Accounts Payable Automation: Adoption, Challenges & Best Practices

The accounts payable process can be plagued with problems, but oftentimes, it’s hard to pinpoint exactly what those are. There are so many ways to throw a stick in the spokes of an AP workflow, and when it comes to a screeching halt, everyone suffers. That’s why it’s so important to understand the key challenges faced with today’s AP operations, so they can be addressed, and effective solutions put in place. That all starts with looking at manual processes and how to streamline them.

Studies show that only 24% of businesses that manually process fewer than 20,000 payments per year, pay all of their purchase order-based invoices on time, and only 25% that manually process between 20,000-100,000 payments per year, pay theirs on time. Those numbers show that time-consuming manual tasks are bogging down the entire finance team and resulting in late payments.

If your business is considering switching from manual invoice processing to accounts payable automation, the move can cut costs up to 90% for processing invoices. However, organizations may shy away from the move due to concerns about lost revenue, productivity, change management, and mistakes in implementation.

It’s time to put your fears aside and realize AP automation offers a host of benefits from time and cost savings to convenience, transparency, accuracy, and much more. In this article, we’ll take a closer look at what exactly AP automation is, best practices for getting started, how to navigate the automation landscape, and choosing a system that works for your business.

What is Accounts Payable Automation?

So, what is AP automation? This is a means of minimizing manual processes and eliminating human error from accounts payable by digitizing tasks and collecting invoice data. Invoice automation is accomplished by using accounts payable software that is integrated with an online payment network; connecting all trade partners virtually.

AP software empowers companies by reducing manual tasks and freeing up cash flow. Submit invoices, manage invoice approval, and process payments—all in a single platform. This not only provides better visibility and control over important financial processes, it leads to a higher rate of accuracy, a greater rate of employee retention, and happier vendors.

5 Best Practices for Making the Leap to AP Automation

When switching from manual to process automation, it’s easy to overlook the implementation project, but it can prove to be the most important step in ensuring your system runs up to par. The length of time it takes to set up a system relies on a variety of factors like the size of your operations, the payable team, legacy programs, staff skills, and more. Sometimes it takes months, and other solutions happen within days.

However, do not be overwhelmed. This setup isn’t as complex as it seems, as long as you’re prepared. Although it’s understandable making changes to the procurement process can get complicated, here are a few best practices to keep your implementation in line:

1. Investigate Current AP Processes 

Your current challenges serve as the focal point for implementing AP solutions. For example, a business function that seeks more invoice data might implement tools to gain instant access. On the other hand, a company that has a sluggish approval process might seek automatic invoice matching features.

Consider bottlenecks in your workflow and align those with business goals to gain some quick wins before starting the implementation process.

2. Get Key Stakeholders Onboard

Gaining approval and getting buy-in are two very different beasts. People may love your idea, but hate paying for it. Key stakeholders need to understand not just the “how,” but the “why.” When everyone from the CFO to AP staff and team leads understands how the shift will increase productivity and visibility, you’ll see a greater level of success.

Sometimes it also takes explaining the benefits of AP automation by role, and how it can positively affect everyone’s work, to gain your biggest supporters.

3. Establish a Project Leader

Someone (or a team) should be in charge of the change management surrounding the implementation of an automated system. Who is responsible for overseeing the process? Depending on the size of your business, team liaisons and points of contact can help reduce repetitive communications.

4. Select the Right Provider

Whether you desire e-invoicing, reconciliation, or approval automation, understanding your top challenges and business needs will point you in the right direction. Also, consider automation goals and long-term business objectives before deciding on the perfect provider.

5. Create an Implementation Strategy

How will the implementation take place and roll out? Will the provider be involved in training, onboarding, or any other means? Depending on company size, an implementation may begin with a setup call or a separate internal meeting for invoice approvers.

