Accounts payable is the amount of money a business owes suppliers for the goods or services purchased on credit. You need to keep a healthy cash flow, have AP automation and maintain supplier relationships as a business. Achieving this can be challenging if you can’t keep up with any goals. It can even jeopardize your business and your relationship with your supplier or vendor. Here are a few common challenges of the accounts payable process:
Slow and Inefficient Processing
If the accounting process is manual, the accounts payable process will likely be slow. This results from lengthy approval time frames, manual data entry, and documents moving through different departments. It can result in falling behind payments, which can attract fines, penalties, and delayed shipments services. Slow payments may also hurt a business’ credit rating, further reducing its ability to obtain favorable credit terms from suppliers. AP automation speeds up the whole accounts payable process and makes it efficient.
Payment Errors
Matching error is a common challenge in manual accounts payable. To ensure payable invoices are correct, the personnel must perform a three-way matching. This involves checking that each payable invoice matches the purchase order making sure the goods or services were received. This model has frequent discrepancies, data entry errors, and incorrect billing, which are time-consuming to resolve.
Missing Invoices and Purchase Orders
In a manual accounts system, it’s too easy for invoices and purchase orders to disappear in a pile of paperwork. This can result in unpaid invoices, creating friction with suppliers, and even cause accounting problems such as missing expenses in current income statements.
Potential of Double Payment
Manual accounting systems are prone to duplicate payments because of duplicate data, inconsistent supplier information, or different invoice amounts. This can result in financial losses for the company.
Best Solution for Accounts Payable Process
The best solution for accounts payable is accounts payable automation or AP automation.
What Is Accounts Payable Automation?
Accounts payable (AP) process automation involves applying accounting software to minimize human intervention and eliminate errors from the process. There are different AP automation software that you can use to automate your invoice payments. This software supports the accounts payable workflow automation and automates the entire invoice-to-pay-to-reconciliation. The automation can wipe out up to 80% of manual accounts payable tasks and processes.
How to Use Accounts Payable Automation
In general, AP automation software converts invoices into a standard digital format and then pushes them through a digital AP workflow whose end is paying suppliers. In the beginning, AP automation utilizes optical character recognition (OCR) technology to extract information from the invoices. Many AP automation software uses machine learning to recognize invoice patterns over time and help improve accuracy. This helps to eliminate manual entries, invoice matching, coding invoices, and approval routing. If you want to understand AP automation better you can check out this AP automation guide. But remember accounts payable automation guides may differ based on each particular AP software.
Endnote
Accounting errors are usually costly and can tarnish a business. Investing in an accounts payable solution may seem like a large undertaking, but it’s reasonable to make the switch by looking at its cost-effectiveness. It will help reduce errors, double payments, matching codes and improve accounts payable efficiency to help a business thrive.
