Credits (1)

Automate Accounts Payable in 3 Simple Steps

Automate Accounts Payable in 3 Simple Steps

The Challenges of Manual Accounts Payable Processes

Manually managing accounts payable is tedious and time-consuming, requiring a good chunk of an accounts payable clerk's day spent on data entry of invoices into the accounting system. All that repetitive manual work also inevitably leads to more input errors that then need to be caught and corrected.

Without automated workflows, it can be difficult to track the status of invoices at various stages of approval. Paper invoices can literally get lost on someone's desk. The lack of visibility leads to invoices being paid late, resulting in missed early payment discounts and damaged supplier relationships.

There is also limited visibility into spending without digital capture and analysis of invoice data. It is hard to get a birds eye view of expenditures or do any kind of spend analysis with a manual accounts payable system. The data is fragmented across paper invoices making it difficult to extract insights.

Goals of Automating Accounts Payable

Manual accounts payable processes are mired in paperwork, data entry, and repetitive tasks. While essential back-office functions, AP tasks like matching invoices, approving payments, and reconciling accounts demand significant staff time and resources. As a result, AP departments struggle with:

  • High processing costs
  • Duplicate and lost invoices
  • Missed payment deadlines and terms
  • Limited visibility into spend
  • Poor supplier relationships

Automating the accounts payable process aims to streamline these inefficient and error-prone manual workflows. Key goals of AP automation include:

  • Reduce data entry and manual work - LedgerBox's OCR technology and electronic invoicing eliminate labor-intensive data entry of invoice information. Workflows are automated based on rules and require less manual intervention. Staff are freed from repetitive tasks to focus on value-add exceptions and reconciliation.

  • Minimize errors - Automated matching and reconciliation minimize human data entry errors. Invoice, PO, and contract data are digitally captured to avoid mismatches. Errors and exceptions are flagged for rapid resolution.

  • Quicker processing and payment - Digital workflows accelerate the posting, approval, reconciliation and payment of invoices. Invoices are paid on time or early to capture discounts and avoid penalties.

  • Better spend visibility and control - Centralized invoice data provides real-time visibility and insights into AP spend by supplier, category, project, etc. This informs better spending decisions.

  • Improve supplier relationships - Suppliers benefit from timely, accurate payments and can check invoice status online. This strengthens the procurement-payables process. Self-service options reduce supplier inquiries.

By streamlining manual efforts, AP automation delivers significant efficiency gains, cost savings, and process improvements. Staff are empowered to focus on more strategic financial tasks.

Digitizing and Capturing Invoices

Digitizing and capturing invoices is a critical first step in automating accounts payable. This involves transitioning from paper to digital formats and extracting data from invoices automatically.

Scanning Paper Invoices

Most organizations receive a mix of paper and digital invoices. Scanning paper invoices is essential for digitization. Advanced AP automation solutions have built-in scanning capabilities or integrations with multi-function printers and mobile scanning apps. This allows AP staff to quickly scan batches of invoices into digital formats.

Receiving E-Invoices

Receiving invoices in electronic formats like PDFs and EDI accelerate digitization. Leading AP automation platforms have supplier portals that allow vendors to directly submit e-invoices. E-invoicing adoption is increasing globally, which further enables the transition to touchless invoice processing.

Extracting Data Automatically

Once invoices are in digital formats, optical character recognition (OCR) and intelligent data extraction can be used to automatically capture invoice data. This includes supplier details, invoice numbers, dates, line item data, totals, and more. Automated data extraction eliminates tedious and error-prone manual data entry.

Reducing Manual Data Entry

By scanning paper invoices and receiving e-invoices, organizations can minimize manual data entry. Automated data capture with OCR further reduces the need for invoice data to be manually entered into ERPs. This results in faster invoice processing, fewer data errors, and significant time savings for AP teams.

Automated Routing and Approval Workflows

Manually routing invoices for approval is extremely inefficient. With automated workflows, you can configure business rules to automatically route invoices to the right people for approval based on any data in the invoice.

