There isn’t enough discussion around automating accounts payable.
Perhaps it’s because businesses don’t like to talk about spending money as much as they like to talk about earning it. But if you’re not looking into the vast opportunities within AP automation, you’re missing the boat on a lot of highly innovative processes that are changing the way we do business.
In this post, we’ll outline the basics of automation, cover accounts payable automation best practices, and list some AP tasks ripe for streamlining.
The Purpose of Accounts Payable Automation (AP Automation)
AP automation is a technological system capable of conducting the large majority of previously manual accounts payable tasks and automating them. With AP automation, anything that can be done by a computer is done by a computer 🤖. Here’s a sample of a typical AP process:
As you can see, there are many tasks that can easily (and more efficiently) be done by a computer, such as extracting invoice data and matching the invoice to a PO and receiving documents, to coding the invoice, then communicating this information into an accounting system, and sending email reminders to invoice approvers, just to name a few. The purpose of AP automation is simple:
Reduce manual accounts payable tasks, speed up invoice processing time while decreasing the cost to process an invoice, and finally, gain better visibility and control over the entire invoice lifecycle.
Let’s take a closer look at how that plays out in terms of the benefits for businesses.
What are the Benefits of Accounts Payable Automation?
Now that you have a firm grip on the what, let’s examine the why of AP automation. What can CFOs and business leaders expect to gain from the implementation of online accounts payable software?
Reduced time spent on AP tasks
There are no two ways about it—this is the primary and most immediate benefit of introducing automation software into your AP department. From eliminating manual data entry altogether to collaboration and communication efficiencies, AP automation software can shave a significant amount of time for your AP department.
“Stampli has reduced our accounts payable process time by 75%.” — Teddi Patchett, Senior Accountant
With saved time, of course, comes saved money. If you’re reading this, you’re likely pretty good with numbers, so we’ll let you tell us:
If you reduced the time spent on accounts payable by 75%, how much would you save?
Hopefully, that’s a decent chunk of change you can reinvest back into the company. But that’s not the only way AP automation can help improve your bottom line. Once you start streamlining your payment processes, new opportunities to cut costs become available to you.
For example, with a more efficient AP system, you’re also going to shorten your time to payment if you choose to do so. As we know, some vendors offer discounts for early payments, which means you have the financial visibility and controls to decide whether or not to make an early payment.
Reporting and real-time visibility
CFOs require visibility when it comes to their company’s financial position at any given moment, including liabilities. Things like late fees can add up quickly and unexpectedly if you don’t have the proper visibility into the invoice lifecycle.
Consider these two situations as you’re trying to look up the status of an invoice:
- Call three different people trying to find the rationale of an overdue invoice while navigating somebody else’s availability.
- Pull up the detailed invoice history and communications trail on top of the digital invoice itself.
As human beings, there’s some built-in natural resistance to the first scenario, which means it’s less likely to get done. AP automation provides the utility of the second scenario, which gives greater control to CFOs, managers, and accountability to the AP department.
Improved vendor relationships
In addition to time savings for your own department, AP automation shortens the time it takes for your vendors and suppliers to get paid. Companies that deploy AP automation systems often reduce their invoice processing times by more than half.
AP automation systems give you the option to allow your vendors to attach documents in a wide range of formats or update their company information if you so choose, which can reduce the amount of hoops they might have to jump through.
The formula for improving your business relationships is simple:
Paying your bills on time + being easy to work with = healthy, long-term relationships with your vendors 😎
Employee satisfaction and utilization
Keeping your vendors and suppliers happy is cool, but you know what’s even better? Keeping your staff happy and fulfilled! Believe it or not, implementing an AP automation system does not mean replacing your workforce with robots.
Rather than eliminate jobs in the finance and accounting sectors, AP automation will open up new opportunities for professionals to utilize the talents they possess that are uniquely human, such as strategy development, creativity, and leadership. Without the need for manual data entry and other tedious tasks, smart businesses will look to develop these skills in their AP department and reap the benefits.
This probably goes without saying, but one of the prerequisites for AP automation is the digitization of all documents in the process. No more lost invoices, coffee-stained documents, or storing invoices in file cabinets. With AP automation, all your invoices and attached documents are stored digitally for 7 years and can be exported if required. Which means your documents are easily accessible and ready for audit.
Oh, and of course once everything is digitized, there is a whole new world of automation and workflow improvement options available to you.
Raise your hand if you’ve ever heard the phrase: “We all make mistakes. We’re only human.”
