Ways Payment Automation Helps Businesses Scale Their AP Processes

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Why Use Payment Automation?

One accounts payable clerk can only do so much. Even a team has a ceiling to what can be accomplished. 51% of today’s accounts payable organizations are prioritizing the link between automated systems and procure-to-pay processes. AP workflow automation can transform your business, drive revenue, and spur incredible growth.

Common Issues in the Accounts Payable Process

When a business draws up a plan to expand, the accounts payable department isn’t always at the top of the list. However, what many organizations don’t realize is that accounts payable is a critical business function that keeps your internal processes on track. In a growing company, there is a long list of issues for an accounts payable department that is under-automated.   

Manual processes often produce errors. This includes things like late, failed, or duplicate payments that take too many business days to rectify. From an optimization standpoint, there is little to no visibility. The AP team often shoulders the blame when late fees and interest charges pop up from the account holder. This is because they are being reactive to invoices that come in. They should be focusing on the entire end-to-end system and effective cash management.

There are so many steps in the manual process (invoicing, verification, approval, payment, etc.) that it can cause lag time, failed handoffs, and inaccurate reporting. That’s why an AP department needs the right technology in place to curb inefficient processes.

What is Payment Automation?

Payment automation is a type of solution that integrates payment processes so that a business can take a hands-off approach to managing their accounts payables and paying their suppliers. Payment automation goes a step farther than “okay-to-pay” solutions by issuing payments to suppliers, typically by ACH transfer, check or wire transfer.

It’s aimed at automating and optimizing procedures and competencies that were historically performed by humans. Types of payment automation include:

  • Communication touchpoints
  • Invoice processing
  • ACH verification
  • Automatic approvals

This allows AP to pay vendors swiftly and accurately.

Automation largely began with accounts payable. Particularly with EDI (electronic data interchange) transfer of data. One of the first technologies to disrupt paper checks was data capture and electronic invoicing. For a growing business, financial automation is critical to scale accounts payable systems and support overall business growth. 

How Does Payment Automation Work?

Payment automation is much more than just electronic invoices. Although superior to paper, they too require manual processing. Even when emailed, the invoice comes in different formats. Is it attached as a Word doc or PDF? Or perhaps it’s pasted in the body of the email (another format still). Managing the data from all these different channels can often be too great of a time commitment for AP. This can result in data entry errors which adds lag time and results in late vendor payments.

Automated invoice processing is a payment method that uses a technology called optical character recognition (OCR). The document is scanned and the data is organized into digital tables. This prevents AP from having to perform tedious tasks that can lead to human error. It also moves the payment process along quickly.

Once the invoice is received, it is automatically routed to the appropriate parties for approval. Unlike the manual system that bottlenecks (whose desk is it on?), payment automation allows AP to set certain requirements and filters to ensure the invoice hits the right employee’s desk. For example, products purchased for a specific department can automatically be routed to the head of that sector. Or, an invoice that is over a certain amount might require a set of approvals. The system will then route to several people.

Automation ensures the right account ownership, prevents bottlenecks, and strengthens workflows.

What is an ACH Verification Process?

When it comes to the disbursement of funds, one of the most popular ways a business chooses to send and receive is through the Automated Clearing House—otherwise known as ACH. However, an organization still needs an efficient method of connecting with and verifying the customer’s bank account data. Without the bank account information, there’s no way of knowing if the ACH transfer is secure. The data required typically consists of an account number and routing number. 

Bank verification is necessary for a customer to initiate payment to you from their checking account. Bank account verification checks to see that the user attaching the account details is the owner. It also ensures there won’t be insufficient funds when processed. 

This type of instant verification is crucial for the account validation of both parties.  ACH transactions can not happen without validation.

Typically there are three ways a financial institution can verify:


Instant Account Verification

Third-Party Integration

Whether it’s an ACH credit or an ACH debit, all of these apply.


These are tiny deposits of less than 10 cents that will verify ownership of a specific bank account. While this accommodates the vast majority of the United States population, if a bank doesn’t offer online banking or a user can’t remember their data, this option may provide a self-contained verification process. In other words, it’s invalid.

Instant Account Verification (IAV)

Some applications can quickly and easily verify an account using code. This allows a business to integrate IAV. To verify an account, a user must enter their banking credentials. Integrating ACH transfers this way can reduce labor and payment processing costs.

Third-party Verification

Partnering with a third-party gives customers a way to verify bank account ownership without sharing sensitive information (which can be a turn off for potential clients). It protects the data while distributing it simultaneously.

How Can Automation Help Your Business?

There are a million ways in which automation is revolutionizing business. When it comes to the financial sector, here are a few arguments to make for the technology:

Total Integration
One fear of automation is that adding it into your processes is costly and complex. Removing your current point solutions and replacing them with automation is not necessary. It can sit right on top of your current ERP systems and make them more efficient. It only optimizes your end-to-end accounting process by consolidating data and enabling better communication.

Reduced Risk
In 2015, 73% of organizations were targets of payments fraud. Accounting efforts are always at risk of regulation failures, compliance issues, and worst of all, fraud. When processing payments manually, a security breach is more likely. It’s difficult to track issues and identify potential red flags before they become huge problems. Automation gives the accounts payable team far greater visibility into total transactions.
Stronger Vendor Relationships
Your vendors and suppliers are vital to the workflows and projects that make your business function. Delaying payment, paying the wrong amount, or failure to pay them will strain the relationship over time. Automation ensures you always pay the right amount, on time, every time. It solidifies vendor relationships and keeps your partnerships intact. It also helps a business avoid any fees or penalties related to late payment.

Additionally, some programs will allow for automated vendor onboarding. This makes approving and onboarding new merchants a cinch. Usually, it’s through a vendor portal where they must create an account with banking details and tax information. This means not only can the AP clerks skip the data entry, but the invoicing is ready to go.

Cost Saving
Electronic payments are always cheaper than paper checks. The median cost of a check transaction is $3.00 compared to an ACH which can range from $0.26 to $0.50. You also have to consider the cost savings on labor. The AP team can skip remedial tasks like data entry and focus on helping the business scale.

Scaling Up

The surge in automation technology is forging a more strategic future. It transforms accounts payable teams into powerful centers for business insights. The past decade has seen an incredible acceleration of AP automation. It’s no longer just about improving efficiency. Every new tool that comes out can do a few more things than the last. There are platforms now that can help an accounts payable department directly support an organization’s cash management and bottom line.

If business growth is on the agenda, it is critical to get AP in order now. The age of digital evolution is here and if you continue to resist modernization, the business will lose out to competition. Especially those brands embracing the opportunity to speed up the financial engine. 

When drafting a growth plan, many companies focus too much on fix-all projects. What is required is an enterprise solution that will apply to different parts of the business. The opportunities that AP automation creates are too hard to ignore. Start the process now by gaining visibility and control of your AP system. Take the time to educate the executive team on the benefits of these efforts and how it fits into the company’s plans to scale. Not only does it raise morale, it creates a universal workflow that opens the door to scale.

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