Your business may believe it’s time to consider shifting to an automated and paperless accounts payable (AP) process.
But how can you be better informed and more confident this is the right move to make for your company?
What factors should you more carefully weigh? What do you need to know to make sure you’ll get a strong return on your paperless AP investment?
Here’s a rundown of the questions you’ll want to answer and issues you’ll need to address. You’ll also gain related insights that will help you make the best decision for your business.
Why should I move to paperless accounts payable?
Your company should move to paperless AP to operate more efficiently, improve your relationships with customers and enhance your brand reputation.
You want to make this move to enjoy a broad range of benefits.
Reducing the time and costs to execute the AP process rank high on this list.
A Goldman Sachs report notes that businesses typically spend about 65-70 percent less time using automated AP versus manual processes.
Consistent with this, its costs businesses approximately $22 to manage the process manually starting with the receipt of the invoice until the payment gets made. Using an AP automation process, that cost drops to approximately $10.
A QuickBooks report notes the average office employee spends 1.8 hours each day looking for information in file cabinets, email inboxes and digital folders. That translates to nearly 500 hours each year per employee.
Building on this theme, Katherine Jackson, a finance vice president with Bayer Properties, shared a compelling story in Forbes of how her company benefitted from automating AP.
By scanning and uploading an invoice for routing electronically, the company cut days to weeks off its routing process. The company also accessed images of invoices for research use without needing to pull and refile paper copies.
Shifting to paperless automated AP, the company cut its labor costs in half, which paid for the AP automation software investment.
But the benefits of paperless AP automation extend well beyond cost and time savings especially with a much larger percentage of people working from home. Paperless accounts payable enables employees to leverage remote, no-touch invoice and payment capabilities.
Paperless accounts payable also ensures lower susceptibility to fraud. Going paperless will make it much tougher for fraudsters to steal your corporate information. If you continue to use paper checks, you’ll continue to open your business to many more opportunities for fraudsters to steal your corporate funds.
How do you go paperless in accounts payable?
To go paperless in AP, you need to consider the problems you want to solve, secure buy-in from affected parties and decide which software makes the most sense for your business.
It all begins with making sure you identify the most important reasons you want to go paperless. How will automated AP give your business the greatest investment return?
For instance, do you want to go paperless primarily to accelerate payments to your buyers and suppliers? Do you mainly want to reduce costs because you’ve determined the whole paper process is eating into your profits? Or do you want to eliminate mistakes and duplicate payments?
Whatever your most important reasons are, be sure to focus on them as you move forward.
The next important step will be to convince members of your finance team, from AP managers to controllers to CFOs, that this investment makes financial and practical sense.
Don’t assume they’ll be immediately sold. You may run into resistance. Team members may be concerned the paperless process will eliminate their jobs. Assuage their concerns.
Explain how they’ll have more time to advance the careers and sharpen their skills doing more important strategic work for the business.
Before moving ahead with the paperless plan, be sure everyone on the team has had the chance to ask questions and feels comfortable with the paperless shift.
Choose an AP automation software
When you gain full team support, you can begin the process of selecting an AP automation software. Determine if a software can easily integrate with your accounting and enterprise resource planning software. Some don’t integrate easily.
Find out how fast the software can be implemented. If a software provider tells you it will take six months to a year to implement the software, that’s far too long.
Unfortunately, most software implementations don’t work. Be sure you choose the software that will work best with your corporate systems. Be alert to the fact that implementing new software into corporate systems can be difficult and time consuming. Do your best to acquire software that minimizes these problems.
The next step is installing the software that will power your AP automation system. An initial application will be converting the paper-based invoices and electronic attachments such as emails and PDFs into an electronic digital format using Optical Character Recognition (OCR).
OCR is the key step that moves your business to a paperless operation.
FRICTION FROM PAPER PROCESS
How do you automate accounts payable?
You automate AP by selecting an appropriate automation software that integrates with your accounting system.
Once integrated, you’ll start converting paper invoices and email and PDF attachments to electronic formats using OCR technology. The technology automatically reproduces these documents in a searchable and indexable digital format.
To reduce the amount of paper you need to handle, ask your vendors to only submit invoices electronically. You’ll then spend less time sorting invoicing arriving in different formats.
