The key roles of accounting departments as they manage accounts payable (AP) are processing vendor invoices and ensuring timely and accurate payment. This may typically include sending out the payment checks, addressing cash flow concerns, and managing any issues relating to payments. Effective management of AP activities is one of the most challenging aspects that needs to be considered for successful running of any business. The goal of automating the AP function is to streamline invoicing processes, eliminate human error, and reduce the cost per invoice.
Why Automating Your Accounts Payable Is Essential?
Processing paper invoices using legacy enterprise tools are stressful for organizations as it requires considerable labor, which impacts business productivity. According to a report from the Institute for Finance & Management (IOFM), a leading professional organization for financial operations professionals worldwide, an average organization receives at least 1,200 invoices each month at a processing cost of $11.76 per invoice. Around 70 percent of invoice handling costs are due to manual entry of data and document handling.
This is where the scope for reaping benefits of automation comes into the picture. Some of the common AP automation solutions include e-invoicing, electronic invoice user interfaces, online tracking, supplier networks, reporting capabilities, payment services, and spend analytics for all invoices. AP processes such as resolving of billing discrepancies, invoice approvals, bank reconciliations, etc. not only require significant man hours but they also demand absolute accuracy in the input of data. Automated workflows address these challenges by providing seamless flow of accurate business data, which expedites information processing and saves time.
Automating AP related processes can help organizations –
- Reduce time-consuming manual data entry.
- Improve data accuracy.
- Increase accountability and to enhance transparency throughout the AP process.
- Streamline operations by providing greater control over cash flow management and ensures reliable forecasting.
- Improve security and auditing capabilities of the accounting process.
- Enhance invoice approval processes which can foster better relationships with suppliers and partners.
- Make accounting information available on request.
- Reduce errors in invoicing.
- Reduce the invoice processing cost and improve cash flow management.
- Eliminate unauthorized access, thereby reducing chances of fraud.
- Meet various regulatory compliance.
Steps for Automating Accounts Payable Processes
Automation can be done in five easy steps:
1. Automate data scan and capture
Manually entering invoice details into the accounting system is tedious and time consuming. The first step to automation is to electronically capture the organization’s invoices from scanners, email, and import folders. To make the this step easier, use an interactive scanner that can directly integrate with the enterprise resource management solution. Capturing the data electronically allows fast and easy retrieval of required AP information such as invoice number, invoice date, invoice amount, purchase order, taxes, due date, and other supplier details. Digital storage also makes the import of financial data into the accounting system easier.
2. Validate smart data
After documents are processed and converted into the digital format, it is essential to get the AP data validated and verified. This calls for the three-way verification of data related to purchase orders, invoices, and delivery information. For instance, it might be required to validate the invoice details against purchase orders, stock codes, and supplier details. Thus, manual tasks, such as confirming the inventory status with warehouses, are automated.
3. Automate invoice processing tasks
Automated AP data verification through a smart business solution helps in the real-time validation of accounting data into the financial system. Supporting documents are also easily accessed in the process. An automated AP workflow also eliminates the delay caused by numerous approvals. Employees can receive real-time notifications for tasks related to invoice processing.
4. Automate approval processes
Invoices may be required to go through several approval processes before the final copy is sent out. A daunting task many organizations face is getting the invoices approved quickly. An automated AP process can match invoice numbers with purchase orders and then forward them into a queue for immediate approval or denial by the concerned authorities. Also, approving managers can review invoices from remote locations even while they are on the go, making the approval process faster.
5. Digitally archive documents
The last step is the digital archiving of data in an easily retrievable format for unhindered access whenever required. This eliminates the loss of any crucial accounting data captured from creditor invoices, along with retention of various supporting documents.
Automation of Accounts Payable is a Simple Process
Most businesses using legacy business software for managing AP workflow think that automating is a time-consuming and complex process. But they couldn’t be more wrong. Several organizations have successfully automated their AP processes by simply adopting standalone AP automation solutions or integrated ERP solutions. Reputed vendors have helped these organizations automate their AP workflows by providing accounting software that they can rely on. This has helped organizations boost productivity and earn profits.