How to Choose the Best Provider for Your Business

Just like any other software solution, there are hundreds of AP automation tools to choose from. This makes the provider selection process a somewhat daunting task. How will you know exactly who is the best fit? Luckily, there are a few factors you can keep in mind when choosing an AP automation tool:

Cost

This is listed first because if something is out of your budget, there’s no use going any further. Price matters. However, you do need to be careful about your cost comparisons. The cheapest solution may limit data storage or restrict access, so it’s critical you also consider business needs when looking at prices and plans. There may also be hidden fees and processing costs. If you want the most accurate price, ask the brand for a custom quote.

Integration

There are some tools that focus solely on automation. However, depending on your existing software, you may be looking for a more comprehensive suite.

If you choose a simple point solution, you will need to make sure it is capable of integrating with the legacy systems already in place, including ERP integrations. Also check whether the software integrates with custom development, as well as the level of maintenance required (cost and who does it).

Security

Make sure the solution you choose reduces the risk of fraud by restricting access to sensitive data through built-in, internal controls for AP. Consider cloud-based solutions, which tend to be more secure, protecting data capture in real time.

Goals

What are you wishing to accomplish with AP automation? Save time? Reduce data entry? Maybe your AP team needs help with payment reconciliation, or vendor onboarding is too manual a process. Whatever the need may be, identify it, create a goal, and use that to define the features you choose when selecting an AP automation platform.

Future

Make sure all software you purchase is future-proof; meaning it can grow with your business. It should work wonderfully both now and in the future. For example, what happens if the number of invoices you process increases by 50%? Will the system you select still process them efficiently? Will it affect your bottom line?

8 Accounts Payable Automation Best Practices

Even with a solid AP automation plan in place, you still might hit a few roadblocks along the way. Here are a few best practices to help make the change without throwing operations into chaos:

1. Get Buy-in

From everyone. After obtaining stakeholder buy-in, employees are next. Does the AP staff truly understand the benefits of the software and why you are making the change? In order for the tool to work, the people using it have to be comfortable and believe in the process. Make sure they understand this does not put their job at risk.

Supplier adoption is also important. Keep in mind that not all suppliers are the same, so when choosing a platform, make sure it addresses the needs of mass payments.

2. Keep Records Updated

All information in your system must be current at all times. This will ensure error-free payments and that the system isn’t automating mistakes. It also protects your company from potential fraud.

3. Assign a Project Manager

It’s important when implementing new software, to have a point of contact for all dealings. This person oversees behind-the-scenes aspects of the initiative and ensures workflows are set up to optimize processes. The project manager (PM) also serves as the point person for internal stakeholders, should any issues arise. While daily management rests with finance, the PM is responsible for monitoring, optimization, and reporting on ways to improve efficiency.

4. Make Training First

If you want to derive the most out of an AP automation solution, it’s vital your team understands not just the reason for the switch, but how to leverage the tool in general. In other words, the software is useless if no one knows how to properly use it. Set up training calls and sessions with the AP automation software provider and make sure the software you choose comes with support for all new, current, and future users.

5. Use Customized Software

It’s best to consider an intuitive solution that speaks the language of the current AP users, rather than reinventing the wheel. This is why customization is important. The software should be tailored to each user role, so people aren’t overwhelmed with unnecessary data, or gain access to information they shouldn’t have. All of this ensures a greater level of adoption across the entire enterprise.

6. Outline Workflows

If multiple people are working on the same workflows and AP processes, it’s best to consider setting up workflow rules. These help to outline issues like handling exceptions, approval deadlines, etc.

7. Monitor Metrics

How will you know if an AP solution is efficient without monitoring and analyzing metrics? Track AP metrics for tasks like:

• Invoice processing
• User activities
• Payment forecasts
• Approval times
• Average cost per invoice
• Invoice cycle time
• Custom KPIs

For 365-degree visibility into invoice status, a business can identify potential bottlenecks holding up invoice processing and approval laggards.

