A lot happens behind the scenes to power accounts payable automation. But there are four key technologies that are especially important for you to know about because of the profound improvements they can make in your finance team’s operational efficiencies.
Those four technologies are application programming interfaces (APIs), machine learning, three-way matching and robotics process automation (RPA).
During the next several years, all four technologies will be widely used in automated AP processes and payments as each makes it easier to process your invoices and payments quickly and accurately.
Explore each of the technologies below:
4 Technologies Powering the Future of AP Automation
1. Application programming interfaces (APIs): Enabling software conversation
The importance of APIs in AP automation is hard to overstate. They make the whole system run. When they’re not working, the system can break down.
APIs are software interfaces that unlock data within software-based computer applications. They facilitate data transfers, connectivity and integration between software, applications and computer systems.
Crucially, APIs make it possible for software-based technologies to “talk to” each other. APIs help convert your accounting system into a higher-performing financial management platform that helps your business grow. Why? Because they’re the connective tissues you need to generate more business, drive productivity, deliver faster payments and improve customer experiences.
Vital bridges to more business opportunities, APIs make data exchange and functions such as payment and invoice transfers between businesses easier, faster, smoother and more reliable. Other AP automation technologies – including machine learning, three-way-matching and RPA – depend on high-performing and reliable APIs.
Here’s another way to understand APIs. Imagine you’re at a restaurant and a waiter comes to your table and takes your order. The waiter goes back to the kitchen, communicates the order and delivers what you asked for on time. An API is the waiter taking orders and delivering what you requested without you having to see what happened in the kitchen or how the dinner got to your table.
Learn more about the capabilities of APIs in our exclusive eBook, “Rising High with APIs: Engines for Boosting Your Business.”
Rising High with APIs: Engines for Boosting Your Business
2. Machine learning: Harnessing the power of data
When you think of important corporate assets, you might picture physical things such as office buildings, computers and printers. But there’s another type of corporate asset becoming increasingly valuable. In fact, it’s a crucial differentiator.
It’s called data.
This is great news for finance pros. You have a creative opportunity to use all the payment, invoice, cash flow, customer and other types of data to generate more valuable insights. These insights lead to more intelligent business decisions such as ways to deliver more personalized payment and invoice services to customers, vendors and suppliers faster and more economically.
This is where machine learning, a popular type of data-centric artificial intelligence (AI), comes into play as a differentiator.
In the world of AP automation, machine learning processes and analyzes historical data to detect behavioral patterns of supplier payments and invoices and predict the likelihood of those behaviors continuing.
And when checks either don’t arrive on time or not at all, machine learning uses behavioral data to alert the business that something needs to be fixed. In response, the business making the payments could offer the supplier a faster and more reliable payment option. Or the supplier could tell the payer what method they would like to use to remedy the situation.
Machine learning in AP automation can also help companies make predictions on market or vendor payment risks, forecast future spending increases or decreases, and detect statistical probability of invoice anomalies and fraudulent checks. And the technology can help sort out a dozen different invoice formats to identify patterns and correctly figure out which vendor or vendors have sent all the different invoice formats.
You can learn more about the importance of machine learning in processing AP automation data in this blog, “Data and Machine Learning: Goldmine of Growth Opportunities in AP Automation.”
Data and Machine Learning — Goldmine of Growth Opportunities in AP Automation
3. Three-way matching: Providing payment peace of mind
Matching in finance does what it sounds like. It’s when you check an invoice to make sure the information aligns with the information on your purchase order (PO) or sales receipt. Matching matters because it ensures you pay for what you bought. Mismatching means something’s off, such as the amount of the PO doesn’t equal the invoice amount. Something needs fixing.
Without a highly organized system, investigating every invoice can take hours. Automating PO matching streamlines your AP processes so you can manage an endless stream of invoices, POs and order receipts in practically no time. And, in the event of an audit, you can rest easy knowing all of your records are organized in one centralized, easily accessible and secure location.
A 3-way matching system makes sure data on the PO, invoice and sales receipt are the same.
There are several reasons why business owners are adopting automated matching in accounts payable:
- Better supplier relationships – error-prone or frequently inaccurate payment processes can erode trust. Verifiable data makes your vendor relationships more transparent and secure.
- Profitability – by verifying data, you protect against overpayment, duplicate payments and fraudulent invoices, saving your business money.
- Transparency – consistent POs, invoices and order receipts make it easier to spot inconsistencies, and having better data on hand can help speed up an audit.
There’s plenty more to learn about matching. For more insights, read our blog, “2-Way vs. 3-Way Matching: What’s the Difference?”
2-Way vs. 3-Way Matching: What’s the Difference?
4. Robotic process automation (RPA): Reducing manual tasks
There’s a tendency to think about RPA through a narrow technological lens as a software tool for automating repetitive work processes. While that’s not entirely wrong, RPA is more than just a software tool.
Think of RPA as an alternative digital workforce that delivers business value. This workforce should be assessed based on, for example, how many invoices it can process in one day and how much time and money that saves your business.
RPA consists of software programs that give instructions to electronic circuits to perform tasks. You’ll see RPA in action doing tasks on your computer screen such as keying in numbers into the amount field of a digital invoice.
The technology uses software rules, instructions and programs to instruct automated software to perform routine, repetitive, high-volume tasks – the time- and effort-intensive stuff that doesn’t impact the bottom line.
“RPA takes away mainly physical tasks that don’t need knowledge, understanding, or insight — the tasks that can be done by codifying rules and instructing the computer or the software to act,” said Leslie Willcocks, a professor of technology, work and globalization, in a McKinsey report.
While not every part of the AP workflow can be coded and handled by software, RPA represents another step toward liberating finance pros from the mundane and allowing them to influence real, sustainable, strategic growth and advance their career opportunities.
For more RPA insights, read this blog, “Robotics Process Automation: The Meaning, Myths and Truths About RPA.”
Robotic Process Automation: The Meaning, Myths & Truths of RPA
You now know more about the four technologies powering the future of AP automation. Now the question: What should I do to take full advantage of these valuable tools? Here are three suggestions:
- Capitalize on the key benefits of these technologies to make your AP automation process more efficient, economical and smooth. Rather than getting mired in all the technical details, focus on the advantages your business and customers will gain because that’s what matters most. This isn’t about the technologies per se; it’s about the benefits they deliver to you and your customers.
- Figure out which of these four technologies deliver the benefits you need most and invest in those first. Maybe your biggest concern right now is three-way matching capability to control your spending and avoid overpayments. If so, focus on building three-way matching capability into your automated AP system. Then focus on your next most important priority. It may be reducing manual tasks and processing more invoices and payments in less time. RPA can help you do that. If your challenge is predicting future payment and invoice patterns, then you’ll benefit from using machine learning.
- Learn about these technologies and how to use them to sharpen your digital skills. The better you become at using them effectively, the more valuable you’ll be to your business, which could help you advance in your career.
This report guides you on how to speak the CFO’s lingo strategically. Learn powerful techniques to think through how automating AP syncs with your CFO’s strategic goals and find out how to come best prepared with answers to tough questions.