Accounts payable (AP) is a crucial function to any business, as errors in the process put a company in problems. Although many businesses still use manual methods as they find the system to work fine, it requires a lot of precision from the accounts payable team. There are better – and more efficient – ways to manage AP through automation.
Challenges of the Process
An AP team is responsible for receiving invoices, reviewing invoices, approving invoices, and paying suppliers and vendors. Some AP departments also handle other functions, depending on the nature of the business. However, AP can be a time-consuming, strenuous and paper-intensive process.
An AP team helps a business control costs, maintain a good supplier relationship and analyze spending. Various challenges might indicate that your business is using outdated practices. Such challenges might include:
- Dealing with double payments
- Difficulties in tracking invoices, especially when your business has many transactions
- Forgotten payments
- Disappearing invoices
- Missing purchase orders
- Poor business reputation as suppliers lose trust in your business
- Negative cash flow
- Too much paperwork taking up employees’ time to sort and organize
- Skipped processes
- Manual processes that result in errors and delays
These challenges not only affect your business negatively, but they also affect your supplier’s business. Consider that late payments cost small businesses $3 trillion per year, which means your late payments create a domino effect. Your business will also be subjected to late payment fines.
To avoid the challenges mentioned above, you should automate the accounts payable process.
Accounts Payable Automation
Automation removes slow and repetitive manual tasks and lets you digitally submit and approve purchase orders and invoices.
However, when making any investment, businesses are more concerned about the return on investment (RIO). Rest assured that through automation, you can achieve ROI through reduced employment costs, fewer late fees, savings on invoice processing costs, and reduced losses caused by errors, among other non-financial benefits.
Following are the benefits achieved by streamlining the accounts payable workflow through automation:
- Get a more accurate picture of your finances – using automation software gives you access to reporting capability that makes it is easy to get a quick overview of business spending.
- Have a better command over cash flow – manage cash better with the help of reports that can be created and reviewed in real-time, which improves AP team visibility and forecasting. Automation will help in invoice prioritization as well.
- Improve user productivity – employees do not have to waste time sorting documents. With the data centrally stored, employees only need to run a query to find the necessary invoice or purchase order.
- Enable remote work – using cloud-based software makes remote access possible and enables approvals to be done remotely.
- Auditing is easy – all data is stored in a central database and can be easily accessed.
- Cost-effective – it enables timely payments and helps avoid unnecessary penalties and interest fees.
- Reduce overhead staff costs – automation will help reduce the accounts payable team, with no need to hire more staff even when a business grows.
- Dashboard and analytics tools – allow access to separate dashboards for the team and approvers, each using individual login credentials. At the same time, analytics gives a quick overview of the whole process.
- No manual data entry – scan documents to capture data and avoid manual data entry.
- Standardized accounts payable workflow – ensures consistency even if your business has different teams responsible for handling the invoicing data.
- Payment reminders – set your system to have reminders when pay dates are near. This will help avoid late or forgotten payments.
- Qualify for discounts – with a smooth workflow, the accounts payable cycle will require less time, and you may qualify for discounts from suppliers for early payments.
A disorganized accounts payable process can run your business down. Choosing the right AP automation software will help improve accuracy, efficiency, quality and speed for your business accounts payable function. Your business also will have a balance between a healthy cash flow and, at the same time, maintaining a good supplier relationship.