Finance forms the core of any organization, no matter its size or industry domain. Managing the all-important balance sheet and regulating cash flow is a crucial task. Accounting teams are in charge of the financial health of the organization.
While the Accounts Receivables (AR) team takes care of incoming payments, the Accounts Payable (AP) department takes ownership of settling dues. That may include vendors, freelancers, suppliers, facility management services, and a host of others. Long-term liabilities don’t fall under the purview of Accounts Payable, but projected expenses within a year do. The efficiency of AP dictates the cash flow and directly impacts relationships with creditors.
But while AP staff members crank the payout gears day to day, AP rarely finds time to take up value-added activities like fraud prevention, data analyses, and cash optimization. Most AP departments still follow manual steps in the Accounts Payable process even as enterprises embark on digital transformation initiatives. According to one study that analyzed the current state of technology used by AP professionals, over 50% of the participating companies received 20% of their invoices in paper form. A further 25.9% of these firms receive between 20–40% of their invoices in paper format.
Statistics such as these alert business leaders to the potential impediments to future-readiness. Technology must empower Accounts Payable operations (as it does for other essential business functions) to boost efficiency in today’s digital era.
Let’s look at the top three reasons for organizations to automate Accounts Payable operations:
Faster invoice approval
Invoice approval involves multiple stakeholders. Since incoming vendor invoices may be through email, a web portal, or regular mail, the AP team must route them to the correct department heads. Alternatively, a Purchase Order (PO) system may require matching corresponding invoices with the PO.
In the former case, the process is long and prone to several bottlenecks because department heads are busy and need constant reminders to finish approvals. Numerous email threads and follow-ups between the AP team and the business heads are both time-consuming and tedious.
Matching purchase orders with invoices doesn’t require intervention from too many people. Still, it is a labor-intensive activity as AP teams pore over every line and individual PO in detail. Automating the invoice approval process saves precious time—invoice routing is no longer a tedious manual task. Approvers receive the invoices, and the system sends out reminders at regular intervals. Programs raise red flags for upcoming deadlines. Similarly, automated PO systems show a significant increase in the speed of matching invoices to the PO. Algorithms rapidly compare them and highlight mismatches immediately.
Improved invoice data entry accuracy
Of all the essential attributes that an invoice data entry system must have, accuracy holds the top spot. Manually typing invoice data into an accounting system is an error-prone, time-consuming, and laborious job. If the AP team deals with a constant flow of invoices, the risk of manual error is naturally higher. The process becomes increasingly vulnerable to mistakes at each step, and things can quickly snowball into an unpleasant outcome.
A simple human error made at any stage inflates over time. According to the classic 1-10-100 Rule of the “Cost of Quality,” the cost of correction is exponentially higher than verification. In other words, if your AP team verifies their work at each stage, it would cost them a dollar. But it would cost them 10 dollars to rectify the mistake at the end of the month!
Here’s where automation eases the process. Advanced AP automation tools integrate directly into your ERP system (even eliminating the ubiquitous Excel spreadsheet in many cases)! Data is synced automatically with near-perfect accuracy in coding data invoices. For instance, Data Capture Solutions from established service providers like AMI Imaging simplify the process by several notches. Use them to extract relevant data from the invoices, post it into accounting applications, and route it to the appropriate reviewers. Use Sharebase to securely share invoices, PO with your internal teams, your vendors, and creditors. The time-cost savings you experience in the entire process will be difficult to ignore!
Timely & accurate payment execution
Another vital part of the invoice management process is payment execution. Following the data entry and approval, the invoice is in the hands of an AP team member responsible for making the payment. Whether this is a check or an online transfer, the step requires meticulous attention. There must be total clarity on aspects like payment due dates, deadlines, and applicable early-payment discounts.
Keeping track of these dates for hundreds of invoices every month is challenging, often leading to missed deadlines. Any error here affects your company’s potential cost savings through discounts and hampers your vendor partnerships and reputation.
That is why AP automation is such a boon! Sophisticated software programs automate your payment schedules, send out system alerts for discount deadlines, and centralize payments for all electronic transfers. Automation leads to timely, accurate payments and drastically lowers the costs and fraud risks that accompany every manual transaction.
AMI Imaging is a leading provider of document management solutions. Our well-known electronic content management services, document scanning services, and versatile business process management solutions assist companies in their digital transformation journeys.
AMI’s solutions for AP automation work well across industries as diverse as pharmaceutical, medical, manufacturing, insurance, and HR simplifying invoice retrieval, vendor contracts, and goods receipts directly from the company’s ERP applications.
By providing better real-time invoice processing status visibility, AP automation solutions improve workload distribution, lower the timelines for invoice approvals, and increase operational efficiency. Organizations must approach AP automation with a long-term view if they want to enjoy optimal benefits. A phased approach may work better than completely changing processes all at once.
Why not give us a call to explore what works best for your AP department?