For example, you can route:

  • Invoices over $5,000 to the CFO for approval
  • Invoices for certain cost centers to the department manager
  • Invoices matching certain keywords to the legal team

Invoices can be automatically emailed to each approver, or approvers can simply log in to an online portal to view and approve invoices. Approvals can be done with just a click rather than printing, signing, scanning and emailing paperwork.

The system handles all the routing so you don't have to track people down or follow up on approvals. You can set deadlines and escalation rules to keep the process moving.

Any invoices that don't match the standard approval rules can be flagged for exceptions handling. These one-off invoices may require special approval, so the right person is notified to manually review it.

Automated workflows eliminate slow, error-prone manual routing steps while ensuring the right people approve invoices based on your unique business rules. This speeds up the approval process significantly.

Seamless ERP Integration

Automating accounts payable should integrate seamlessly with your existing ERP system rather than operate as a separate silo. This enables smooth, real-time syncing of invoice and payment data between the AP solution and your accounting system.

Key aspects of ERP integration include:

  • Automatic syncing of vendor, invoice, and payment data between the AP system and ERP. This eliminates duplicate data entry and ensures the ERP always has the latest information.

  • When an invoice is approved in the AP system, it is automatically updated in the ERP as well. This keeps everything reconciled in real-time.

  • As payments are made in accounts payable, the corresponding vendor and general ledger accounts are automatically updated in the ERP. This maintains symmetry across both systems.

  • Standard connectors make integration seamless with major ERPs like SAP, Oracle, Microsoft Dynamics, and more.

Overall, tight ERP integration enables the AP automation solution to operate as an extension of your existing accounting system. This streamlines operations, reduces manual work, and provides real-time visibility and accuracy across procure-to-pay.

Supplier Management and Self-Service

Supplier management and self-service capabilities allow suppliers to directly interact with your automated AP system. This improves visibility, communication, and efficiency on both sides of the transaction.

Key features of supplier management include:

  • Supplier portal - Suppliers can log into a portal to check the status of invoices and payments. This allows them to see when an invoice is received, approved, scheduled for payment, and paid without having to contact your AP team.

  • Visibility into payments - The portal gives suppliers real-time visibility into scheduled payments. They can see payment dates, amounts, and remittance details. This improves cash flow forecasting.

  • Submitting invoices digitally - Suppliers can upload invoice PDFs directly through the portal. This allows for touchless invoice receipt and cuts down on data entry. Suppliers also get immediate confirmation when the invoice is received.

By providing supplier self-service, you enable suppliers to get answers to their questions around the clock. This reduces inquiries to your AP staff and improves supplier relationships. Digitally submitting invoices also accelerates the process on your end. Overall, supplier management capabilities create efficiencies on both sides of the transaction.

Automated Reconciliation and Payment

Automating the reconciliation and payment process is a major benefit of accounts payable automation. The system can match invoices, purchase orders, and receipts through 2-way or 3-way matching to ensure accuracy before approving payments.

The software allows you to set up rules for payment scheduling. You can configure it to pay invoices automatically on their due dates or schedule multiple payments on set dates each month. This prevents late payments and improves vendor relationships.

For making payments, the system can integrate with your bank for ACH transfers or set up virtual card payments. Virtual cards allow you to make payments by generating a unique card number for each invoice. This is more secure than storing supplier bank details within your system.

ACH electronic payments or virtual card payments mean you can skip printing and mailing paper checks. This speeds up the payment process, lowers costs, and reduces the risk of fraud.

Overall, automating reconciliation and payment provides major efficiency gains over manual processes. Invoice matching ensures accuracy, scheduled payments prevent late fees, and electronic payment methods streamline supplier payments. This improves compliance, cash flow management, and vendor satisfaction.

Analytics and Reporting

AP automation solutions come with robust reporting and analytics capabilities that provide real-time visibility into cash flow, spending, and other key metrics. With customized AP dashboards and KPI tracking, finance teams can identify bottlenecks, spending trends, and opportunities for cost savings.

