The most common Accounts Payable problems
Trying to process large amounts of invoices manually is incredibly inefficient for businesses, demanding time and resources and incurring errors. Manual processes risk late and duplicate payments and make it hard to identify fraud. Some firms have added Optical Character Reading (OCR) to reduce manual entry, scanning invoices directly into the accounting software, but the process remains is slower, less accurate and more expensive than digital invoice capture from supplier’s emailed PDF invoices.
Failure to embrace purchase-to-pay (P2P) systems creates a number of problems:
- Firms have no way of controlling business spend because manual processes lead to delays in approvals. Managers either buy without permission to hit deadlines or lose out on discounts, adding cost. Budget holders want the value and convenience of online purchasing from both suppliers and marketplaces such as Amazon Business, but this is not controllable with manual processes.
- Spend is not immediately visible to finance. With no view of the business’ committed spend until invoices are submitted by the supplier, cash flow management is complex and time-consuming. Procurement cannot be optimized without detailed supplier spend information. Procurement teams have limited opportunities to identify savings without a great deal of manual work and no insight to support contract negotiation.
How can these problems be addressed? Accounts Payable Automation.
What is Accounts Payable Automation?
Accounts Payable automation or AP automation is all about streamlining the business processes undertaken by AP departments – essentially improving the way all transactions between the business and its suppliers are handled. The goal is to minimize the manual interaction required for each purchase – from order, through approval to invoice payment.
There are two key aspects of AP automation:
- Automating the capture of vital data from supplier invoices directly into the accounting system for automatic matching with the purchase order as well as confirmation, if required, with the business manager/ budget holder.
- Ensuring business managers and budget holders only buy from approved suppliers and always generate purchase order numbers for each purchase – including undertaking any required approvals.
Reducing manual intervention at every stage of this process eliminates human error, reduces costs, and improves control.
Why use Accounts Payable Automation Software?
Accounts Payable automation software is technology used to streamline and automate the AP process by removing manual tasks and improving visibility and control over financial information in a business.
AP automation software can extend the functionality of your existing accounting system to deliver significant productivity gains and cost savings.
The use of real-time electronic invoice capture and automated workflow removes the need for manual data entry, tedious invoice matching or time-consuming approval processes.
With end-to-end visibility, the finance team can rapidly identify errors such as duplicate invoices that can lead to overpayment. They can also highlight possible fraud – a key issue with fraud estimated to cost UK businesses up to £193bn per year.
With AP automation firms can embrace a zero-touch approach, managing only the exceptions flagged up by the system, saving significant time for AP staff.
AP automation also simplifies the purchasing and invoice approval process for the entire business. A streamlined purchase approval process uses workflow to automatically route requests to the correct individuals, where they can be approved via any device.
A simple, fast purchasing process improves compliance to procurement rules and the real-time data capture ensures the finance team has complete and up-to-date visibility of committed spend.
Improved productivity and time saving through AP automation frees up finance teams to undertake far more interesting and valuable activity – from improving cash flow management to spend analytics.
Key features of AP automation software
- Fully integrated online purchasing, purchase order automation
- Invoice capture
- Simple but sophisticated approval workflows
- Real-time reporting analysis/
- Content saving & management
- Automated invoice data extraction at header and line level
- Procurement analytics and tender automation
- Documents management
How does an Accounts Payable Automation solution work and what are the benefits?
The standard accounts payable process
A traditional AP process requires invoice information to be manually keyed into an accounts system and manually compared with the purchase order. Authorization requires approvers to be chased up and each payment has to be manually verified to avoid duplicates or errors.
The automated accounts payable process
Every invoice is captured and automatically loaded into the accounting system, matched with the relevant purchase, ordered and coded to the relevant department/category. Authorization processes are automated and tracked through workflow, ensuring any delays or blocks are flagged, and payment made automatically. Management by exception minimizes manual activity throughout AP.
