The Ultimate Guide to Understanding Accounts Payable Automation

Accounts payable automation simplifies processes, enhances accuracy, and boosts efficiency, revolutionizing financial management for businesses.

A manual accounts payable process can be laborious and prone to errors. Dealing with stacks of paper invoices, reaching out to approvers individually, and sending checks via mail slows down the process, increases the risk of fraud, and complicates audits. Here's where accounts payable automation solutions step in!

Accounts payable automation (AP automation) technology is the way for a quicker, slicker, and spot-on handling of your financial game. With an AP automation workflow, you can boost your connections with suppliers and partners, while saving time and cash. Plus, you can slash days sales outstanding (DSO).

Understanding Accounts Payable Automation

AP automation technology streamlines repetitive tasks such as invoice reception, coding, approval routing, payment, and reconciliation. You might encounter the term "touchless" processing, indicating that AP automation removes the necessity for manual data input throughout the process while approvers may still need to authorize payments with a simple click of the mouse.

AP automation software commonly includes dashboards and analytical tools to assist in managing the AP process and identifying issues. With all accounts payable data digitized and stored in a unified system, searching for information and conducting audits becomes more straightforward.

How Does Accounts Payable Automation Function?

AP automation software works its magic, turning your suppliers' invoices into a digital format and guiding them through an AP automation workflow that ends with paying those suppliers. Right at the start, AP automation starts optical character recognition (OCR), extracting all the data from those invoices. Certain solutions utilize machine learning to identify patterns and enhance accuracy over time.

For instance, they may propose particular general ledger codes or approval routes based on previous instances. By tailoring rules to your business, such as allowable discrepancies or approval structures, you may eliminate the necessity for manual involvement in most invoices.

Below are the stages within the AP automation procedure:

  1. Invoice Digitizing

The endeavor into AP automation starts by turning those paper invoices into digital format. How? With Optical Character Recognition (OCR) technology. It scans, interprets, and transforms those paper-based invoices into digital treasures. While OCR is doing its thing, e-invoicing systems jump into the mix, letting vendors zap their invoices electronically, skipping the whole paper hassle.

  1. Invoice Verification

Following invoice data capture, the system matches and verifies invoices against corresponding purchase orders and delivery receipts automatically. This verification guarantees alignment between the invoiced items and the agreed-upon purchase terms. Through automation, businesses can pinpoint discrepancies or inconsistencies, ensuring that only precise invoices progress to the subsequent stage.

  1. Invoice Approval

Guided by pre-established organizational guidelines, the accounts payable automation solutions direct invoices to appropriate personnel or departments for approval. Criteria, such as invoice amounts, vendors, or other specified factors determine the routing. Additionally, alerts and reminders can be configured to hasten the approval process. This approach guarantees prompt reviews, minimizes the risk of overlooking invoices, and preserves a transparent audit trail of all approval activities.

  1. Payment Scheduling

Upon approval, the AP automation system streamlines the payment process, which involves scheduling payments to enhance cash flow, choosing the preferred payment method, and executing payments automatically or with minimal human involvement. Through payment automation, businesses can guarantee punctual settlements, capitalize on early payment incentives, and uphold favorable relationships with vendors.

  1. Payment Reporting

Following payment execution, the system initiates an automated reconciliation procedure, cross-referencing payment transactions with bank statements to ensure alignment of amounts and recipients. Additionally, AP automation tools produce comprehensive reports on metrics, such as spending trends, vendor performance, and potential cost-saving prospects. This automated reconciliation obviates manual verification, minimizes errors, and furnishes financial teams with data-driven insights to guide strategic decision-making.

Why Opt for Accounts Payable Automation?

There are numerous rationales for implementing AP automation, with some yielding tangible and swift returns on investment. By digitizing AP processes and minimizing manual labor, AP automation can lower processing expenses. Moreover, it can facilitate easier scaling of AP operations as your business expands, reducing the necessity to hire additional personnel.

AP automation also equips you with tools to oversee payments and cash flow. By expediting and streamlining the payment process, AP automation can enhance your capability to seize supplier payment discounts.

Tasks to Automate Through Accounts Payable Automation

The AP tasks that stand to gain the most from automation are those in which processing time can be reduced or accuracy enhanced, ultimately leading to cost savings. When compared to manual processing, AP automation can significantly enhance the following steps:

  • Data entry:Automating data capture from all source documents is quicker and less susceptible to errors than manual data entry.
  • Invoice Coding:You can implement rules that automatically assign the appropriate general ledger code to each invoice, removing the time and inconsistencies associated with manual coding.
  • Approval routing:Electronically routing documents to all required approvers is quicker than manually distributing them, and it also offers improved tracking throughout the workflow.

Final Words

AP automation is a vital tool for contemporary businesses seeking to improve their financial processes. By adopting this system, organizations can realize both tangible and strategic advantages, positioning themselves for long-term success and expansion.

Are you seeking top-notch accounts payable automation solutions? Reach out to KatPro!

Katpro Technologies

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