Accounts Payable (AP) Automation utilizes technology to automate routine vendor invoice tasks, from receiving an invoice to payments and reconciliation. As companies grow, manual accounts payable processes become inefficient and increasingly prone to errors. Manual processes involve:
- Working through paper invoices and emails.
- Entering them into accounting systems.
- Reaching out to internal stakeholders for approval, printing, and mailing checks.
- Sending ACH instructions.
This process opens the company to errors, payment delays, and fraud, with downstream impacts like impaired cash flows, strained vendor relationships, and higher costs.
What is Accounts Payable Automation?
Accounts Payable Automation software helps businesses streamline their payables process and help make it more efficient and accurate by significantly reducing manual efforts and minimizing errors.
Challenges with Manual Accounts Payable
1. Manual data entry: Entering vendor invoice details manually increases the possibility of errors, and attempts to find and rectify the mistakes can lead to delays in processing. If not detected, these errors can also result in incorrect payments, negatively impacting the business’s cash flow and profitability.
2. Matching and reconciliation errors: Accounts payable departments typically perform a 3-way reconciliation between invoices, purchase orders, and receipts. This ensures that payments are being processed for goods or services received. Handling data entry errors, missing information, and exceptions in manual reconciliation processes is time-consuming and results in frequent discrepancies.
3. Approval and payment delays: As businesses scale, internal processes to control spending become increasingly more complex. When multiple stakeholders are involved in invoice and payment approvals, and accounting teams are required to send invoices and follow-ups by email, delays in approvals and payments occur frequently.
4. Difficulty tracking invoices: Handling an increasing volume of vendor invoices and purchase records results in higher storage costs and difficulty tracking invoices. This can negatively impact supplier relationships due to delayed payments or misplaced invoices. The problem in retrieving purchase records makes month-end or year-end reconciliations more challenging.
5. Incorrect payments: Inadequate controls with manual processes may result in payments being made for unauthorized purchases. Inconsistencies in invoice information captured during data entry, like incorrect vendor information or invoice amounts, can also result in duplicate or overpayment of invoices.
Benefits of Accounts Payable Automation
1. Minimize human errors in the accounting or payments process that create bottlenecks in the productivity of teams or lead to incorrect payouts. Automating the majority of the accounts payable processes eliminates such errors caused by manual interventions and enhances accuracy.
2. Enhanced efficiency: By curtailing manual interventions, Accounts Payable automation helps expedite the payables workflow. The software helps improve the turnaround time of reviewing and approving pending invoices by 10x.
3. Lower Costs: An accounts payable software provides tangible cost benefits through reduced labor and overhead costs that come with manual and paper-based invoice processing. It also saves valuable resources by preventing human errors.
4. Fraud prevention: Automation software ensures the legitimacy of incoming invoices by continuously monitoring transactions, highlighting duplicate invoices, unknown vendors, or anomalies in spend.
5. Simplified compliance: Comprehensive audit trails, role-based access rights, and other enterprise-grade security features help make audit and compliance efforts more manageable.
Selecting the Right Accounts Payable Automation Software
1. Understanding business requirements: The first step in selecting accounts payable software for your business is to assess your current AP practices and document your software requirements. A few considerations to remember are integrations with accounting systems and support for multiple payment modes, which may be specific to your business processes.
2. Vendor Evaluation and Selection: Before selecting software, you need to examine each vendor’s features, costs, and implementation approach. It would help to understand how simple software is to use and how much training would be required for your employees. Does it facilitate more accessible communication between your business and your vendors? Does it simplify the onboarding process for new vendors?
Accounts payable automation software needs to provide a business with long-lasting value and aid in achieving operational efficiency. ClearTech’s AP software automates your processes to help you save time and money. With near-100% data extraction accuracy, it eliminates manual entry and automates approval workflows. With pre-built integrations for popular accounting systems like NetSuite, QuickBooks, Sage, and Microsoft, it syncs all the relevant data to keep your financial records accurate and up-to-date.