Metrics are also good for payment forecasting. Run reports for on-time invoices, those overdue, processed, and a total payment forecast. These numbers provide key insights into the overall financial health of your AP department and can help a business better prepare for the future.

8. Align Business Goals

The purpose of automation is more than paying invoices or digitizing the payment process. The software must align with your business goals and objectives. Some applications are more likely to improve your business than others, so it’s about paying attention to the strong features offered by each solution and matching that to your top needs.

Overcoming Most Common AP Automation Challenges

AP teams are super busy, and in addition to managing payments, they may also be overseeing T&E (Travel and Expenses), loan payments, and short-term liabilities. They require ongoing collaboration with the purchasing department and enterprise-wide suppliers. Yet still, with all of these balls in the air, stakeholders expect teams to save both time and money while increasing efficiency whenever possible. This can lead to more than a few obstacles and issues.

Here are some common AP automation challenges that companies face every day:

Invoice Processing

How did the supplier send their invoice? Who was it addressed to? Where is it now? Manual AP process can result in finger-pointing between AP, purchaser, and supplier. Unpaid invoices not only mean you can’t catch any early payment discounts, but it also strains the supplier relationship. Unpaid invoices cause significant problems when the payment hits the balance sheet late, or the expense is coded to the incorrect income statement. This leaves management with inaccurate financial reporting.

To realize more efficient and centralized invoice management, a business needs to move away from paper and manual processes, and consider integrating accounts payable automation software into the payable department.

Vendor Onboarding

Depending on the system you choose, suppliers may need to make changes to invoice formats or the way in which they are issued (electronic payments and paperless processes). This can lead to some resistance, and you may even lose a supplier over it.

However, there are AP automation solutions with 100% connectivity, so suppliers never need to change the way they operate. Supplier enablement platforms are out there.

Lengthy Processes

Doing things by hand takes more time. From scanning paper invoices to manually keying data and signing paper checks, these AP processes are labor-intensive. As a company grows and scales, there’s less time to spend on tedious and error-prone tasks.

Accounting software uses optical character recognition (OCR) to scan and digitize invoice data, allowing you to track the end-to-end AP process with ease.

Scaling Issues

Although a business may be growing, you still may not have the resources to hire more help. This is a common side effect for brands experiencing rapid expansion. A lack of resources means the AP team doesn’t have the ability to manually process the increase in payments. The solution to this problem lies in AP automation. Rather than hiring more people, you can streamline the payable workflows already in place by removing manual tasks from the equation.

Additional Challenges

• Physical document storage for paper invoices
• Duplicate payments from manual data entry
• The solution does not seamlessly integrate with legacy systems
• Convincing senior management to sign off on automation

Rising Importance of AP Automation Across Industries

AP automation solutions enable AP departments to become strategic profit centers, rather than cost centers. This new technology is not designed to take jobs away but, rather, enhance the ones people already have. The staff has more time to focus on strategic and cost-savings tasks that add true value to their work.

The importance of automating accounts payable business processes can be stressed across a multitude of industries. For example, AP automation can help those in agriculture cultivate a better yield by forming tighter controls on finance. In education, it cuts costs by improving AP productivity. Government agencies find value in AP automation by gaining clearer insight into tax compliance, and restaurants use it to manage vendor relationships.

Across the board, accounts payable automation is helping companies get organized, gain greater insights, and form tighter controls over all financial processes.

Conclusion

Shifting your critical processes like accounts payable over to an automated system can feel overwhelming, but without that help, it will be hard to effectively scale in the modern competitive landscape. Too many people are already taking advantage of these systems for a business to overlook these advantages.

Before you decide on a solution that’s right, it’s best to explore top needs and goals. This will help you find a provider that aligns with the same objectives. Assign a project manager and make training a key priority to ensure smooth implementation.

Once an AP solution is in place, outline workflows, set rules, and monitor metrics. This forecasts future trends that will future-proof your business and allow the software to organically grow with operations.