Everything You Need to Know About AP Automation

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Thirty-one percent of businesses have automated accounts payable processes. Simply put, the vast majority of companies are still operating with a manual AP workflow.

Shifting away from a legacy payment process is inevitable. $22 trillion B2B US payments market is facing disruptive change due to the overwhelming increase of remote work.

An exceedingly high volume of invoices, paired with a dwindling accounting department—and a primarily analog process, drives a big desire to digitize. 

As a result, a business must automate the accounts payable process so it can elevate financial operations and efficiencies. 

Chapter 1: What is AP Automation & How is it Profitable for Finance Teams?

Companies using a digital payables platform can see up to 81% lower processing costs and 73% faster cycle times. 

Accounts payable automation helps an organization gather business intelligence from manual workflows. AP technology streamlines accounting operations. The technology plays a significant role in the optimization of financial systems and the cross-collaboration of teams. 

These applications help consolidate processes, save on costs, improve efficiency, and grant you a sharp competitive edge.

How Does Accounts Payable Automation Work?

Accounts payable automation works by converting paper invoices into a standard digital format, then pushes the invoices through a virtual workflow that culminates with paying suppliers. 

At the beginning of the invoice management process, AP automation software uses optical character recognition (OCR) to extract information from invoices digitally. 

Some AP systems employ machine learning to improve accuracy and recognize patterns over time. Artificial intelligence uses the experience to suggest specific ledger codes or approval routing. 

In most cases, AP teams eliminate the need for manual processes through custom business regulations. The elimination includes everything from approval hierarchies to PO matching and acceptable data variances. 

The accounting system manages all coding and routing of invoices through a digital workflow. 

Industries Using Automation

Any business benefits from automation, which has come a long way since its inception. The top industries that have scaled with artificial intelligence in finance include:

  • ​Healthcare
  • Law enforcement
  • Agriculture
  • Foodservice
  • Transportation
  • Manufacturing
  • Accommodation

Company Sizes With Automation

Companies use AP automation in different ways. Regardless of size, there is an accounts payable solution to fit every niche. Companies of all sizes benefit from solutions, including:

  • Microenterprise – 1 to 9 employees
  • Small Business – 10 to 49 employees
  • Medium-sized Business – 50 to 249 employees
  • Large Enterprise – 250 employees or more

Top Accounts Payable Tasks to Automate

Automation helps teams increase accuracy or cut processing times, leading to cost savings. 

Compared to manual data entry, accounts payable automation software significantly improves payables-related tasks like:

Invoice matching

Known as three-way PO matching, you can match invoices and supporting documents, such as purchase orders and shipping receipts. 

Data entry 

A primary time-consuming task in payment processes is manual data entry. A key benefit for businesses is to automate the data capture of all source documents. This paperless process is quicker and less prone to error.                

Coding invoices

AP automation increases the efficiency and functionality of approval workflows. It allows a business to establish rules that set the correct general ledger code for each invoice. 

Approval routing

When a business automates accounts payable, it facilitates approvals. AP automation enables electronic routing to all necessary approvers in the invoice processing cycle. 

Accounts Payable Automation Increases Profitability

There are many reasons why automating the procurement process is a good idea. One of the top benefits is improving company profitability. When a CFO integrates AP software with the right team, expect benefits like:

Transparency and visibility

The more visible a business is with processes, the more a company gains brand trust. 

Invoice automation software helps a company establish clear communication channels. Employees and vendors gain access to invoice data like:

  • Invoice status
  • Payments
  • Purchase orders

AP automation helps to reduce the risk of fraud significantly, including in-depth reporting on the flow of invoices and transactions across the entire network. 

Streamline processes

AP software streamlines the end-to-end accounts payable process, including everything from managing invoices to processing outbound payments. 

Improved accuracy and efficiency

Applying automation improves accuracy and efficiency. It eliminates bottlenecks and identifies data inconsistencies at an early stage. Enhanced efficiency contributes to better business relationships with vendors and partners. 

Minimize costs

AP automation reduces paper usage and processing time. Additionally, AP automation reduces errors and improves the quality of financial data. Faster processing means fewer late payments. A business can even take advantage of early payment discounts with some vendors.

Enhance performance

Setting and re-visiting key performance indicators (KPIs) is an easier task with AP automation. It’s nearly impossible to track KPIs and cash flow through a manual system. 

AP staff can spend more time on value-added tasks like dispute management or innovating business growth. 

Developing Supplier Relationships

Automation software enables AP to focus more on building supplier relationships. Automation helps to negotiate lower prices, product discounts, and forgiveness when making late payments.

Audit Trail

The AP process is subject to a variety of audit and compliance regulations. Automation software helps a business keep tabs on all compliance requirements. This type of technology also helps a business set up a robust audit trail