Accounts payable (AP) automation is a technology solution that accounting teams use to convert paper invoices into a digital format and then automate the process of organizing within the system, routing approvals, coding and executing payments. The digital tool can be used alongside an organization’s preferred accounting software, leading to increased productivity.
AP automation eliminates manual, time-consuming tasks and provides many benefits to AP departments that need to streamline disorganized and inefficient workflows. The software enables full visibility into the status of individual invoices as they move along the automated pipeline.
From a workflow standpoint, automating AP cuts the number of steps financial pros need to take to process, approve and pay invoices. All that translates into faster payments and better relationships with customers, vendors and suppliers as it helps ensure all entities get paid accurately and on time. The whole AP automation system also enables companies to make payments early and therefore gain more opportunities for early payment discounts.
To better understand the challenges that AP automation solves, consider this scenario: When businesses open, they usually only need to process a few invoices per month. As their customers and revenues rise, the number can swell to hundreds or even thousands. As invoice volumes increase, AP leaders need to decide how to handle them.
Some companies hire more staff, which helps get the job done but adds costs. Alternatively, if they want to handle increased volume with their existing team, the company needs systems in place to handle payments and invoices efficiently.
What are the five benefits of AP automation?
1. Reduce human errors and improve accuracy
Accuracy is key when dealing with invoices and payments. Mistakes sometimes slip through the cracks, but the right AP software can help reduce human errors. There’s more opportunity for errors when AP staff are asked to manually enter data as information may be keyed into the wrong fields or dropdown boxes.
Automatically capturing data, matching invoices to supporting documents and coding invoices can reduce errors and inconsistencies from manual processes while saving valuable time.
2. Aid in business growth
Increasing revenues and profits as well as managing cash flow are typically the main objectives for financial teams. While paying bills – the essence of AP automation — is not going to directly grow the bottom line, it’s a necessary focal point in a growing company.
Financial teams need to identify whether the company is positioned to handle growth. For example, does the AP manager have the tools needed to scale and add more invoices each month without a process breakdown? AP automation can help finance teams figure out and decide how the company can grow faster and more profitably using automated AP processes.
3. Free up more time for higher-level strategic initiatives
Repetitive tasks are a central part of how many AP pros spend their workday. It’s not uncommon for AP leaders to spend more time each workday on transaction processing rather than department planning, staff training or other managerial tasks they were hired to perform. As a result of time-consuming manual tasks, strategic initiatives often get pushed to the side.
By investing in AP automation, AP staff can be freed up to focus on higher-level work such as growing the business or analyzing data to make better business decisions. AP automation can also lead to more satisfying work and higher career satisfaction as AP pros value skills development and opportunities for career growth.
4. Unite the workflow of the entire AP team
One automated AP system can help unite the workflow of team members, giving AP staff the visibility they need to work efficiently. With one system, AP pros can quickly pick up tasks where others left off and efficiently handle anything that comes across their desk.
Responding to an ad hoc payment or invoice request can take hours or even a full day in a paper-based AP process. With automated solutions, AP pros can simply log-in to the online portal and quickly get the answers they need.
5. Strengthen supplier relationships with better business payments
Relationships are the foundation of business building, but poor payment practices quickly ruin them. Automated solutions will improve your “on-time” record with suppliers and help foster stronger relationships with them by enabling AP teams to track and pay invoices more efficiently.
AP automation also provides more payment options beyond paper checks, like Automated Clearing House (ACH) and virtual card payments. These types of payments are more secure and financially advantageous for your business given the rising cases of check fraud while also benefiting your suppliers by accommodating their preferences. A true win-win.
Are you ready to transform your AP workflow?
AP automation may sound like the wave of the future, but it can make a tremendous impact on your business in the present.
To learn more about putting the future of payment processing to work for you today, check out AvidXchange’s suite of automated accounts payable software solutions.