Benefits of automation
- Real-time invoice capture data automate accounts payable
- Advanced workflow automatically sends documents (purchase requests and invoices) for approval
- Reduction in errors, minimizing the chance of over-or missed payments
- Streamlined approvals enable the business to take advantage of early payment discounts
- Complete visibility reduces the risk of fraud, improving security and peace of mind
- A real-time view of spend commitments improves cash flow control
Building a business case for Accounts Payable
Digital transformation is affecting every business, every department – and that includes finance. For the AP team, automation provides significant opportunities to reduce costs, improve productivity and release time to focus on added value tasks such as cash flow management and spend analytics.
The exchange of a digital invoice between a supplier and a buyer, typically as a PDF delivered through email. The digital information within the invoice, including supplier bank details, is automatically pulled into either the AP automation invoice registers or delivered directly into the accounts system. The elimination of paper and manual intervention reduces the chance of errors. The AP process is faster and more efficient, delivering time and cost savings.
- All supplier invoices are automatically processed, matched against the Purchase Order Number and delivered into the appropriate workflow approval process.
- Inaccurate and duplicate invoices are automatically flagged and payment prevented.
- Fraudulent activity is easily identified.
- The finance function can scale in line with business growth – without adding heads.
Automated Purchasing Systems
The use of workflow to create an effective purchase approval process and enforce procurement policies. Real-time purchase automation saves time and money for finance and business managers.
- Cost control: business managers have an up-to-date budget position; the finance team has accurate committed expenditure figures.
- Best value: Business managers can make purchases from the right suppliers at the right time to maximize business opportunities – such as early discounts – and meet deadlines; while fully integrated access to online marketplaces, such as Amazon Business, enables companies to gain the convenience and cost savings offered online.
The analysis of all business expenditures to better understand trends and support supplier contract and pricing negotiation.
- With accurate and up-to-date digital purchase information of every supplier invoice, including header and line level information, including contracts, order history, and supplier quotes, procurement teams gain the depth of information and the spend analysis tools required to make valid supplier comparisons and negotiate better deals.
Preparing for Accounts Payable Automation
Planned & executed properly, automating accounts payable processes can improve the performance of the finance function, & save finance teams time & money. So how do you get started & achieve best practice AP automation?
1. Define business goals
Every accounts payable automation project will have a number of objectives – from addressing maverick spend to improving cash flow & releasing capital, to enabling budget holders to explore the value & convenience of online marketplaces such as Amazon Business.
Including business stakeholders to understand what they need from AP with help to prioritize activity.
2. Identify & resolve existing business issues
There's no value in automating flawed processes. Be rigorous – look at the existing business model & determine whether new processes are required to drive improvements. This does not necessarily mean an entire process overhaul - if something works consider how it can fit with the new process. A strong foundation will ease the transition to an automated AP model & enable companies to become more sophisticated in the future.
3. Clarify processes
Including information required for templates and assigning responsibilities for approvals. With these clearly defined up front, the implementation of AP automation software will be much faster.
4. Get employee buy-in
Setting expectations is one of the most fundamental aspects of any IT project – indeed any project that will result in some form of business change. Employees – both within AP and the wider business - need to understand the benefits accounts payable automation will bring not just to the business but to their individual roles.
Choosing the right Accounts Payable Automation Software
What are the essential components of the AP Automation solution that your business needs to move forward and gain significant cost and time savings? There are a number of functional aspects of the solution to consider, but also the quality of vendor support, both initial and ongoing.
Each business will have a specific set of requirements, including:
- Integration – Does the AP automation solution work seamlessly alongside other applications and is there an Application Programming Interface (API) to enable a rapid, plug & play deployment?
- Online Buying - Does the AP solution also offer real-time integration with online purchasing/suppliers, including marketplaces such as Amazon Business?
- Mobile support – A technology-agnostic solution that can be deployed on multiple devices is essential for effective purchase automation and streamlined approval processes.
- Reporting capabilities – What information is required to support AP teams, business managers and procurement experts?
- Spend analytics – Can the team leverage the time freed up by AP automation to deliver cost saving to the business, using real-time spend analytics to transform procurement? Are these skills and resources available from the supplier to complement existing resources, or provide them if unavailable?
