the benefits of accounts payable automation, to mitigate these issues and streamline business operations.
Key Benefits of Accounts Payable Automation
Now, is the right time to assess the benefits of accounts payable automation and evaluate if transitioning to automated software is suitable for your business. Listed below are the key benefits of accounts payable automation including time-saving capabilities, seamless integration, cost-effectiveness, and protection against fraud. It will help you in making an informed decision.
1. Efficient Time Management
In the past, invoices faced delays in approval, either on desks or in email inboxes. AP automation eliminates these bottlenecks by providing real-time visibility into the approval process. Intuitive dashboards enable users to apply specific parameters, ensuring timely processing and reducing the days payable outstanding.
2. Cost-Effective Invoicing
According to the IOFM, the cost of processing invoices varies between $1 and $21. But best-in-class solutions leveraging AI-powered AP automation achieve processing costs lower than average. This highlights the efficiency gains possible through technology adoption.
3. Precision in Data Handling
AP automation validates invoice data against ERP, minimizing the chance of duplicate payments. Manual input errors are reduced, enhancing accuracy. This not only saves time but also ensures financial data integrity, a crucial aspect of streamlined AP processes.
4. Comprehensive Insight
Clear dashboards in AP automation software provide a comprehensive view of the accounts payable operations. This transparency helps identify invoice locations and responsible parties, facilitating efficient communication and enabling timely interventions in case of delays. Real-time access allows seamless reporting and analysis.
5. Effective Fraud Protection
AP automation assigns specific employee access to invoice approval and payment release, reducing the risk of fraud. This dual-control system not only enhances security but also provides opportunities for data verification, safeguarding against potential financial threats.
6. Enhanced Data Transparency
Improved dashboards contribute to increased data transparency. They enable in-depth analysis of employee productivity, offering valuable insights for accounts payable performance and strategic decision-making.
7. Cost-Efficient Data Preservation
Storing crucial information related to accounts payable is important, but manual storage can be costly. AP automation mitigates this by leveraging affordable cloud storage, reducing expenses, and ensuring compliance with record-keeping regulations.
8. Streamlined Auditing Processes
AP automation software aids document management by linking all transaction-related documents and messages. This creates a trackable audit trail, reducing the risk of paperwork loss, and ensuring compliance with auditing requirements for quarterly or annual filings.
9. Seamless Integration
AP automation easily integrates with existing ERP, databases, and financial systems. This comprehensive integration eliminates the need for multiple logins and data re-entry, minimizing errors and enhancing overall operational efficiency.
10. Early-Payment Discount
Many vendors offer early-payment discounts, yet businesses often miss out. AP automation addresses this by streamlining invoice routing and approval processes, ensuring that businesses can take advantage of these discounts. A report by PayStream Advisors indicates that manual processes hinder early-payment discounts for 31% of respondents.
How Accounts Payable Automation Works?
Accounts payable automation employs digital technology, driven by artificial intelligence (AI), to automate tasks traditionally associated with the payables process. These tasks include data entry and 3-way matching. Through machine learning, accuracy improves with each processed transaction, allowing for the automation of manual tasks without human intervention.
By utilizing a unified, technology-driven platform, accounts payable process automation enables the scanning or uploading of purchase orders and invoices. The relevant data is extracted and automatically populated into the appropriate documents. This eliminates the need for the payable department to manually input invoices into the system, thereby reducing the occurrence of manual errors.
Furthermore, accounts payable automation can streamline the approval process. It replaces the manual method of routing an invoice to an associate for approval, which can often lead to delays.
Choosing a Robust Accounts Payable Automation Solution
Transitioning from manual management of accounts payable to accounts payable automation marks a significant paradigm shift. Gone are the days of chasing signatures and being overwhelmed by manual tasks. Cutting-edge solutions such as Peakflo’s Accounts Payable solution revolutionize the entire accounts payable process. This solution not only guarantees operational efficiency but also aligns with environmentally friendly practices by adopting a paperless approach.
Through seamless integration with ERP systems and online portals, Peakflo alleviates the burden of matching invoices to purchase orders. This, in turn, enables teams to redirect their focus towards strategic initiatives. Accounts payable automation simplifies workflows, providing the means for accounts payable teams to effortlessly scale alongside the growth of the business.