The accounts payable process is often perceived as a cycle of making payments to vendors and tracking them throughout the month until they are repaid. This is how traditional accounts payables are completed. However, there are many advantages of companies adopting an automation system to process their monthly financial transactions.
Sure, both of these accounts payable processes have lots in common. Both are about getting the right checks into the right hands. But there are plenty of differences as well.
And if you want to understand how accounts payable automation works differently than traditional payables, you need to compare the two processes closely. That’s what we’ll do here, kind of like a blog post version of dueling banjos!
Problem — The traditional accounts payable process is manual, involves paper, and often requires multiple people
The accounts payable process is a necessary evil. It’s a necessary evil because we have to pay our bills on time. But it’s an evil because it’s time-consuming, tedious, and requires multiple people to complete the process when done traditionally.
You might have one person who enters invoices into your system, another who approves them, and someone else who issues the check. Sometimes, you may even have a separate department to manage accounts payable.
Automated accounts payable software streamlines this process by automating many of the manual steps involved, allowing you to spend less time on administrative work and more time growing your business.
Solution with AP Automation — Accounts payable automation is handled electronically by a piece of software
With accounts payable automation, you don’t need to send out bills or checks to vendors or suppliers. Instead, the program will automatically process invoices and issue payments after they’ve been approved.
The software collects all relevant information, such as invoices, purchase orders, and receipts, and automatically applies the information to the accounts payable ledger. It’s much more efficient than traditional methods because it cuts down on paper and manual labor.
The software may be cloud-based, meaning it can be accessed from any computer or device with an internet connection. Accounts payable automation systems are typically used by businesses with more than one employee who needs access to accounts payable transactions and data.
Now, having your entire AP process handled by sophisticated software comes with some benefits, including:
- Centralized database
- Single source of truth for all financial data
- Audit trail
- Elimination of post-payment costs
Problem — Traditional processes require time-consuming data entry
Traditionally, AP departments are required to enter invoice payments into their ERP system manually. This means that you need someone with accounting knowledge in your organization who has access to the information systems necessary to enter each payment. In addition, these individuals must also be able to access and update purchase orders, invoices, and other documents associated with your AP processes.
Although some organizations may use Excel spreadsheets or other tools for these tasks, these tools aren’t designed for large-scale operations like those found within an AP department. These tools also don’t provide any automation capabilities — they’re simply used to store data temporarily before it’s manually entered into another system.
This process is time-consuming and prone to errors. It also requires employees to spend time every day collecting and entering information into the system, which they could be spending on more productive tasks.
Solution with AP Automation —Automation allows documents to be scanned and converted into readable files without data entry
Traditional processes require time-consuming data entry, manual reconciliation, and workarounds that add cost and complexity.
Accounts payable automation can simplify your process by automating the entire process from invoice receipt to payment.
New automation technology is transforming how companies process accounts payable. Automated processes are helping businesses capture more accurate data and make faster payments, ultimately reducing their risk exposure.
Automation is key to improving the efficiency and effectiveness of your business’s accounts payable function — but it’s not just about getting rid of manual data entry or speeding up your AP process. Automation offers real benefits beyond the obvious ones, like faster payments and fewer errors.
Once your organization has implemented an automated system, you can expect to see faster payment processing, fewer errors, and more consistent compliance with vendor terms and conditions.
Problem — Manual data entry results in more mistakes and inaccuracies during the accounts payable process
Manual data entry is prone to mistakes and inaccuracies because it involves many different parties and departments.
For example, if you have 100 vendors with the same name but different addresses, the manual process requires the same information to be entered into the system multiple times.
If you’re not double-checking each invoice before entering it, there’s a good chance you’ll make mistakes when entering the invoice into your system or even on the invoice itself. For example, if an invoice has been entered for $100, but it was actually for $200, you’ll end up paying $200 instead of $100 — and then have to try to get the money back later.
This can cause many problems, like:
- Missing invoices: It’s also possible that your system won’t pick up a missing invoice because it wasn’t entered correctly in the first place. This can cause delays in getting paid and result in late fees or penalties being applied to your account.