Another essential consideration is the vendor experience.
- Speed and simplicity – Can the AP automation solution be deployed easily, quickly and with minimal disruption or does it require specialist expertise?
- Supplier support – From training to ongoing support and help, dedicated support can ensure your AP team continues to make the most from the software.
Implementing & Optimizing your Accounts Payable Automation
AP automation implementation should be seamless. It is possible for companies to be fully live within a single day, with staff up and running on the system immediately. Training is always important, but most finance staff will be able to make the transition with minimal training.
you should ensure you do for any digital transformation are:
1. Test the solution
Seamless implementation requires good planning – and rigorous testing. During the purchasing process it is essential that vendors offer the chance to test the system. They should also be willing to support process change and create AP automation best practices.
2. Involve staff
Including finance team members in this testing activity will provide great insight as to how the system works in practice, as well as flagging any potential problems. Don’t forget to include a handful of business managers. An effective, smooth purchase approval process is key to realizing the value of effective procurement – and making sure the system can be easily adopted by business managers and budget holders will make a big difference to speed of adoption and improvements in procurement compliance.
How Accounts Payable can improve supplier relations
The end-to-end process visibility enabled by AP automation provides an opportunity to transform the way a business interacts with its suppliers.
- Zero-touch accounts processing improves payment times and reduces the risk of late payments that can either incur penalties, jeopardize supplier relationships or impact production.
- Payment problems – such as inaccurate invoices – that may cause delay are automatically flagged, enabling the AP team to investigate and remediate.
- Both AP teams and budget holders have real-time access to payment status. This transparency builds trust, improves communication internally and ensures everyone understands the current position with each supplier.
- Efficient purchase automation processes enforce the use of preferred suppliers at preferential pricing, ensuring the business realizes the negotiated savings.
- Real-time integration for online buying from supplier websites and marketplaces such as Amazon Business enables business managers and budget holders to maximize the cost and convenience of online purchasing.
- Procurement managers can leverage detailed spend analytics and category management to identify and deliver significant savings.
How Accounts Payable Automation can remove bottlenecks in the approval process
For business managers, a slow purchase approval process is incredibly frustrating - from missing the cost savings available from early bird offers to the stress of failing to secure the services required to meet an essential deadline. With AP automation, there is no longer any reason for delays in purchase approval.
- Real-time data capture and verification provide the foundation for effective approval processes. Combining automated purchase order and invoice matching with exception management means only those invoices that do not accurately reflect the purchase order information require manual investigation.
- With no manual data entry – and no errors – the entire process is automated. Clear workflows can be used to instantly send approvals to the correct people.
- Automated notifications can be used to ‘nudge’ approvers, and every relevant individual can see the current approval status, with full visibility and an audit trail for all approvers.
- With simple approvals available from any device – including mobile approvals – managers can confirm purchases at any time, from any location.
- If an individual is on leave or sick, Out of Office functionality can automatically change approval routing.
- Rather than the time-consuming sequential approval processes employed by the majority of solutions, the use of concurrent workflows enables multiple approvers to simultaneously approve a single order or invoice, significantly speeding up the process.
With end-to-end visibility of the purchase process, errors are reduced, and approval delays avoided, enabling managers to focus on the business, not chasing approvals.
The Compleat AP and purchasing automation buyer's guide
The quality of every decision we make is founded on what we know and the questions we ask, before we make that decision.
This guide will help you ensure you make the best, most informed decision for your business and avoid all of the risks of subsequent “buyer’s remorse”.
Proving ROI of Accounts Payable Automation
AP automation delivers return on investment (ROI) in a number of areas. Businesses gain not only from the immediate benefits achieved by replacing error-strewn manual processes with accurate automation: real-time visibility provides the insight to drive incremental benefits in savings, cash flow and working capital.
There are three key components of AP automation ROI:
Invoice automation value:
- Speed: How many invoices are processed each week or month by the AP team? Compare how long it takes manually and the amount of time that will be freed up by automation.
