In today’s fast-paced business environment, it’s essential to streamline and optimize your company’s financial processes. One significant area of improvement is the accounts payable (AP) department, which often relies heavily on manual tasks and paperwork. By automating accounts payable processes, businesses can save time, reduce errors, and enhance relationships with vendors. This article will explore the top 10 ways automation can revolutionize your AP department and offer actionable tips to get started.
1. Embrace E-Invoicing
The Benefits of E-Invoicing
The first step to automating accounts payable is to transition exclusively to e-invoicing. By working with vendors and clients to process invoices electronically, you’ll reduce paper clutter in your office and decrease the risk of losing important documents. E-invoicing also facilitates the use of Optical Character Recognition (OCR) systems, which can recognize and categorize essential data fields in your invoices.
Implementing OCR Technology
OCR technology is a crucial element of AP automation. By capturing data from electronic invoices, OCR systems can expedite the entire AP process. This automation eliminates manual data entry, one of the most time-consuming and error-prone aspects of AP management. By storing the captured data in a smart spreadsheet or CSV file, you can easily analyze and investigate financial trends in the future.
2. Streamline Approvals
The Importance of Approval Processes
The approval process is a critical part of managing accounts payable. Each invoice must be reviewed and approved by the appropriate parties before payment, which can create bottlenecks and introduce errors. Automating the approval workflow can significantly enhance efficiency and reduce the risk of mistakes.
Creating an Automated AP Workflow
An automated accounts payable workflow can route each invoice to the relevant parties for approval. For example, an inventory invoice might first be sent to the person who initiated the purchase order, then to the department head, and finally to the CFO for approval. With an automated system, each individual will have access to clear data and an easy-to-complete approval process, which then moves seamlessly to the next approver. This approach eliminates lost paperwork and wasted time.
3. Eliminate Manual Data Entry
The Role of Data Entry in AP Processes
Data entry is a vital component of the AP process, as it allows for analysis and identification of financial trends. However, manual data entry is time-consuming and prone to errors. By automating data entry with OCR technology, companies can improve the accuracy and efficiency of their AP systems.
Leveraging Automation for Long-Term Benefits
Automating data entry offers advantages beyond the immediate AP process. By capturing and storing invoice data in an accessible format, such as a smart spreadsheet or CSV file, companies can facilitate future analysis and investigation. This automation allows for improved financial planning and strategic decision-making.
4. Enhance Invoice Matching and Verification
The Importance of Accurate Invoicing
Paying incorrect invoices can lead to financial losses and strained relationships with vendors. Matching and verifying each entry in your accounts payable ensures that you only pay for what you agreed upon and received, reducing the risk of overpayment or disputes.
Automated Invoice Matching
Accounts payable automation can help you quickly identify discrepancies in invoice totals, payment amounts, due dates, and price-per-item. By using OCR technology, automated invoice matching can locate invoice and purchase order numbers, match totals, and verify purchases. This process can also gather all related documents in one place, making it easier to spot inconsistencies and resolve issues.
5. Simplify Complex Coding
The Role of General Ledger (GL) Coding
GL coding is a critical aspect of accounts payable management, as it classifies each invoice with a range of values, such as vendor, amount, invoice category, product line, and more. This process can be time-consuming and error-prone when performed manually, presenting a significant challenge for AP teams.
Automating GL Coding
By automating GL coding, companies can streamline this essential process and reduce the risk of errors. As your OCR system processes data from each invoice, it can automatically apply GL codes to the necessary data points. This automation ensures that your financial data is well-organized and easily accessible for future analysis or tax preparation.
6. Utilize Smart Cards for Payments
The Advantages of Smart Cards
Many AP managers may be hesitant to move their AP spend to a card, fearing that it won’t allow for automatic categorization. However, smart cards like Divvy can categorize transactions with just a few taps from the spender. Additionally, virtual cards tied to expense management software can enable companies to float payments and improve cash flow flexibility.
Integrating Smart Cards with AP Automation
By using smart cards for vendor payments, finance teams can gain better control over their AP processes and streamline categorization. This approach also offers the added benefit of keeping cash in the company’s account until the payment is due, providing greater financial flexibility.
7. Expedite Invoice Processing
The Impact of Timely Payments
In the world of accounts payable, time is of the essence. Automation ensures that invoices are processed quickly, enabling businesses to make timely vendor payments and maintain strong relationships with their suppliers. Prompt payments also allow companies to take advantage of early payment discounts, further improving their bottom line.
Utilizing Artificial Intelligence for Invoice Processing
Artificial intelligence (AI) and machine learning can help modern AP software extract critical data from invoices and match them to purchase orders. By automating this process, companies can significantly reduce the time it takes to process and approve invoices, resulting in more efficient AP management.
8. Reduce Paperwork and Complexity
The Benefits of a Paperless AP System
By eliminating the need for paper records, AP automation can greatly reduce the complexity of invoice processing. Digital invoices can be automatically approved within minutes, streamlining the entire AP workflow. Cloud-native AP software can also detect duplicate invoices, automatically reject incorrect submissions, and route invoice mismatches for resolution.
Implementing Cloud-Based AP Software
To reap the benefits of a paperless AP system, companies should consider implementing cloud-based AP automation software. These platforms can offer easy-to-use and configurable dashboards, providing AP teams with a centralized location to manage their invoicing processes efficiently.
9. Enhance Fraud Prevention
The Importance of Payment Controls
Automating Accounts Payable software can enable advanced payment controls, reducing the risk of fraud and errors. For example, two-factor authentication requires payment approvers to enter secure codes sent to their mobile devices, ensuring that only authorized individuals can authorize a payment. Automation can also facilitate the segregation of duties, further minimizing the possibility of fraud.
Adopting AP Automation for Security
By implementing an AP automation platform with robust security features, companies can better protect their financial data and processes. This added layer of protection is essential for maintaining the integrity of your accounts payable system and safeguarding your business from potential fraud.
10. Improve Compliance and Auditing
Streamlining the Audit Process
Automating accounts payable can help companies maintain a comprehensive record of their invoice processing history, including information on when invoices were received, processed, and modified. This data can be invaluable for auditors, who can access real-time information and verify purchasing information more easily.
Enhancing Compliance with Automation
By processing invoices through a standardized, automated system, AP teams can achieve higher compliance with tax laws and industry regulations. Cross-functional visibility and collaboration between AP and procurement teams can also be improved, leading to more efficient and compliant financial processes.
Conclusion
Automating accounts payable processes can offer numerous benefits for businesses, including improved efficiency, reduced errors, and enhanced vendor relationships. By embracing e-invoicing, streamlining approvals, eliminating manual data entry, and utilizing artificial intelligence, companies can revolutionize their AP systems and drive significant value for their organization.