- Inaccurate payment dates: If your system isn’t set up correctly, it might not be able to process payments on time because they were entered incorrectly or the wrong dates were used when entering them into the system (for example, if you entered an invoice as being due on January 1st but it actually should have been due on January 5th).
Solution with AP Automation — Automation lessens the risk of mistakes because it automatically populates specific fields within an invoice or purchase order
Many companies are turning to accounts payable automation solutions to streamline their processes and save time and money, which makes it easier to track expenses, pay vendors, and manage cash flow.
This ensures that data is complete and accurate before being sent to an accounts payable clerk, who then has to check it manually (if they even have time). Once approved, the payment can automatically be issued without human intervention or error.
For example, if you want to pay for a purchase order that includes several line items for different amounts, you can designate which fields represent each item. The automation takes care of the rest by automatically filling in all these fields with the correct information from your spreadsheet.
Section: Companies that use manual processes need people to do that work
The accounts payable process is a key part of the larger operational cycle and can be one of the most time-consuming and costly processes for companies.
These companies also need to pay those people, which means they must keep track of who’s doing what, and when they’re getting paid. And, as you might imagine, this can get complicated pretty quickly.
Accounts payable is one of the oldest departments in a business. It’s been around for hundreds of years, but it hasn’t always been a smooth process. In fact, accounts payable was originally a paper-based system that required manual data entry and processing.
For example, let’s say you have a business with 100 employees who work in different departments throughout your organization (across marketing, accounting, sales, and operations). You want to pay them all at once by electronic check or direct deposit into their bank account. If your company only has one employee who handles all payroll tasks manually (which is common), then this process could take several hours each week because they need to:
- Gather all employee information from various sources such as Excel spreadsheets or paper files
- Enter each employee’s information into the payroll system manually
- Print out checks or deposit slips for each employee
As technology has become advanced and more affordable, businesses have started using accounts payable automation software to streamline this process and make it much more efficient.
Automating accounts payable can save your business time, money, and effort
With automation, there’s no need to hire people to do the work that AP software can do for you or pay overtime for the work that needs to be done on a tight deadline. Automating AP also makes it easier for companies to track their spending and prevent overspending on items like travel expenses or equipment purchases.
When it comes to accounts payable automation, there are two main ways that businesses can go about it:
- Automation through an AP system – This is a software solution that plugs into your existing ERP system and handles much of the process of paying vendors and suppliers on behalf of your company. It will also handle invoice validation, reconciliation, and payment processing requirements.
- Automation through a vendor – There are also companies who offer an outsourced option where they take care of all aspects of their client’s accounts payable processes, including invoice verification, reconciliation, and payment processing requirements.
Takeaway — Automating your accounts payable process is the way to go!
The accounts payable process is one of the fastest-growing areas of automation in the enterprise. The primary reason for this is simple: it’s a significant cost center for most businesses, and automating it can help you save money.
So, if you’re thinking of going all in with AP automation software in your workplace, you need to choose from the following categories:
- Payables automation software — This software automates the entire accounts-payable process, from invoice generation through approval, payment, and reporting.
- Accounts payable automation solutions — These are solutions that automate some aspects of the accounts-payable process but not all. For example, an AP automation solution might generate an invoice but require you to enter data manually into fields such as purchase order number or supplier name.
- Payables automation tools — These are tools that automate only one aspect of an invoice or purchase order — for example, they might let you generate a purchase order online. Still, they don’t integrate with other systems such as ERP or accounting software.
From what we’ve seen and heard, many businesses have chosen to automate their business processes, ranging from marketing to payroll. Businesses everywhere are always looking for ways to reduce costs; automating business functions can help organizations do just that.
Of course, it’s up to you which is the best option and which makes the most sense for your organization. As we’ve seen, many benefits go along with using AP automation software. Hopefully, this article has made AP automation a more attractive option for your business. Make sure to carry out due diligence before investing in an AP automation software for your business.