What is Accounts Payable Automation?
Accounts payable automation, or AP Automation is an automated technology process that digitizes the supplier's invoice management by capturing all the required details for account processing.
In addition, AP automation reduces manual or human data entry tasks. For example, artificial intelligence and machine learning technologies automate invoice processes to minimize errors and achieve 99% accuracy.
Accounts Payable Automation Workflow
Accounts payable automation enables companies to process supplier invoices without human intervention by providing a digital workflow to manage steps previously handled by an AP staff member.
- Capturing Invoice Data: Holistic accounts payable automation starts with capturing invoice data in a digital format, usually through scanning or capture methods such as optical character recognition (OCR).
- Digital Workflow: Accounts payable automation will then manage the coding and routing of the invoice through the digital workflow, which functions based on specific logic configured in the organization's accounts payable automation software.
- Visibility & Reporting: Accounts payable automation significantly reduced the risk of fraud by giving management and AP staff unprecedented visibility and reporting capabilities into the flow of invoices and transactions across the organization.
- Cost Savings: Accounts payable automation can provide significant cost savings for the organization beyond the expected savings from eliminating manual tasks. Companies can optimize their vendor portfolio, avoid duplicate or erroneous payments, and take advantage of early payment discounts.
How to Automate Accounts Payable?
Accounts Payable Automation works differently depending on the supplier invoices.
- Indirect spending: The accounts payable automation solution supports automatic invoice data capture, coding, and assignment of invoice approval to the appropriate stakeholder within the organization.
- Direct spending: The accounts payable automation solution automatically matches the invoice data to the purchase order and directly sends the invoice for payment. This workflow is referred to as "touchless invoice processing" and is the end goal of automation in accounts payable.
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Benefits of AP Automation
AP automation provides benefits not just for the finance department but across the entire organization:
- There are no need to store paper-based invoices and delivery cost receipts
- Reduced manual efforts as there is no need for multiple employees to spend time investigating invoice errors and handling vendor complaints
- Invoice audits and compliance efforts are more manageable
- Built-in security and accountability features can flag suspicious activity, helping to detect invoice fraud
- Paying vendors on time enhances your reputation and helps you in future negotiations with vendors
- Staff can be redeployed to perform higher-value tasks, such as analyzing invoice payment data, instead of spending their time on manual invoice data entry
Top Accounts Payable Process to Automate
Accounts Payable workflows benefit from automation by cutting processing time, increasing invoice accuracy, and saving costs. Compared with manual processing, AP automation can significantly improve the following workflows:
- Invoice Data Entry: Automating invoice data capture from all sources is faster and less error-prone than manually entering invoice data.
- Invoice Matching: Automatic matching of invoices for supporting documents, like purchase orders and receipts (three-way matching). This automatic invoice matching is more accurate than manual matching, especially for organizations that manually match physical documents.
- Invoice Coding: AP Automation helps to establish rules that automatically set the correct general ledger code for each invoice by eliminating the time and inconsistencies inherent in manual coding.
- Invoice Approval Routing: Electronic routing to all the necessary approvers is faster and easier than manually sending documents to each of them. It also provides better accountability throughout the workflow.
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