Interested in an innovative way to avoid late payments, invoice approval delays and inefficient, outdated processes? Accounts payable workflow automation can help.
Read on to learn the benefits and steps needed to make accounts payable (AP) workflow automation a reality.
What is an Accounts Payable Workflow?
An accounts payable workflow is a step-by-step process outlining how a company handles its bills and payments. It typically includes receiving invoices, verifying them, obtaining necessary approvals, and making payments to suppliers or vendors.
In the AP world there are manual and automated workflows – and they’re dramatically different.
What is a Manual Workflow in Accounts Payable?
A manual AP workflow happens when people get directly involved in the step-by-step process of receiving invoices and making payments. The steps include:
- AP departments receive paper invoices, type the invoice data into an electronic system and deliver the paper invoices to business leaders for approvals.
- Once the invoice is approved, the AP department chases the appropriate signatures, cuts paper checks and send payments to vendors and suppliers.
There are a handful of flaws in this process:
- Businesses often have to process hundreds or thousands of invoices a month, and keeping track of all the paper invoices can be overwhelming.
- Paper processes tend to generate invoice errors. Frequently, they aren’t caught so payments get sent for the wrong amount.
- Fraudsters steal information from paper invoices, which can become a costly issue for companies.
What Does Accounts Payable Workflow Automation Look Like?
An AP workflow is a series of sequential steps. The workflow starts when the invoice is received. It ends when the payment gets sent.
If the invoice comes to you in paper form – which is often the case – the automated system works like this:
- AP automation software converts paper documents into digital format using optical character recognition (OCR) technology. Automatically, the technology inserts invoice data into an electronic digital file that your finance team can easily find and search.
- The system checks to make sure the data on the invoice matches the data on the purchase order and sales receipt. Automated workflows catch exceptions faster and more reliably than a manual check with human eyes.
- If the system finds mistakes, the document is forwarded as an “exception” for a person to review.
- To fix the exceptions, they’re electronically routed to people and business units based on rules set up in the AP software. You no longer need to send paper around to people or chase them via phone calls and emails. The software takes care of all that. Disputes and exceptions get fixed faster. Collaboration across various corporate departments and suppliers improves.
- Once approved, invoices move electronically into the company’s accounting and enterprise resource planning (ERP) systems. Then payments get sent electronically or by paper check, depending on vendor preference.
As part of this process, your finance team uses a consolidated financial dashboard. There, they can see invoice status information, generate better insights and make quicker payments.
The dashboard lets business leaders more effectively check staff performance, identify workflow bottlenecks and balance workloads across corporate locations.
What are the Benefits of Accounts Payable Workflow Automation?
There are dozens of benefits of accounts payable workflow automation. Below are the nine most significant.
Mitigate Fraud
Automated systems detect and flag anomalies, helping prevent fraud, overpayments and payments to illegitimate vendors
Pay on Time
Many manual systems are vulnerable to mistakes and lost invoices. That leads to late or missed payments. Automated systems minimize those mistakes and bring more checks and balances to the process.
Avoid Late Payment Penalties
When you pay vendors late, you often have to pay a financial penalty. But that’s not likely to happen using automated workflows because the system keeps you up-to-date on the statuses of invoices and payments. When a deadline approaches, the system will let you know in plenty of time.
Centralize Accounts
Centralizing your invoice and payment information gives you access to all your supplier information from a single, well-organized database. You’ll be able to check the status of invoice approvals and payments faster than with a manual, paper-heavy process.
Eliminate Data Entry
By automating your AP workflows, your finance team won’t have to focus on typing in invoice data. They will have more time for strategic initiatives.
Boost Employee Morale
Your finance team will no longer have to spend countless hours organizing various pieces of paper from around the office. They don’t need to worry about chasing down leaders for invoice approvals. Instead, they’ll have time to spend on more fulfilling projects.
Secure Online Approvals
Your automated workflow will regularly remind business leaders they need to approve an invoice, which they can do with just a click.
Generate Audit Trails
Auditors will have an easier time finding the information they need using an automated workflow system. And your finance team will be able to automatically share the specific information auditors need.
Automate Three-Way Matching
With AP workflow automation, you’ll no longer have to manually match the data on an invoice to the purchase order and sales receipt. The system will do that tedious job for you.
How Do You Automate Accounts Payable Workflows?
There are several sequential steps to automate AP workflows:
1. Map Out Your Current AP Processes
Consider doing a deep investigation of your current AP processes. Identify which ones work best and which don’t. Figure out what part of the process costs your business the most money. Is it late payment fees? Or something else?
By nailing all these details down, you’ll figure out what workflow automation technology can help you most.
2. Build Advocacy
Building support for your move to automated workflows is crucial. Ask your finance team what AP workflows they’re using. Find out from them which ones consume the most time and cause the greatest difficulties. Ask them what problems they most need solving in the AP process.
Their input will help you make the best automation decision for your business. And they’ll feel part of the solution and therefore will be more likely to support the shift to automation.
3. Evaluate Needs
Evaluate your AP department’s greatest needs. Calculate the time, expense and resources it takes to process an invoice using manual workflows and compare that to an automated system.
Then decide whether your business needs to improve its workflows mostly to reduce costs, save time or reduce errors. Knowing this, you’re will help you choose the best AP automation solution.
4. Implement the Best Software for Your Business
There are several types of software for automating AP workflows. Before buying one, identify the biggest problems your business needs to solve. Then invest in the software that best solves those problems.
5. Eliminate Paper
Stop using paper in your AP workflows. The less you use, the fewer mistakes you’ll make, and the less susceptible you’ll be to fraud. Paperless processes are also faster and easier to use.
Eliminating paper-based processes in finance departments reduces the potential for errors. Approvers benefit from a transparent overview of all invoices and their respective positions in the approval pipeline. Without paper, the risk of misplacing invoices is virtually eliminated and the approval timeline is accelerated for everyone involved.
Final Thoughts on AP Workflow Automation
Find out how automation can help your AP department achieve its goals in the months ahead.
Schedule a demo with our AP automation experts to find out how AvidXchange can support your organization.