- Cost: The accepted wisdom is that automated invoice processing costs less than a quarter of manual processing, delivering significant and immediate savings.
- Accuracy: Real-time data capture eradicates errors, avoiding duplicate, over or underpayments that take time and money to rectify.
- Scale: A business will be able to grow rapidly without any need to scale up the AP team.
Calculating payment automation value:
Control: With confidence in the accuracy and timeliness of invoice processes, firms can move from weekly payment runs to monthly with no fear of incurring late penalties. This will improve cash flow and working capital.
- AP automation eradicates unmanaged indirect and maverick spend.
- Real-time procurement data provides the business visibility required to improve supplier negotiations and realize long-term cash savings.
The Future of Accounts Payable Automation
The benefits that Compleat is enabling through automation today are tangible, but this is just the start. Our P2P solutions continue to evolve, offering companies greater opportunities to improve efficiency and cut costs.
For example, growing numbers of firms are embracing the value and convenience of online purchasing, gaining the benefits of great deals and next, even same-day, delivery.
For easyHotel, the power of AP automation delivered an ROI within one month and has supported rapid growth from just a handful of hotels in the UK to 40 worldwide – without adding to its AP team. The adoption of Complete to automate its AP processes enabled the business to:
- Move from a weekly to monthly supplier payment run
- Rapidly add new hotels, supporting multiple currencies – including three in one month
- Gain financial savings by reducing its reliance on third-party services from PwC
- Improve financial control, with full visibility of committed costs
- Ensure smooth approvals processes, including managers across multiple locations and countries, using the mobile solution
In addition to immediate cost savings, the adoption of Complete has enabled easyHotel to release £2.5 million working capital back into the business.
“At easyHotel, AP automation has enabled us to save money, improve our working capital position and focus on more value-add activity. Automation is the way forward. The benefits are unlimited.” Vedant Desai, Group Finance Director, easyHotel
How Compleat can help
AP automation extends the functionality of existing accounting / ERP application through real-time integration, utilizing the supplier and GL information to ensure accuracy and provide an end-to-end transaction audit trail.
- Increases productivity by up to 90% for everyone involved
- Provides visibility and control for AP teams and budget holders, reducing both internal and external interruptions and queries
- Delivers a real-time view of the status of every transaction (current and historic)
- Enables real-time commitment accounting for improved cash flow management
- Streamlines processes through the use of mobile approvals for purchasing/invoices
- Direct integration ensures businesses maximize the convenience and value of online purchasing from suppliers and the marketplace, including Amazon Business
- Delivers the best user experience for everyone outside the finance department – they will love you, whilst making your life easier by driving adoption and improving compliance
The unique capabilities of iCompleat include:
- Ease of Deployment:
- Deployed and integrated in less than five minutes without technical skills, with most deployments live within a single day
- Simple to configure and maintain workflows, both sequential and simultaneous concurrent/parallel approvals to speed up approval process
- Ease of adoption:
- Advanced defaulting to fully automate general ledger coding at purchase order and invoice capture to maximize productivity
- Fully integrated online purchasing, including Amazon Business, to provide finance visibility and control whilst delivering the business the best buying experience (your users will love you for that one)
The unique values of CompleatProcure digital procurement include:
- Automated data capture and management:
- Data from every supplier invoice is captured, including head, line-level data and bank details.
- Common line items are automatically consolidated
- Automatic category allocation by supplier or by GL code, location and department for single and multi-company groups
- Rapid approval processes improve purchasing compliance
- Concurrent workflow functionality enables multiple approvers to simultaneously approve a single order or invoice, significantly speeding up the process.
- Improved tender management:
- Simple tender creation to identify savings
- Automated tendering and e-auction
- Enhanced purchasing options
- Utilization of online purchasing (punchout) to drive adoption of preferred suppliers and deliver savings
- Access to external procurement resources (share of savings achieved) and best practice processes
Grab a coffee, a pastry (I like pain au chocolat myself but up to you), and take in some insightful written content from Compleat staff in various departments.