Well, computers and artificial intelligence (AI) are decidedly not human, and they don’t make mistakes—at least not those of the typographical and “human error” sort.
By mitigating human errors from invoice processing, you can virtually eliminate fairly common AP problems like duplicate payments by flagging irregularities and exceptions for manual review. By only requiring manual review when something is potentially incorrect, you reduce the amount of oversight that needs to go into every step of the process while improving accuracy.
A digitized ‘paper trail’ also helps expose fraud more easily than having to track down changes manually, since AP automations tracks every step or communication made throughout the invoice lifecycle.
Top Accounts Payable Processes to Automate
At this point, we’ve laid out some clear benefits to AP automation, but what’s perhaps even more interesting is how we’re able to achieve those benefits. Let’s zoom in on a few of the most common AP tasks that can be streamlined through automation.
Receiving Invoices and categorization
In order to pay a bill, you have to receive it first. Sounds simple enough, but in practice, it can actually be quite a frustrating experience. Vendors can send invoices via email, fax, or even (gasp!) snail mail. And once these are input into your system, they still need to be categorized.
But, if you’re able to get your vendors to send invoices electronically, many doors open up for you. At the risk of sounding too cavalier, the first step in AP automation is akin to waving a magic wand over all the tasks listed above and making them disappear. Those tasks are still getting done, but there’s no longer some poor accountant manually categorizing them and submitting them to your system. One headache down, a few more to go!
Data capture and coding
Computers learned how to ‘read’ many years ago via optical character readers (OCR) and intelligent character recognition (ICR), and they can do it extremely efficiently with virtually no errors. Also, with a few tweaks to some settings, you can teach your AP automation system to categorize and code invoices. For example, Stampli will remember GL and accounting codes and populate the suggestions as you’re working.
Once an invoice arrives, you need to send it to the right person for verification and approval, which is something a computer can easily do. AP automation will remember your approval workflows and route them accordingly. And because the dollar amount and categorization of the invoice has already been ascertained, the computer can make sure it goes to the right person and in the correct order when there are multiple approvers.
It makes you wonder how many forgotten invoices are sitting in someone’s SPAM folder after being forwarded to the wrong employee…
Typically, before an invoice can be paid it needs to be matched to other documents such as purchase orders (PO) and receiving reports. Because this process is simple as matching a specific amount, keyword, and category, this is a perfect job for a technological system. With the proper organization through attachments and connecting to your accounting system, invoice verification has never been easier.
Using AI, your AP automation system can not only examine and dissect all the information on the bill, it can compare it against historical invoices and help you easily spot any anomalies.
Sound good to you? Keep reading to see how you can plan for an AP automation solution at your business.
Key steps to a successful accounts payable automation solution
At Stampli, we know AP automation—it’s all we do. Over 500,000 professionals trust us to automate invoice approvals and give them complete control of the invoice lifecycle. That said, we also know it can often be a challenge to implement a new system at any level of business for a variety of reasons from cost, implementation time, or just good old-fashioned office politics.
If you want to get your AP automation process off on the right foot, follow these simple steps.
1. Identify your primary business problem
AP automation systems can provide a ton of value through a variety of features. But if you don’t identify the core problem that initiated your search for a solution in the first place, then the outset may be less rewarding.
Identify and rank your most pressing problems within accounts payable before you begin your search for a solution, and as you talk with an AP automation specialist, ask them if the solution solves for your specific business problem.
2. Map out your entire process
On that note, it can be extremely helpful to fully understand how things get done in the AP department. Some of the problems might help work themselves out as you zoom in on the issues, while others will reinstate the need for automation.
Grab your whole team, a whiteboard, and a stack of Post-it notes and go to town! Inviting a group can make this more effective, and more fun, but it can also help get people on board down the line.
3. Find consensus
If you get your team involved early, this takes care of itself. But if you’re having trouble getting people on board with your project, consider finding a champion or a small group and work with them directly. This will help them feel like they’re a part of the solution, which creates ownership, and therefore a higher success rate upon implementation.
4. Prepare to dedicate resources to the project
AP automation implementation can take time and money (although perhaps not as much as you think), so you’ll want to make an official project out of it. Assign a budget, a timeline, and a team to make sure implementation goes smoothly.
5. Choose the right partner
Different products have different specialties, and AP automation software is no different. Take a look at not only their features list, but also their customer reviews on G2, integrations, and product roadmap. Of course, you can always reach out to the friendly team at Stampli with any questions!