A lot of the problems, issues, and mistakes that happen in accounts payable can be handled through automation. AP is essential for maintaining strong relationships with vendors and a positive cash flow which is why you should automate Accounts Payable.
It’s somewhat easy to overlook the importance of accounts payable until a significant problem arises.
Some of the common problems that occur in AP include:
Slow Processing
If your office is still relying on paper-based processes, consider the average number of desks each invoice is crossing before it’s approved for payment. Every time someone handles the paperwork, it increases the risk of errors and it’s slowing processing. When your processing time is slow, it leads to vendors who aren’t happy and late invoices.
Matching errors
When there are discrepancies between your purchase orders and your invoices and receiving reports, it leads to matching errors. If the matching error requires a manual investigation, this is the time taken away from your staff’s other work.
Payment before delivery
If an AP team is trying to stay ahead of things, they might make payments as soon as they get an invoice. Yes, there can be benefits to paying quickly, but not if you haven’t received your goods or services yet. If the shipment comes with missing or damaged items, it’s going to be a lot harder to fix the issue when you’ve already paid.
Double payments
There are a lot of particular errors that can lead to two invoices being issued. For example, if there’s a typo in one of your purchase orders, then two invoices might be generated, both for the same order. Duplicate payments can also come from human errors like not marking invoices as paid.
With these errors in mind, automation is one of the most important things you can do to improve accounts payable in your organization and handle different invoice types. The following are seven specific reasons to automate Accounts Payable.
1. Savings and Improved ROI
When you have a high payment volume, you’re probably using a lot of resources to do manual tasks. There are costs that come from manual accounts payable processes.
When you automate your AP process, you’ll be able to cut down on processing times, and the more you automate, the greater the ROI you’re going to see. Payment automation drives most of your ROI.
You can additionally see benefits from reducing the number of delayed payments your partners and vendors receive. Your team will be able to choose the right timing to pay your suppliers, freeing your working capital and also allowing the department to take advantage of early payment discounts.
2. Reduced Errors
There is a high volume of invoices that are being managed in AP, so it’s inherently prone to errors. If a supplier sends an invoice by mail and then a follow-up email, the invoice can get paid twice. Errors can raise the cost of doing business, impact your cash flow, and negatively affect relationships with vendors.
When you’re spending a lot of time on manual tasks and also errors, you’re not going to be able to focus on other strategic business issues or strategic initiatives.
It can take as long as two weeks to fully process invoices without automation, so automate your processes to eliminate this.
Any manual process still being relied on in a business is ultimately going to be prone to mistakes, along with being inefficient. Just a single wrong digit can create a major problem.
3. Facilitates Remote Work Environments
The modern work environment is often hybrid, meaning there’s a mix of working on and offsite going on. There are benefits of hybrid work from an employer and employee perspective, such as the fact that you can tap into better talent, and employees have more flexibility.
When you have remote workers in any capacity, it becomes a necessity to use automation and digital solutions. You want the experience for out-of-office employees to be the same as it is for in-office employees.
In hybrid or remote work environments, manual processes are no longer an option.
4. Increased Visibility
You have invoices coming from different locations and payments that need to be made to suppliers operating in varying locations as well.
You need to be able to keep track of everything. Automation provides visibility. Authorized employees have access to data they need when they need it.
Everyone who’s in the AP department will know when an issue comes up, and they’ll have the data to fix that issue readily available, regardless of physical location.
5. Improved Cash Flow Management
When you use automation in the form of AP software, your accounting team and management will have more command over your cash flow. This opens up opportunities to manage cash to your advantage.
You can easily create reports and review them in real time.
With AP automation, it’s possible to identify places where you can save money, and since you have improved visibility, this, in turn, means better forecasting.
When invoices are moving through the system, the AP automation platform will track each change and event, storing this information in a database.
6. Legal Compliance
There are reporting and tracking features that come with AP automation that can help with creating detailed audit trails.
Your audits become faster and cheaper with automation.
You can also maintain compliance more easily with state and federal regulations.
7. Improved Security and Fraud Protection
Scams and situations involving embezzlement can cost your company financially but also in terms of your reputation. When you automate AP processes, you can eliminate paper checks. Payments without the needed approvals are very unlikely to happen with automation.
With invoice controls, it’s almost impossible to double-pay an invoice.
If there is an instance of fraud, AP automation will alert the relevant stakeholders about what happened, how it happened, and who did it. You have a very deep level of insight with automation into who’s authorizing what payments and the verification steps they’re going through before they get approval.
The chances of fraud even happening are reduced, and if they do, you’ll be able to clearly see who the responsibility lies.