Why automating accounts payable should be your next strategic goal
Accounts Payable (AP) is a vital part of any business as it forms the basis of the relationship between a company and its key suppliers. But some companies are so focused on innovation and growth that they ignore their accounts payable obligations. Automation will help solve this problem and will be trendy in the future. As per the global survey by McKinsey & Co. in 2020, 31% of companies have fully automated at least one of its functions, and 66% have solutions to automate business processes. So, let us have a closer look at the advantages of accounts payable automation and have a clear idea about what it is. So, let's get started right away.
What is Accounts Payable Automation?
Accounts payable automation leverages advanced data collection technology to streamline payment processes, reduce human intervention, and improve financial transparency. Automation helps companies improve supplier relationships, identify cost-saving opportunities, and conserve valuable resources. This process consists of three steps:
- Invoices and purchase orders are entered into an optical character recognition (OCR) or AI-based word processing solution for data capture, and the software stores the captured data in a structured database for analysis.
- Next, the data recorded from the invoice is compared with the order.
- Once the data is validated, the invoice is submitted for review, approval, and payment processing.
Why is Accounts Payable Automation the Next Strategic Goal?
The reasons why accounts payable automation is considered strategic goals are as follows.
- Ease of approval process for managers
Invoice approvers, mostly managers, are often extremely busy and have packed schedules. They are executives, managers, salespeople, and executives with job descriptions varying from product sales to people management to various other roles. While invoice approval is a desirable step of the process, if it takes a lot of time the task gets pushed to the back burner.With AP automation, this task becomes very easy. AP automation solutions, especially cloud-based subscriptions, simplify invoice approvals. One can view a picture of the real invoice from anywhere and approve it with one click.
- 10x reduction in processing time
Generally, reviewing the billing terms, obtaining the necessary approvals, and signing the paperwork can take several weeks. However, with accounts payable automation in place, it takes just minutes to send an unpaid invoice. Accounts payable automation streamlines processes, makes things go faster and takes 10x less time. AI-based automated accounts payable software improves invoicing by doing away with data entry and reducing reconciliation time. The software automatically matches invoices to purchase orders (PO) and goods receipt documents (GNR). It prevents large backlogs and makes cash outflows more predictable for the company.
- Streamlines the workflow
Delegating tasks and setting team goals can be difficult when accounts payable goals are unclear due to unorganised workflows. Some organisations use spreadsheets for this purpose and quite often access issues crop up. Another drawback of using a spreadsheet to track accounts payable is that the spreadsheet is static. It cannot automatically provide an overall forecast of cash flows and liabilities. Additionally, a lack of version control can lead to record validity issues and additional workloads for your team.
Accounts payable automation helps streamline workflows by combining disparate and high-volume invoice records into one platform. Plus, it's cloud-based and syncs with other business systems and apps for any time, anywhere access.
- Improved accuracy
- Reduces costs by 65%
- First, it saves valuable financial resources by preventing double payments due to human error. The software can be adjusted to automatically send notifications to accountants in case of duplicate entries. Additionally, you can benefit from early payment discounts by expediting payments to your suppliers.
- In addition, digital storage reduces printing costs by archiving receipts and invoices on cloud or local servers. Digital preservation is also relatively more economical than archiving documents manually.
- At last, skilled software for accounts payable automation can instantly sense fraudulent payments and inform the correct authorities.
Manual processes could be more efficient and error-prone. Manual insertion of billing data makes the data’s reliability, accuracy, and integrity questionable in the accounts payable procedure. The risk of human error is eliminated in the accounts payable process with the use of automation. The auto-validated AP data capture service leverages technology and human validation to ensure 99.9% accuracy of AP data. Also, AP automation detects and corrects errors with little or no human intervention.
Software for accounts payable automation also standardises invoice data in defined workflows. So even if different teams enter invoices into the automated system, the workflow will automatically standardise the invoices as per the company-defined invoice process.
Admittedly, deploying AP automation software is costly and requires employees to learn. However, the ROI from implementing accounts payable automation is unmatched in the long run. Let's see how:
Saving money is the goal of every business. Automating the accounts payable process can be highly beneficial in achieving this goal. Also, there are numerous additional justifications for adopting accounts payable automation. These range from factors such as boosting employee satisfaction, and ensuring tax and audit adherence, to enhancing disaster recovery capabilities.
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