Matching invoices to purchase orders — automatically
The software then matches electronic invoice information against purchase orders and receipt data to make sure everything aligns.
The AP automation software automatically routes the invoices for approvals to the appropriate corporate employees. Once approved with a simple click of a button, the invoice amount is posted to your accounting system. Then the payment is sent by electronic channels such as virtual credit cards and Automated Clearinghouse (ACH) to suppliers and vendors.
What software does accounts payable use?
The software accounts payable uses consists of instructions and rules tailored to streamline the accounts payable process.
The special type of software is a subset of your company’s accounting and ERP software. This subset performs specific invoice and payment functions based on conditions and rules your business sets up. The AP software complements and augments your accounting and ERP software capabilities.
Some accounting and ERP system have their own AP software rules and instructions. But AP software tends to be more focused and customized for automating AP functions.
AP software also has highly specific rules you can assign for your specific business needs. For instance, you may build a rule that automatically forwards invoices over $1,000 for the CEO’s approval.
The software automatically notifies the CEO on his or her PC or smartphone screen.
Some AP software is customized for the unique needs of small businesses. Others target needs of medium or large businesses.
Be sure to shop for software tuned for the size and specific needs of your company.
Who uses paperless accounts payable?
Large, medium and small businesses use paperless AP software. The software is more widely used by larger businesses with more money to invest in technologies.
But it’s a growing market. The pandemic moved more people to work at home as companies still needed to make secure payments.
To give you a better sense of the growth in who uses paperless AP automation, AvidXchange and the Institute of Finance & Management (IOFM) produced a new report with results summarized in this blog titled Accounts Payable Software Drives Growth in 2021.
The survey showed 66 percent of invoices are processed electronically. In 2021 that number could rise to more than 70 percent.
The survey also found 73 percent of respondents use an automated AP software system. That’s up from 66 percent in 2019 and 45 percent in 2018.
“Organizations realize there are delays dealing with paper invoices, there are duplicates and there are redundancies,” IOFM executive editor Jess Scheer said. “And they can get paid faster because those invoices can be submitted directly into the automated systems.”
Within corporations, the biggest users of paperless automated AP are AP departments with teams of AP managers. Controllers within these departments also use this software.
From an industry perspective, real estate, construction, homeowners’ associations, financial institutions such as banks, tech companies and many more industries use paperless AP systems.
Can I use AP automation with QuickBooks?
Yes, you can use AP automation with Quickbooks, the leading accounting software for small businesses.
How do I set up a paperless accounts payable system?
To set up a paperless accounts payable system, start by asking yourself why your business might need it.
If you’re consistently paying late using a paper system, that might be a great reason to go paperless because you’ll reduce the strain in your business relationships. If you’re constantly chasing executives for approvals, that’s another good reason. You won’t have to chase anymore using paperless AP automation.
If you’re employees spend an inordinate amount of time typing information into digital invoice formats, that could be a sign you need to go paperless. Those workers could be spending more time as business advisors and financial analysts – functions that add more value to the business than typing.
Also determine where your AP workflow process stands. How long does it take to process an invoice? How long do approvals take, and what is the total cost of your AP system.
When you identify your top reasons and nail down these numbers, make your decision either yes to paperless or stay with the system you’ve got.
If it’s yes to paperless, you’ll want to select a software that will integrate smoothly with your accounting and ERP systems and complement their capabilities.
Once integrated so that all systems can “talk to” each other, you’ll start converting paper invoices and email and PDF attachments to electronic formats using Optical Character Recognition technology. The technology automatically reproduces these documents in a searchable and indexable digital format.
To reduce the amount of paper you need to handle, you can ask your vendors to only submit invoices electronically. You’ll then spend less time sorting invoicing arriving in different formats.
The software then automatically matches the electronic invoice information against the purchase order and receipt data to make sure everything aligns.
If so, the invoices will be automatically routed for approvals to the appropriate corporate employees. Once approved with an automatically and simple click of the “approve” button, the invoice amount gets posted to your accounting system. Then the payment gets sent by electronic channels such as virtual credit cards and automated clearing house (ACH).
Schedule a demo to learn more about how AvidXchange can put your business on the path to paperless accounts payable
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