Key reporting features of AP automation include:

  • AP Dashboards - Real-time dashboards provide at-a-glance views of pending approvals, aging invoices, cash flow forecasts, and other critical AP metrics. Users can drill down into reports and tailor dashboards to their role.

  • Spend Analysis - Detailed reporting on spend by supplier, product category, project, department, and other variables helps identify opportunities for sourcing improvements, discounted pricing, and cutting unnecessary expenses.

  • Savings Opportunities - Analytics can pinpoint duplicate payments, overpayments, and fraudulent transactions, enabling AP teams to capture lost savings. Reports can also match invoices to contracts to ensure proper pricing and terms.

  • Forecasting - Cash flow reporting provides clear visibility into upcoming payments, helping treasury and finance teams better predict funding requirements.

  • Auditing - Complete audit trails, version histories, and reports support compliance with financial regulations and accounting standards.

In summary, AP automation equips finance teams with the data and insights they need to continuously monitor and optimize the payables process. Robust analytics and reporting represent a major advantage over manual AP workflows.

Implementation Best Practices

A successful AP automation implementation requires careful planning and execution. Here are some best practices to follow:

  • Secure executive sponsorship - Get buy-in and support from senior leadership. Assign an executive sponsor to champion the project and allocate resources.

  • Assemble a cross-functional team - Include representatives from IT, Finance, Accounting, and business units. Different perspectives lead to a more well-rounded solution.

  • Conduct training and change management - User adoption is critical. Provide extensive training on the new system. Communicate changes clearly. Involve employees in the process. Offer support during the transition.

  • Start with a pilot - Roll out automation to a smaller group first. Work out any issues before company-wide deployment.

  • Customize the workflow - Configure the approval workflows and rules to match your existing processes. Automate as much as possible.

  • Integrate with ERP - Ensure data flows smoothly between the AP software and your accounting/ERP system. Handle interfaces and mappings.

  • Clean up data - Review supplier records and invoices to identify any errors or inconsistencies. Data quality is key.

  • Define metrics and goals - Determine KPIs to measure. Set targets for efficiency, processing times, and cost savings.

  • Continuous improvement - Refine and enhance the system even after go-live. Optimize and expand over time.

Following best practices will lead to a successful implementation and drive adoption across the organization. Investing time upfront results in a smooth transition with rapid ROI.

The Benefits of AP Automation

Automating accounts payable can provide numerous benefits for an organization. By eliminating manual processes, AP automation can help reduce costs, improve efficiency, enhance controls and visibility, and strengthen supplier relationships.

Reduced Costs

AP automation reduces the costs associated with manual invoice processing in several ways. It eliminates the need for paper and postage to mail invoices. It also reduces the staff time required for data entry, filing, and physically handling invoices. Automation removes the need for storage space and supplies. Studies estimate that manual invoice processing can cost $5-10 per invoice, while automated AP slashes that to $0.25-2 per invoice.

Improved Efficiency

Automating the approval workflow and routing of invoices speeds up the entire process. Invoice approvals that once took days or weeks can happen instantly with preset automation rules. Payments go out faster, preventing late fees and benefiting supplier relationships. Staff are freed from mundane AP tasks to focus on more strategic work. Automation also improves accuracy by reducing manual errors.

Better Controls and Compliance

AP automation implements approval rules, exceptions reporting, and audit trails right within the defined workflows. Access and permissions settings control who can view and approve invoices. This improves internal controls and compliance with accounting regulations. Many solutions integrate with ERP systems to enforce business rules and prevent duplicate invoice processing.

Increased Visibility

With automation, AP data flows into centralized systems and dashboards provide real-time visibility. Managers can view AP analytics to spot spending trends, identify root causes of bottlenecks, and optimize workflows. Real-time visibility enables data-driven decision making to help containing costs and improving efficiency.

Enhanced Supplier Relationships

Suppliers benefit from timely, accurate payments and instant visibility into invoice status. Automated AP also enables supplier self-service portals for uploading invoices and managing orders. Stronger supplier relationships improve contract negotiation, cash flow management, and continuity of supply.

See all postsSee all posts