What is AP Automation?

AP automation, or accounts payable automation, is the process by which accounts payable processes are handled digitally using technology, rather than manually. It has revolutionized the way businesses process and pay their invoices.

How does an Accounts Payable Automation solution work?

AP automation solutions allow buying organizations to receive invoices, manage approvals and process payments automatically, via a single platform.

AP Automation covers 3 components:

Invoice Receipt

Invoices can be received electronically or converted from paper to electronic. Electronic invoicing covers methods such as B2B/EDI connections, PDF invoicing or receipt via a supplier portal, where data flows electronically. Paper invoices are scanned and processed using artificial intelligence or OCR to extract and store the data in the cloud.

Matching and Workflow

Once the data has been captured, invoices are either matched to purchase orders and goods receipts or they are automatically routed to the relevant team or individual for review and approval. Once approved, they are sent to the ERP or accounting system for payment.

Archive and Audit

All Invoices are securely archived, and audit trails of all actions taken on invoices are easily available for financial audit purposes. Electronic archival of invoices also makes it easy to search for and find invoices anytime from anywhere in real time.

What are the benefits of using an Accounts Payable Automation provider?

AP automation providers offer a whole host of benefits for businesses, including cost savings, timely payments, and processing efficiencies, reduction in errors and exceptions and the ability to optimize working capital through the capture of early payment discounts. The key benefits of using an AP Automation solution are:

Time Savings

AP Automation software makes the invoice processing and approval faster and more efficient. By eliminating many of the manual stages of invoice processing, automation significantly reduces the number of human touches per invoice and as a result minimises the amount of time staff spend on this aspect of their role.

Improved Efficiency

Automation streamlines the invoicing and payment process, reducing approval times and increasing productivity. Accounts Payable automation solutions can also be integrated with existing financial systems, making the process even more efficient while ensuring the seamless flow of information between systems.

Increased Accuracy

A significant benefit of AP automation solution is that automation increases accuracy by eliminating the risk of human error and helps reduce payment errors, such as duplicate or fraudulent payments. By automatically validating invoice data against ERP information early in the process, erroneous payments can be flagged before they are made.

Reduced Costs

Using an accounts payable automation provider can significantly cut the cost of processing invoices, saving the business money as well as time and resources. Automation helps reduce labor costs by reducing the amount of data entry involved in the process, as well as eliminating the costs involved in document storage, postage, invoice production, etc.

Built-in Compliance

When AP processes are automated, compliance rules are built into the system. This makes the process fully transparent, so that common risks and instances of fraud can be tracked and prevented. For example, the system will flag duplicate invoices, additional charges and suspicious activity.

The ROI of AP Automation

What is the ROI of AP Automation?

When deciding whether to implement an accounts payable automation solution, it’s important to consider the ROI.

In reality, calculating the ROI of AP automation isn’t always straightforward. This is because it impacts so many different areas of a business, and the savings compound as volumes increase.

When calculating the ROI of accounts payable automation, there are a number of points to consider, including both financial and non-financial benefits.

The Financial ROI of AP Automation

The specific numbers will depend on factors such as the industry your business operates in, the amount you invoice each month, and how much you currently spend on the process.

Factors to consider include:

  • Reduced invoicing processing costs
  • Reduced losses as a result of human error
  • Fewer supplier inquiries into payment status
  • Increase in on-time payment performance
  • Time savings
  • Increased capture of early payment discounts
  • Reduced staffing costs

The Non-Financial ROI for AP Automation

As well as the financial returns, you should also consider the non-financial ROI, including:

  • Increased control
  • Streamlined processes
  • Easy auditing
  • Optimised business relationships
  • Employee satisfaction

Considering all the factors above and their financial implications will help you calculate the potential ROI AP automation could offer for your organisation.

How to get buy-in for AP Automation in your business

If you’re considering implementing AP automation in your business, you’ll need to secure buy-in from key stakeholders. Introducing automation won’t just impact the accounts payable department, it will also impact roles such as IT, procurement, management, and the CFO.

Each stakeholder, or group of stakeholders, will have their own questions and potential concerns when it comes to AP automation. To overcome them, you must identify the issues, and explain how automation will benefit their areas of the business.

AP Automation FAQs

How does AP automation improve the invoice approval process?

AP automation makes the invoice approval process quicker and more efficient. By identifying the correct approvers, sending notifications and reminders automatically, it streamlines the process and removes unnecessary human involvement, thereby reducing human errors. It also means that key documents are stored in one place and are accessible to all relevant team members.

How can AP automation resolve issues with invoice-related communication?

AP automation can help resolve invoice-related communication issues by creating an accurate, real time record of any comments, questions and inputs relating to a specific invoice or client. This also means that documents and communication records can be accessed and searched by all authorised parties.

Can AP automation improve document management?

Yes. With AP automation, all invoices and other invoice-related documents are automatically stored electronically. Online archival ensures that employees have easy access to invoices and other transaction related documents anytime, from anywhere.

How does AP automation prevent duplicate payments?

Validation checks built into the solution check all invoices upon arrival and flag any duplicate invoices. This means that duplicate payments are stopped from being made in the first place, instead of having to recover the money after the fact.

Can AP automation software help prevent invoice fraud?

AP automation provides comprehensive controls that can be introduced to your financial processes to prevent fraud and enhance security. Within the invoice approval process, for example, approval limits can be applied to the accounts of specific or all users and additional approver requirements can also be set. The reporting tools provided by AP automation also increase transparency and visibility, meaning any fraudulent, suspicious, or unusual activity can be identified quickly.

Will my suppliers interact with my AP automation solution?

There are a number of ways your suppliers can interact with the AP automation solution, including using the supplier portal to submit invoices and check the status of transactions real-time, significantly reducing the number of supplier inquiries into your AP department.

Will my suppliers interact with my AP automation solution?

AP automation solutions can be seamlessly integrated with existing ERP and financial systems, allowing real-time data flow and file integration.