If you run a business and buy anything on credit, knowing how to automate your accounts payable (A/P) process can save you time, minimize hassles, and ultimately save you money.
Accounts payable management is critical to maintaining a healthy cash flow and building strong vendor relationships, and no matter how effective your A/P operations are, there’s always room for improvement. Automating accounts payable allows businesses of all sizes to accelerate repetitive tasks and offload labor-intense busywork.
There are always bills to pay, whether you’re an established corporation with sites across the globe or a recently-launched startup that’s operating from a garage. Here’s how to automate your accounts payable so that your bills get paid more effectively and efficiently.
Looking to automate your accounts payable and account receivable processes? See our comprehensive guide to How to Automate Accounts Receivable for the A/R side of your operations.
How Does Traditional A/P Work?
Traditional accounts payable workflow processes relied heavily on manually-driven operations and paper documents. It often looks something like the following:
- Invoice received: An invoice is sent to you via traditional mail by one of your vendors or suppliers. Your A/P team transcribes the relevant information by hand to your financial systems.
- Verification: Your accounting staff scours through your paper or electronic records to verify that the received invoice is legitimate and aligns with an actual, documented transaction. Depending on the complexity of your A/P processes, employees may need to obtain multiple signatures to authorize the payment.
- Scheduling: With all of the necessary approvals secured, your accounting team determines which check run will include the needed payment.
- Disbursement: On the designated day, a batch of checks is printed, signed, and mailed to the appropriate creditors.
And while you can easily run a business using manual A/P processes like these, you’ll invest a lot more labor than is necessary. Further, you’ll need to overcome many challenges with manual processes, including mistakes introduced by human error, lack of clarity and information surrounding purchase history and payment details, slow payments, and fraud.
How to Automate Accounts Payable
You can overcome many of these challenges with effective accounts payable workflow automation while introducing further efficiencies. However, no two businesses—or A/P processes, for that matter—are identical, so you’ll need to find the best automation solution for your unique business. When considering which platform to choose, we recommend that you:
1. Understand your current A/P processes and pain points
If you’re new to automation, or this is just another in a long line of successful projects, you want to start off by reviewing and mapping out your current processes. Pay particular attention to how many levels of authorization each payment needs to go through and how many of your staff are involved in each step. Also, look out for any redundancies or variances across departments or locations. Ideally, you’ll want to centralize all A/P activities through your new automated solution.
Are there any bottlenecks that you are currently dealing with? Or do you need to comply with any industry- or government-driven reporting or auditing requirements? Don’t forget to evaluate which systems—such as your ERP platform or archiving solution—that you’ll need this new automation system to work with.
2. Research software features that meet your company’s needs
With a clear understanding of what you need, explore the available products on the market and note the offered features and surrounding service levels.
Do you receive most of your invoices through traditional mail? If so, you’ll likely want an automation tool that features OCR capabilities. Or you might consider setting up a payment portal where vendors can create and submit their own invoices. Do you need an advanced rules engine that can automate your company’s complex general ledger coding?
Try to match each of your current pain points with a corresponding capability offered by whatever automation platform you are considering. You should also determine the priority of these needs, which will let you recognize what challenges cause minimal disruption and could potentially be addressed later.
At the very least, A/P automation software should allow you to:
- Go paperless: Every vendor you work with will have its own invoicing process. You’ll want to standardize these incoming bills as much as possible. Check with vendors to see if they offer electronic invoices, which will accelerate delivery. And for those payment requests that still come in the mail, use an automation tool that offers optical character recognition (OCR) capabilities to let you scan the record and automatically add the relevant data to your payment systems.
- Streamline workflows: Depending on your processes’ complexity, any given invoice might pass through several pairs of hands before payment is rendered. And each of these stops introduces a new opportunity for delay. But with automated workflows, each purchase is routed to only those key personnel that need to approve the transaction, cutting out potential delays or process bottlenecks.
- Validate automatically: Consider a platform that can independently verify the accuracy of payment requests and flag any potential inconsistencies for further review. Ideally, your system should be able to identify discrepancies between submitted bills and the number of goods, status of delivery, due dates, or potential discounts.
- Embrace integration: For your automation strategy to be truly successful, you’ll need a platform that can readily share data with your other enterprise resource planning (ERP) systems. Proper integration will also help to streamline reporting and auditing processes.
For more information, please see our article on features to look for in AP automation software.
3. Set goals that align with your pain points
Once you’ve chosen your A/P software solution, set your key performance indicators (KPIs). This is an accounts payable best practice that allows you to establish clear benchmarks and track the performance of the new platform. Ideally, these key performance indicators (KPIs) will align with the specific pain points that you identified in Step 1.
Some common accounts payable metrics you can track are:
- Time spent on each invoice
- Average processing cost
- Percentage of discounts captured
- Frequency of errors or discrepancies
- Number of late payments
- Working capital
If possible, you should also track these metrics before deployment to have a clear benchmark against which you can measure future improvements.
4. Make sure your team is involved
An often overlooked step for those looking into how to automate accounts payable, making your team a part of the decision-making and KPI-building process can not only help you better identify your company’s needs but cut down on resistance to the new technology once it’s implemented.
5. Demo the software before committing
You wouldn’t sign a client or agree to work with a vendor without checking that they’re set up to follow through on their promises. Why should signing up to use an A/P automation software solution be any different?
Schedule a demo if you want to ensure that your automated AP software is as easy to use as it claims to be and contains the features it claims to have. Make sure key members of your team can attend. These demos are also useful for checking on what it will be like working with the company should any issues arise.
Make Accounts Payable Automation Easy with Invoiced
Now that you know how to automate accounts payable, it’s time to start looking for automation software. With our automated accounts payable and accounts receivable software and business network e-invoicing solution, Invoiced provides you with simple, easy-to-use tools to get paid faster and pay your own bills on time.
No tweaking, no headaches, just user-friendly controls that keep your payment cycle moving.
Want to see Invoiced in action? Schedule your demo today!