There has been a broad shift underway in the accounts payable world in recent years. years. Where once paper invoices were processed strictly by hand, a cumbersome effort that could take weeks, if not months, companies are now opting en masse for AP automation software. It’s easy to see why this happens. Companies that look to AP automation software can expect quicker and cleaner approvals, at a lower cost per invoice.
That said, it’s not simply a matter of finding any old AP automation vendor to begin experiencing the many benefits. Here’s how to ensure your company finds a good partner.
Three Problems AP Automation Can Solve
AP automation software didn’t just arrive on the market because technology evolved. It also can solve a host of longstanding problems for AP departments.
Here are three to be mindful of.
Problem No. 1: Approvals Take Too Long
Even in 2021, approval time remains the greatest challenge for AP departments. Stampli found in a recent white paper, “The How, the Why and the ROI of AP Automation” based on a January 2021 survey that more respondents than any other, 57%, saw faster invoice approval as a benefit of AP automation.
The good news is that the time it takes for companies to process an invoice has improved dramatically, from weeks or months to just days generally. But on the slow end, for companies still stuck on old manual processes, approval can drag for weeks, even months, with processing costs increasing steadily. In fact, some sources have suggested the savings can be as much as a whopping $26.50 per invoice.
Delays happen and processing costs increase because having to get invoice approvers on the phone or via email is tricky work, particularly during a pandemic when many executives are spending as little time in their companies’ offices as possible. But it doesn’t have to be like this.
How AP automation solves this problem: Centralized communication tools in AP automation platforms allow real-time collaboration and payment approvals on top of the invoice. The systems can also provide automated reminders, ability to approve invoices from anywhere at any time, and generally easier to use approver interfaces.
Problem No. 2: Data Entry and Three-Way Matching Kill Time (and Morale)
The tediums of AP work can sink even the most dedicated workers in the field. Payables clerks might have to manually key in hundreds, even thousands of invoices per month, swallowing up incalculable amounts of staff time. It’s also a notorious morale killer, with a study in early 2020 ranking data entry among the most-hated workplace tasks.
A core part of AP is also grouping invoices with purchase orders and receipt reports, a process known as three-way matching that ensures goods were agreed to and received. Doing this reduces the risk of paying unnecessary or outright fraudulent bills and is vitally important. Done by hand, though, three-way matching, like data entry, is also no fun for accounting staff.
How AP automation solves this problem: The software can feature PDF invoice capture capabilities and data extraction and matching, via artificial intelligence, to general ledger coding. It goes without saying that this also improves storage and access to vendor invoices, purchase orders, and receipt reports for three-way matching.
Problem No. 3: Missed Discounts and Late Payments
Businesses had to scrounge for every dollar they could in 2020 with the onset of the COVID-19 pandemic and resulting recession. All the same, far too many companies are still missing out on early payment discounts, which can run 2% to 3% for paying bills within certain timeframes. Worse, many companies are still sailing well past this and racking up unnecessary late charges with their vendors.
While cashflow can be a challenge for any business in these uncertain times, AP automation software makes it far easier for companies to avoid late fees and missed discounts.
How AP automation solves this problem: The software provides automated and customizable approval reminders, making it so AP clerks don’t just have to rely on memory. It also offers the ability to easily identify and track invoices that are late or those that are coming due in a Late Invoices tab.
Preparing to Implement AP Automation
Problems can definitely accumulate for companies that cling to manual accounts payable practices. For companies that have seen the light and want to opt for AP automation, here’s how to begin to make the shift.
Chart Goals for Accounts Payable
Accounts payable departments get themselves into trouble flying blindly, not mindful of all the invoices and data flowing through them. Therefore, it’s smart for businesses to conduct a corporate inventory of sorts before moving ahead with an AP automation implementation.
Whatever a company’s AP goals might be, charting them can help the business to determine its accounts payable strengths, how prepared it is for AP automation, and if other process improvements need to happen concurrently, such as establishing greater internal focus on data analysis.
Strengths and Weaknesses of Different AP Platforms
All the major AP automation platforms have different strengths and are not all designed the same. While system interoperability is becoming a more important factor in the B2B payment space, far too many automation platforms aren’t flexible enough to work any approval process or adapt to process changes and handle exceptions.
Some AP automation software might force you into an approval matrix-only system which doesn’t consider when someone is sick, on leave, or left the company. Others are really more payment-first solutions, with AP automation an add-on feature. Of course, the opposite can be true as well, with certain processing solutions not including payment options.
This is part of why Stampli launched its Stampli Direct Pay solution in 2020, providing an all-in-one, payment agnostic platform with maximum flexibility.
Compare Pricing Carefully
Most AP automation platforms charge based on a monthly subscription service which can be month-to-month or an annual plan. However, when comparing prices, look for less obvious costs. The cheapest plan might have limited features or only permit you to process a certain number of invoices each month. There are additional costs which come in form of a platforms payment options.
Watch for providers which offer payments and force the invoice approval process to only work with their specific payment offering. These solutions try to lock in entire organizations. It harkens to the bad old days of accounts payable when companies had to invest heavily in creating their own in-house invoice processing systems that became quickly out of date.
Additionally, consider support and development requirements, as these may add additional costs not included in the monthly subscription costs. Technology upgrades should also be accounted for.
AP Automation Software Features to Target
Choosing the right AP automation software solution requires careful planning and consideration. But which factors are most critical? When comparing solutions, consider the following factors carefully, and be sure to weigh the pros and cons to find the solution that fits your needs best.
Ease of Use and Customized User Views
When comparing solutions, pay close attention to how easy the software is to use for each type of user. Moreover, the AP system needs to be customized to what their role is in the process. The solution should speak the language of at least three different groups of AP Automation user roles listed below.
- Invoice approvers: This group, which can include CFOs, controllers, and CPAs, typically makes up the vast majority of AP automation users. These users, who are often high-level personnel, need a simple and easy to use interface where they can ask and answer questions, and approve invoices.
- Advanced users: A small group, these users often have one or multiple permissions where they can edit invoice fields, cancel/recall invoices, revise approvers, and/or refer an invoice for payment. Additional roles include vendor managers, system admins, and management overview features.
- Management overview: This provides reporting dashboards and enables users to gain access to reports for invoice processing, payment forecasts, and user activities among other metrics.
While a slight learning curve is to be expected from anything new, a platform that doesn’t speak the language of each kind of user will have a lower adoption rate. This can also help determine the level of IT support that will be needed from an AP automation vendor.
Fraud Prevention Tools
In addition, some platforms offer fraud protection features. For example, Stampli will notify the AP department when a vendor makes a change to their Vendor Portal account. Depending on the level of visibility and customization you want to leave your vendors with, the Stampli Vendor Portal offers a secure place for vendors to view invoice or bill status without seeing any sensitive information.
Needless to say, fraud remains a major problem in the B2B payments space, as PYMNTS.com noted in February 2021. But AP automation can fight this and help create a system of checks and balances to minimize risk.
Final Thoughts on Choosing the Right AP Automation Platform
In addition to considering your business’ current needs, choosing the right AP automation platform also requires you to look ahead. What will your needs be in the next two, three, or even five years? Does the system you are considering have the flexibility to scale as your business grows?
At Stampli, the focus is clearly on the long haul. Stampli’s AP automation system works with your current and future systems and processes to create a streamlined invoice approval workflow. It’s all about ensuring we can be the best, most flexible AP solution that our partners could need. AP automation that works your company, and not the other way around. Try Stampli today.