The Compleat Guide to Accounts Payable Automation
Find out how AP automation can deliver benefits for both AP and business managers, saving money, improving cash management and transforming procurement.
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:
How can these problems be addressed? 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 minimise the manual interaction required for each purchase – from order, through approval to invoice payment.
There are two key aspects of AP automation:
Reducing manual intervention at every stage of this process eliminates human error, reduces costs and improves control.
Some of the most common AP automation solutions include eInvoicing, purchase to pay (P2P) software, scanning and workflow, integrated online buying, reporting and spend analytics.
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 over payment. 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.
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. Authorisation 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. Authorisation processes are automated and tracked through workflow, ensuring any delays or blocks are flagged, and payment made automatically. Management by exception minimises manual activity throughout AP.
Benefits of automation
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.
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.
The analysis of all business expenditure to better understand trends and support supplier contract and pricing negotiation.
Planned and executed properly, automating accounts payable processes can improve the performance of the finance function, and save finance teams time and money. So how do you get started and achieve best practice AP automation?
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.
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 on-going.
Each business will have a specific set of requirements, including:
Another essential consideration is the vendor experience.
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.
Two things 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 practice.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 realising 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.
The end to end process visibility enabled by AP automation provides an opportunity to transform the way a business interacts with its suppliers.
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.
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 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”.
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:
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.
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. Want to know more about how to retain control when buying online? Click here.
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:
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
AP automation extends the functionality of existing accounting / ERP application through real-time integration, utilising the supplier and GL information to ensure accuracy and provide an end to end transaction audit trail.