As a finance professional, you may be struggling with your manual accounts payable (AP) paper processes and questioning what to do about it. Well, this accounts payable software explainer will help you get out from under tedious, inefficient data entry and on to more important matters.
The fact is you don’t have to continue down this same difficult path. You don’t have to chase down executives for invoice approval. You don’t have to scramble to find missing paperwork.
Instead, you could invest in AP automation software that helps solve these problems. The technology can help your business cut costs, be more productive and liberate your employees to be engaged with more strategic projects.
If you’re seriously considering making this move, here’s a summary to educate you on what this software is, what it does and why it can help your business come out stronger in the months and year ahead.
What is accounts payable software?
AP software consists of a set of instructions customized for automated start-to-finish business payment processes. The software classifies, matches, verifies information and then forwards to your accounting system to be posted.
Conceptually, the software functions a bit like the GPS application on your smartphone. You type in where you want to go and the software instructs and guides you on how to get there including every stop, turn and reroute. The best part? You’re in control — but guided to get you there faster.
In a similar conceptual fashion, you load AP automation software, set it up to handle your specific AP processes and the software guides you through the steps and along path to your destination: paying your company’s bills. The software leads you through this journey, step by step.
How do you automate the accounts payable process?
AP software automates the AP process from receiving the invoice all the way to paying suppliers while maintaining existing banking relationships and workflows.
By automating this invoice and payment process, customers have 24/7 visibility into payment and approvals while a dedicated service team with the software provider manages the suppliers and executes payments on their behalf.
Sequentially, some of the key features of this software from the user’s perspective include:
- logging in to see all pending approvals sitting in their queues
- accessing the invoices from any device connected to the Internet
- seeing exact amounts of invoices, how long they’ve been in the queue and who should approve them next
- once approved, specifying which invoices customers want to pay or payments they want to send and
- sending payments in the exact way recipients want to receive them such as by electronic payments or checks.
Unlike manual AP in which people are heavily involved throughout the process, AP automation reduces the need for people to get involved.
AP software executes based on conditions
One of the more valuable capabilities of this software is that it relies on various conditions to execute tasks. For example, if your company’s policy has a condition that the CFO must approve any invoice above $1,000, the software can identify that condition and make sure to automatically forward that invoice to the CFO for approval.
Similarly, if your company has a condition that any invoice below $100 does not have to be approved by anyone other than an AP manager, the software identifies invoices below $100 and routes the invoice for approval only to the AP manager and no one higher up in the company.
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Why is automating AP crucial to your business?
Automating AP is crucial to your business because it minimizes data entry and paper invoices, drives consistency in payment processes, more securely pays suppliers and controls cash flow while minimizing spending on AP.
AP automation also drives down payment-processing costs — frequently by between 50-to-85 percent — when compared to paper-based checks, according to a report by the research and advisory company, Ardent Partners, titled “Accounts Payable Metrics That Matter in 2020.”
Big time time-savings are also achievable. The research company also reveals that the industry average time to route and approve payments is 28 days. Using automation that process shrinks to a few days.
Beyond all these benefits, financial pros can spend more time on more strategic roles as financial analysts, business advisors and internal controls specialists.
To give you deeper insights into these benefits and how they align with what finance pros value most from automated AP, let’s look at Levvel Research’s findings from a recent survey.
The research reveals that nearly two-thirds (64 percent) want faster approval of invoices. Along these same lines, 55 percent desire higher employee productivity and 53 would like to reduce paper invoice volumes.
These statistics in favor of AP automation align with how finance pros perceive its value. The Ardent Partners report, “Ardent Partners’ Accounts Payable Metrics That Matter in 2020 Report,” shows that “the overall perception of AP in 2020 continues to rise.”
The numbers amplify this perception. Over half (55 percent) of all financial pros surveyed – up from 52 percent last year – now perceive the AP function as either “very” or “exceptionally” valuable to the organization’s operations.
Consistent with this, 55 percent of business-to-business payments are now being made electronically compared with 45 percent manually, according to the report by Ardent Partners. Within two years, the report predicts, 60 percent of companies will be fully automated.
All these statistics point to the growing momentum towards AP automation within businesses. That makes sense. If you can save money and time and make your company grow faster and be more productive, you should seriously consider ways to do that.
Final thoughts on what AP software can do for you
So where should you go from here?
It starts with knowing the fundamentals of what this software is and what it does. To explain accounts payable software plainly, AP automation is smart, specialized, application software for a very specific purpose: guiding and accelerating payments while reducing costs and liberating your employees to more strategic work.
Your company will need to figure out the exact software to address for your specific AP business goals. For example, you may need a system that handles 100 payments a month or perhaps 1,000. Or your business may want to integrate your AP automation strategy with a new cash flow or budgeting and planning process.
Whatever the case may be, you should find the software that best suits your specific business needs.