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accounts payable automation

The business case for accounts payable automation

March 7, 2024

Accounts payable (AP) automation can save time, preserve accuracy, and create efficiencies. Traditional manual processes are time-consuming but also prone to errors. What should you look for in an AP automation provider? Let’s examine a few common questions and explore the opportunities AP automation presents for businesses.

Why is AP automation important? 

AP automation streamlines the entire invoice-to-payment cycle, potentially reducing mistakes and hands-on tasks for your AP team. Automation cuts down on the need for manual data entry, which is notorious for errors. This not only saves time but also enhances the overall reliability of financial data. 

Moreover, with automated approval workflows, businesses can ensure compliance and reduce the likelihood of fraudulent activities. The efficiency gained through AP automation translates into tangible cost savings. 

Who benefits from AP automation?

AP automation is not just about streamlining your AP department; the benefits of AP automation create a win-win scenario. Customers, organization leadership, and service teams can feel the benefits of enhanced data accuracy. Customers, for example, may experience quicker response times and enhanced service. 

The precision in financial data and resulting cost savings empower companies to reinvest in the entire organizational ecosystem. But this isn’t just about efficiency gains; it’s about creating an environment where every interaction, from invoicing to support, is seamless and customer-focused. 

What are the benefits of AP automation?

Accounts payable automation can help standardize the way your enterprise handles invoices, purchase orders, and payments. What is the advantage of standardization?

Save time and money 

Perhaps the most important advantage of standardization is that it enables a more streamlined process. Full automation allows organizations to cut labor cost and reduce the occurrence of errors, enabling mid-size companies to achieve greater accuracy and efficiency in process management compared to those with partial or no automation. 

Account payable automation can dramatically reduce the time spent on manual invoice processing. With automated systems in place, they can process high volumes of transactions swiftly, leading to improved data availability and insights. This precision is particularly crucial in financial reporting and compliance, where inaccuracies can result in substantial issues, including regulatory penalties.

Businesses can then take advantage of early payment discounts. This not only strengthens relationships with suppliers, but also translates into direct cost savings, optimizing cash flow management. 

Vendor satisfaction 

Compliance is huge. AP automation systems ensure that payments are processed efficiently and on time. Around 32% of suppliers would stop doing business with a customer if they experienced late payments. This reliability in payment cycles enhances the vendor’s cash flow predictability, allowing them to plan and manage their finances more effectively. Consequently, vendors are more likely to prioritize and continue working with businesses that consistently meet their payment obligations. 

Automated systems also excel at identifying discrepancies in invoices promptly. This ensures that any issues are addressed and resolved promptly, preventing delays in payments and reducing the likelihood of disputes with vendors. 

Reduce risk and error

One of the advantages of AP automation lies in the ability to minimize the inherent risks and errors associated with manual accounts payable processes. Manual processes are susceptible to fraudulent activities, which could include:

  • Invoice manipulation 
  • Unauthorized payments
  • Collusion and kickbacks

Companies were 63% more likely than average to feel very confident in their fraud prevention with fully automated AP processes. 

Automated systems use advanced algorithms to validate and cross-reference information, ensuring accuracy. This minimizes the risk of overpayments or duplicate payments and enhances the reliability of financial records. 

Improved cash management

In many organizations, accounts payable is the second-largest area of cash outflow (after payroll expenses). Automating accounts payable lets you define cash flow objectives and manage the flow of cash through your system more efficiently and effectively. This results in increased accuracy for cash forecasting and the ability to create richer financial planning models.

The combination of AP automation and rebate optimization transforms accounts payable into a proactive contributor to cash flow management. By leveraging early payment discounts and negotiating advantageous terms with vendors, businesses can unlock hidden financial benefits, reinforcing the importance of adopting AP automation as a comprehensive financial strategy. 

Improved data analysis and strategic planning: 

Accounts payable automation, especially when it integrates with your other business technology solutions, provides you with a depth of business intelligence that can be used for other business processes such as working capital optimization and supplier performance management.

AP automation rightly takes a seat at the table regarding your overall business strategy. It helps drive collaboration between multiple departments within your organization, contributing to a more holistic way of handling procurement, supplier performance management, and financial forecasting.

What opportunities exist thanks to AP automation?

While automation may appear to be a “set-it-and-forget-it” investment, AP automation can bring dynamic change to your business. Automation tools can scale alongside your business, allowing continuous monitoring of their effectiveness. The data they provide not only keeps you informed but also offers valuable insights to grow your business. Rather than introducing new challenges during expansion, automation ensures a consistent output, allowing scalability and stress-free growth.

How can I identify AP automation opportunities?

Consider for a moment what your current accounts payable workflows involve. At a bare minimum, your accounts payable department:

  • Receives invoices in a variety of formats from multiple vendors.
  • Reconciles those invoices with your internal purchase order system or a similar tracking mechanism.
  • Enters invoices into your payables system, tying them to the corresponding purchase order.
  • Generates a vendor payment for the invoice.

Though it may seem simple enough, this process is often fraught with difficulty. At best, it is a time- and labor-intensive process. At worst, it is a dilemma of bottlenecked processes.

Careful and honest analysis of your current AP processes might reveal significant inefficiencies that accounts payable automation can easily address.

What should you look for from an AP automation solution?

When it comes to an AP automation solution for your business, it is important to consider many factors before making a decision. Some things you should consider are: 

  • A simple user interface for AP staff and approvers 
  • A partner who is versed in my ERP and other systems I need in my business 
  • Ensuring a payments technology system that is compatible with mobile and off-site teams 
  • A system that is seamless and scalable — both nationally and globally
  • Wholly owned and cloud-first technology platform
  • Issuing, compliance, and funding capabilities
  • Deep payments expertise in virtual card, chargebacks, and product usage
  • Broad network of accepting suppliers, and continuously adding more

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The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax and investment advisers.

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