What Is Accounts Payable Process Automation? (+Challenges)
- August 29, 2022
No business operates entirely on its own. Companies, especially enterprises, rely on the procurement of goods and services provided by other businesses or contractors to function. These goods and services need to be paid for in a timely manner, and that’s where Accounts Payable, or AP, departments come in.
Accounts Payable departments manage the receipt and payment of all the invoices a company receives. Although it sounds fairly straightforward, it takes a great deal of time to take in and organize invoices, track down approvers, and align everything with the budget. Handling all of this manually used to mean dealing with ‘missing’ invoices, late payments, wasted time, and other issues that end up costing a company big bucks.
Recently, businesses have begun automating significant portions of the AP process to cut down on these problems while increasing efficiency and sparing team members unnecessary headaches.
What is Accounts Payable Process Automation?
Accounts payable processes can be automated from start to finish through the utilization of software solutions that streamline and digitize associated tasks. This means integrating with existing tools to facilitate receipt and allocation of invoices as well as moving them between approvers and back to AP for final approval and payout.
This decreases the need for individual employees to have their hands on each invoice as it moves along its journey and eliminates opportunities for errors to occur. As a result, fewer team members are required to oversee invoice management and those who are can spend fewer working hours doing so.
5 Benefits of Accounts Payable Process Automation
While it can benefit just about any business area, the accounts payable process is riddled with opportunities to build efficiency through automation.
1. Timely payments
Automating invoice processing means invoices will be paid on time, eliminating stress and interruptions. With AP automation solutions, team members can set up automatic payments, facilitate necessary approvals, and track what’s going on throughout the entire procure-to-pay process. With a good enough handle on things, it’s even possible to take advantage of early payment discounts.
2. Reduce invoice errors
Another benefit of automation is the reduction of errors that occur during processing. Most AP automation software makes use of Optical Character Recognition, or OCR, to capture data from invoices. Again, this makes it possible to avoid mistakes in terms of the payment amount and budget category as well as issues with duplicate payments. Reducing payment issues will allow team members to catch mistakes before they happen, saving plenty of time and effort.
3. Enforce compliance and prevent contract leakage
Automation also provides value by ensuring compliance. By allowing OCR software to handle invoice processing and storage, businesses will see fewer errors affecting compliance, increased transparency and accessibility through cloud-based document storage, and an overall reduction of risk.
Users can additionally implement user-based approval limits to guard against suspicious activity and prevent fraud.
4. Reduce invoice processing costs
Because automation requires less work on the part of Accounts Payable teams, companies don’t need to hire as many team members dedicated solely to AP tasks. Maybe the department is a bit smaller, or maybe AP is simply a component of team members’ larger set of responsibilities. This presents an enormous opportunity for savings in terms of time and labor.
Streamlining invoice processing reduces costs in other, smaller ways, too. For instance, digitization and automation mean a huge reduction in document printing and storage costs for many different departments.
5. Faster invoice approvals
The approval process is one component of invoice processing that can slow down the rest of the process. AP Automation software can help clear these hurdles by sending automatic reminders to approvers. This means no “missed” emails or convoluted paper trails – invoices go right where they need to be, right when they need to be there.
3 Challenges of Accounts Payable Process Automation
Here are the top three challenges of accounts payable process automation:
1. Supplier adoption
With some solutions, suppliers may need to change how they compose and send invoices for payment. They may be directed to a vendor portal to submit and track the status of their invoices, and this can cause pushback in certain situations.
When adopting an automated Accounts Payable process, it is important to provide vendors with all the information they need and choose a solution that includes supplier and vendor onboarding solutions if necessary.
2. Employee change management
Helping employees shift to a new solution can cause stress and bring about resistance to change. Even so, businesses can’t possibly expect to use the same technologies for eternity. This is where change management and facilitation of user adoption come in.
The IT team should come up with a rollout plan for changes like these so employees can warm up to the new technology before diving in. Consider strengthening this support by incorporating a digital adoption platform solution like Whatfix into the rollout.
3. Integration with legacy systems
The solution you find to automate the Accounts Payable process should be able to integrate with existing systems including your ERP software and procurement software. Finding the right fit may take some searching, but it’s out there.
4 Ways to Automate the Accounts Payable Process
Here are the top four ways to automate the accounts payable process:
1. E-voicing
Set up the Accounts Payable process to be automated from the moment an invoice or request for payment is received. Shift to E-voicing by encouraging vendors to send digital invoices, or submit them directly to a portal depending on the software you choose.
Even if there are a few hard-copy stragglers, every invoice should be fed through an OCR invoice system which can read the documents and pull relevant data to move the process along. E-voicing decreases paper clutter and lessens the likelihood of mistakes or loss of documents and invoices.
2. Make approvals seamless
Rather than hand-delivering or manually emailing invoices to approvers, the approval process should also be automated to eliminate hangups, delays, and errors. Building out approval workflows will ensure that invoices get to the right parties on time and reminders are sent out automatically so that documents keep moving through the pipeline.
3. Avoid manual data entry
Invoices should be fed into the system to be read by OCR systems which capture invoice data and route them easily. This technology cuts out a large portion of data entry tasks, helping minimize opportunities for mistakes and free up employee time to work on other duties.
4. Automate complex coding
OCR systems can also automate classification and general ledger coding by searching documents for additional fields to help categorize them and align spending with budgets. They can pick out fields like vendor, amount, category, department, etc., and process that data to free up even more employee time and energy.
5 Best Practices for Accounts Payable Process Automation
Here are five best practices for accounts payable process automation:
1. Get employee buy-in
To get employees on board with automation, the rollout team should be able to identify the pain points it will alleviate and explain how automation will go further to improve their work experience. Be sure to emphasize that this will increase their value as team members, and convey the types of work they will be doing instead. Don’t leave room for employees to jump to conclusions, potentially fearing for the future of their jobs.
2. Prioritize supplier adoption
Make it easy for vendors to submit invoices and provide them with onboarding assistance rather than simply assuming they will figure it out. Chances are, your suppliers have many clients and don’t have the bandwidth to create a special invoice for your company every month or spend an hour trying to navigate a new portal without instruction.
3. Outline workflow rules
Lay the groundwork for success by meeting with each department to outline the chain of approval for different types of invoices. Establishing approval workflows means invoices will be routed correctly as soon as the ball gets rolling. Including backup contacts can be useful in the event of employee turnover or extended time off as well.
4. Monitor your metrics
Keep track of adoption by monitoring your software’s built-in analytics tools. You should be able to see how long it’s taking different types of invoices to move through the system.
Is there a difference between different departments? What could be causing the delays? Take care to provide additional training if needed and be prepared to reinforce the importance of the new technology.
5. Keep vendor information current
Use your solution’s supplier management tools to make updates to contact information and communicate with vendors. You might be able to keep important notes about the relationship and alternate contacts as well. Keeping everything up to date can help your teams improve relationships with suppliers and avoid late payments due to outdated contact info
Invoice management is integral to the success of any organization, despite being a process riddled with inefficiencies when handled manually. Moving to an automated solution is ideal for most businesses, but getting there can take some effort.
Digital adoption platforms like Whatfix can make this transition a breeze by utilizing in-app training tools like on-screen instructions, tasks, and tips as well as full-scale walkthroughs. You can even rack how employees are making use of the software through the software to adapt training content
Learn more about how Whatfix can support your AP process automation efforts today.
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