7. Accounts Payable(AP) Automation

What is Accounts Payable Automation?

AP Automation is the use of software to automate part or all of the Accounts Payable process. It aims to create efficiency in accounts payable workflows by digitizing how supplier invoices are received, processed, and stored.

By eliminating manual processes and the need for paper-based systems, the automation of accounts payable could lead to fundamental changes in the way account departments operate. Invoices are received digitally, processed automatically, and stored centrally, reducing the risk of human error, and freeing up former time on laborious tasks.

AP Automation has revolutionized the way organizations manage the accounts payable process. The value brought by the adoption of payables automation is obvious which is why the market size is expected to reach $7.5 billion by 2030.

How does this work?

It is usually done through a dedicated software solution that is connected to an ERP system. It has the function of automating every step of the account payment process.

First, upon receipt of an invoice from a supplier, the AP automation software uses optical character recognition (OCR) or another form of the language processing system to extract information from the paper invoice or digital. Accurate to begin with, the feature only improves over time as machine learning helps the software recognize patterns and optimize accuracy.

Once invoice data is entered, details are automatically matched against existing purchase orders and invoices and sent digitally to the relevant team for approval. Once approved, payments can be made as usual. Finally, invoices are securely stored in a central repository, allowing easy access to approved stakeholders.

During the process, the trace of the invoice is recorded digitally with a date stamp. This allows for easy future AP testing, replacing arduous manual testing processes.

AP Automation Process

1. Supplier invoices are received in paper form or in a valid digital format (PDF)
2. If on paper, the invoice is manually scanned to create a digital copy
3. OCR technology is used to automatically extract all important data from digital invoices, including invoice amount, ledger code, and date.
4. Invoices are automatically matched to purchase orders and associated invoices (three-factor matching) are stored in the digital system
5. Following the established routing process, the invoice is forwarded to the relevant party for approval
6. Once approved, payment can be made as usual through the regular channel and the invoice will be marked as paid in the digital system.
7. Finally, invoices are stored digitally in the appropriate location, where anyone with access to a central repository can find the invoice.

Benefits

There is a good reason why accounts payable automation is being implemented by organizations of all types around the world: it has the potential to dramatically increase the efficiency and accuracy of the accounts payable process.

Here are some key tangible benefits of implementing an access point automation system:

Time-saving

Automating elements of the accounts payable process, such as data extraction and three-way matching, eliminates the need for too many human "touch points" and speeds up the entire functionality. This allows the AP department more time to devote to other value-creating activities.

More effective

Accounts payable automation software often integrates with other parts of the ERP, such as supplier information management systems and cash flow forecasting modules. Integration between these elements means that major gains in operational efficiency can be achieved, with more accurate data being shared between systems.

Increased Accuracy

Even the best AP parts make mistakes from time to time. Removes manual elements from the AP process, including extracting payment data, reducing the risk of human error, and reducing the risk of duplicate or fraudulent payments. Differences between supplier invoices and purchase orders can also be detected more accurately.

Cost reduction

As a by-product of reducing the need for manual intervention, hotspot automation helps hotspot departments reduce operational costs. It also avoids manual recordkeeping requirements, postage, and material costs (for paper bills), saving money elsewhere.

ESG improvements

Ultimately, reducing the need for paper invoices means organizations can take steps to achieve their ESG goals. The completely paperless account checkout process has its own benefits and implementing automation software is often the first step towards achieving them.

Bottom-line

Achieving the benefits of accounts payable automation is an ever more achievable goal. Invoicing automation software is designed to facilitate the transition to digital accounts payable management. It allows you to simplify the way you manage invoice processing, incentivize vendors to upload their own invoices and increase visibility into accounts payable.