Choosing the best accounts payable automation software starts with identifying your company’s unique needs. The scope of your accounts payable (AP) landscape, the size of your company, and system dependencies will all impact which AP software is best for your company. Check out our Ultimate Guide on AP Automation to learn more.
Your primary goal for deploying accounts payable automation software is to increase efficiency, save money, and improve the business-to-business (B2B) payment workflow. All of this translates into better vendor relationships and higher profit margins.
Tips for Choosing the Best Accounts Payable Automation Software
Read on to learn more about choosing the best AP automation software.
1. Define Your AP Landscape
To define your AP landscape, it’s imperative to understand the intricacies involved in invoice processing. How does your company receive invoices? Paper, XML, PDF? Do you receive some invoices on paper while receiving others in PDF format via email? An AP automation software worth investing in will allow you to receive supplier invoices in a variety of formats and will support turning them into digital copies through built-in optical character recognition (OCR) scanning.
Defining your AP landscape also consists of outlining your invoice workflow. The goal is to speed up processing time by automating manual tasks, particularly the repetitive and tedious ones. Ask any AP department employee and they will quickly attest to the importance of properly processing invoices. For example: When expense invoices aren’t coded and distributed correctly, this hinders the approval and payment process. When purchase order (PO) invoices aren’t matched according to their specific line levels, this makes it nearly impossible to pinpoint deviations and mitigate errors. More importantly, it makes it difficult to pay vendors and suppliers on time.
Accounts payable automation software worth purchasing will automate coding and matching. It will integrate with your existing enterprise resource planning (ERP) and finance systems to deliver touchless invoice processing. To ensure that you choose the right software, consider how it will be configured to support your current workflows.
2. Map Your AP Invoice Process
Defining the AP landscape involves mapping the AP invoice process. There’s a good chance the process is comprised of two separate workflows: processing expense invoices that aren’t related to POs and processing ones that are. You’ll need to identify your pain points in both of these workflows to ensure that you find the most helpful AP automation software. You can deploy software with all of the bells and whistles, but if those features don’t address your unique needs, your investment is going to be ill spent.
The first step in mapping the AP invoice workflow is identifying how you handle non-PO related expense invoices and PO-related direct spend invoices. Which steps are repetitive? Which ones are manual? Do you already have some steps that are automated? Where do bottlenecks occur? What type of invoice archiving are you using?
Here’s a list of common pain points:
- Invoices where pertinent line data isn’t synced between systems;
- Invoice data deviations;
- Lack of a central inbox for sending vendor invoices;
- Too many people involved in invoice processing;
- Human error due to manual invoice processing;
- Invoice processing delays due to clunky AP systems.
Identifying your pain points and AP challenges allow you to intelligently move forward in choosing the best accounts payable automation software.
3. Look for Centralized Information Management
It becomes difficult to keep track of all of your invoices when they aren’t managed in a central location. AP automation software worth investing in will ensure that all invoice elements are stored and processed in a centralized location, including the receiving of invoice receipts, extraction of data, and validation of data. Software should make it possible for the entire AP department to collaborate through an online, centralized platform even if they are working from different offices; this is particularly advantageous if you have multiple business locations.
4. Opt for Automated Tax Form Collection
Have you ever spent hours looking for a vendor’s specific tax ID number? Collecting and managing tax information becomes a major headache when AP processes are not automated, especially when working with global suppliers. You must pay close attention to detail in order to stay in compliance with regulations and rules set forth by the Office of Foreign Asset Control and the Foreign Account Tax Compliance Act. You may need to collect everything from W-8EXP, W-8BEN, and W-8IMY forms from suppliers. Tax and regulatory compliance become much simpler when you deploy AP software that features automated tax form collection.
5. Consider Your Workflow Rules
Achieve the highest level of AP efficiency by choosing software that allows you to define workflow rules. These rules lessen the likelihood of employees completing the same task twice, like making a double payment on an invoice.
Defining workflow rules involves setting tolerance ranges, such as those directed toward PO matching. These ranges can be customized to align with your company’s precise needs. For example: If an invoice and PO can’t be matched using OCR scanning according to your set tolerance thresholds, the software can ping the appropriate entity for approval. This leads to a faster procure-to-pay cycle, which is vital to establishing positive long-term relationships with suppliers.
6. The Cloud Is the Way to Go
Installing an on-premise accounts payable automation software solution means you’ll need to deploy your own servers and perform your own system configurations. Stack these tasks on top of your existing AP landscape and you’ll create a time-consuming and costly AP environment. Choosing AP automation software that operates via the cloud is a smart business decision and still allows you to create a strong internal AP framework.
Cloud AP software can be configured to support your existing AP infrastructure and can scale on an as-needed basis. These software programs typically come with advanced analytics and metrics, easily allowing you to determine which AP processes are hindering efficiency and which ones are improving it.
Common key performance indicators you’ll want to measure include:
- Percentage of invoices received versus the number of invoices being processed within a certain period of time;
- Average cost of processing each invoice;
- Invoice cycle time;
- Percentage of incorrect payments versus the percentage of total payments;
- Percentage of early payment discounts versus the percentage of discounts offered.
Today’s accounts payable software solutions are designed to take advantage of artificial intelligence and machine learning, which yield great benefits. You’ll enjoy increased B2B payment efficiency, enhanced ERP, and lower levels of fraudulent activity.