AP automation: What is ap process automation?

In today’s competitive business landscape, automation has become a fundamental tool for streamlining and optimising processes across departments, especially in finance. One area that greatly benefits from automation is Accounts Payable (AP), a vital function responsible for managing outgoing funds and ensuring that vendors and suppliers are paid accurately and on time. With AP process automation, companies can reduce manual tasks, cut down on errors, and achieve a higher level of efficiency.

In this guide, we’ll explore what accounts payable process automation is, how it works, and why it’s an essential investment for modern organisations. We’ll also cover how to choose the right AP automation software for your business, ensuring that it aligns with your specific needs.

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What is accounts payable process automation?

Accounts payable process automation is the use of technology to streamline and automate the tasks associated with managing payables. Rather than relying on manual data entry, document handling, and approval routing, AP automation software automates these processes, ensuring that invoices are processed quickly, accurately, and efficiently.

In a traditional accounts payable workflow, tasks such as data entry, invoice matching, approval routing, and payment scheduling can be time-consuming and prone to error. By implementing AP automation, organisations can reduce the risk of human error, decrease processing times, and improve visibility into their cash flow.

The automated accounts payable process is particularly beneficial for businesses that manage a high volume of invoices and payments, as it enables them to scale their AP operations without significantly increasing headcount or resources.

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How does accounts payable process automation work?

The accounts payable automation process utilises various technologies to streamline tasks that were previously done manually. Here’s an overview of how AP automation typically works:

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• Invoice capture and data extraction: Invoices arrive from vendors via different channels—email, physical mail, or electronic portals. AP automation software can capture invoices from these sources and use Optical Character Recognition (OCR) technology to extract relevant information automatically. This data is then uploaded to the AP system without the need for manual entry.
• ‍Automated data matching: The AP automation system matches the data from the invoice to purchase orders, contracts, or goods receipts to ensure accuracy. This three-way matching process is essential in verifying that the invoice reflects what was ordered and received.‍
• Approval routing: Instead of manually forwarding invoices for approval, the AP workflow process is automated to route invoices to the appropriate individuals or departments based on pre-set rules. Notifications are sent to approvers, and reminders ensure that invoices are approved promptly.‍
• Payment scheduling: Once approved, invoices are scheduled for payment based on their due dates and company cash flow needs. AP automation software can prioritise invoices to take advantage of early payment discounts and avoid late fees.‍
• Record keeping and reporting: After payment, the AP system automatically archives the invoice and any associated documents, creating a digital trail that can be easily accessed for auditing, compliance, or future reference.

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Through these automated steps, AP automation enhances efficiency, reduces the chance of errors, and ensures a faster turnaround time for payments.

Which accounts payable tasks can be automated?

One of the advantages of AP process automation is that it can handle a wide range of repetitive tasks that previously required manual intervention. Here are the most common tasks that can be automated in the AP department:

Invoice receipt and data entry

AP automation software captures invoices directly from email or scans, eliminating the need for manual data entry. This reduces the time required for data capture and ensures a high level of accuracy.

Three-way matching

Matching invoices to purchase orders and goods receipts is essential to prevent fraudulent or duplicate payments. AP automation software can automatically match these documents, flagging any discrepancies for review.

Approval workflows

Routing invoices to the right people for approval is a time-consuming process, especially if multiple departments are involved. With automated AP workflows, invoices are automatically sent to approvers based on predefined rules, with reminders to ensure they’re reviewed and approved on time.

Payment processing

Automated AP software can be integrated with payment systems, allowing for seamless payment scheduling and execution. Once an invoice is approved, the system can automatically schedule payments and release funds on the due date, ensuring timely payments.

Document archiving and compliance

AP automation software creates a digital archive of all invoices and associated documentation, making it easier to retrieve records for audits or compliance checks. This automatic archiving provides full visibility and traceability for each invoice.

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What are the benefits of ap process automation?

Increased efficiency

Automating the accounts payable process significantly reduces the time required to process invoices, allowing AP teams to handle a higher volume of invoices with the same resources.

Enhanced accuracy

Manual data entry can lead to errors that cause costly delays and disruptions. By using AP automation tools like OCR and AI-based data validation, businesses can improve the accuracy of their data, reducing the risk of errors.

Cost savings

AP automation reduces operational costs by minimising manual work, reducing paper-based processes, and taking advantage of early payment discounts. According to industry reports, AP automation can reduce processing costs per invoice by up to 80%.

Better cash flow management

With automated accounts payable, businesses gain greater visibility into their outstanding liabilities, enabling better cash flow forecasting and management. This transparency allows companies to make more informed financial decisions.

Enhanced compliance and security

Automated AP systems provide built-in compliance features, such as audit trails and secure data storage, which help prevent fraud and ensure regulatory compliance. These systems create a complete record of every invoice action, making audits and compliance checks more straightforward.

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How to choose ap automation software

Choosing the right AP automation software is essential to ensure a successful implementation that aligns with your company’s specific needs. Here are some key factors to consider when evaluating AP automation solutions:

Integration capabilities

The AP automation software should seamlessly integrate with your existing Enterprise Resource Planning (ERP) or accounting systems. Integration is essential for maintaining data accuracy and ensuring a smooth workflow between systems.

Scalability

As your business grows, your AP automation solution should be able to handle an increased volume of invoices without compromising performance. Look for a solution that can scale with your company’s needs.

User-friendliness

The software should be easy to use, with an intuitive interface that simplifies the AP process for users. This is especially important for ensuring high adoption rates among your team and reducing the time required for training.

Customisable workflows

Every business has unique AP processes. Look for software that allows you to customise workflows according to your organisation’s specific approval processes, matching rules, and payment preferences.

Security and compliance

Given the sensitive nature of financial data, it’s critical that your AP automation solution has robust security features, such as data encryption and role-based access control. Additionally, ensure that the software meets relevant compliance standards for your industry.

Reporting and analytics

A strong AP automation solution should offer detailed reporting and analytics capabilities, enabling you to track KPIs such as processing time, approval turnaround, and cost savings. These insights can help you continuously improve your AP operations.

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Conclusion

Accounts payable automation is transforming how businesses manage their financial obligations. By automating tasks such as data entry, invoice matching, and approval routing, AP automation helps organisations increase efficiency, reduce errors, and improve cash flow management. With benefits like reduced processing costs, enhanced accuracy, and greater transparency, AP automation is becoming a crucial component of modern financial operations.

For companies seeking to streamline their AP process and drive greater efficiency, investing in an automated accounts payable process is a sound decision. As technology continues to evolve, AP automation software is likely to become even more powerful, offering more sophisticated features that enable businesses to stay ahead in a competitive market. By choosing the right AP automation solution and implementing it effectively, your business can gain a strategic advantage and set the stage for future growth and success.

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With the insights provided in this guide, your organisation can confidently explore and adopt AP automation, optimising your accounts payable processes to deliver lasting benefits.