A Guide to Choosing the Right AP Automation Tools

Manual processes can be time-consuming, inaccurate, and expensive. But which tools should modern accounts payable teams use instead? Ask any accounts payable (AP) team member to pick their least favorite part of the job, and the chances are they will pick manual processes and paper – which can be both risky and expensive. In a survey of 1,100 finance professionals worldwide*, 41% blamed manual data inputting for inaccurate financials.

And the issue is not rare – 86% of SMEs still enter invoices manually* and could benefit from the cost savings, mitigated risk, and greater visibility automation tools can give them.

Let’s take a look at some of the challenges AP teams face with manual processes, the tools which can tackle them, and how to select the right tools for a full 360° solution for all your AP workflows.

Did you know? Accountants work an extra day a week!

Accountants are often stressed. As well as crunching numbers, sending approval reminders, inputting data, and other tedious tasks, they are also responsible for accurate processing and reporting on the financials.

This can lead to errors – a whopping 88% of spreadsheets* contain inaccuracies often caused by an overworked employee. It’s no wonder that a research study* found that one in ten accountants works seven days per week, while another reported* that 34% of accountants consider quitting on a weekly basis. And with so much work pressure, it’s equally unsurprising that 47% take work home with them*.

Case Study: London Olympics

At the 2012 London Olympics*, an employee accidentally wrote 20,000 in a spreadsheet of tickets instead of 10,000. The error created 10,000 extra tickets for seats that did not exist. To be fair to the individual in question, mistakes like these are hard to avoid when you are managing a large volume of data manually.

Breaking out your AP toolbox

The good news is there are tools out there that can help with data entry, document management, and lack of automation. Let’s take a look at data entry, document management, and AP automation tools.

Data entry tools

Repetitive and time-consuming, data entry can be tedious work. In many instances, double entry is required, such as when you switch between spreadsheets, accounting software, or any other systems. It isn’t just tedious - data entry is prone to mistakes that can end up costing a fortune. There is a possibility of errors, especially if manual data is involved at every step.

Data entry tools use Optical Character Recognition (OCR) to read invoices. OCR works by capturing data from invoices, verifying it, and populating your accounting system with it. You can use these tools to scan invoices in batches and it can be integrated with accounting software. Some examples include Verify, AutoEntry and Receipt Bank.

What are their limitations?

Data entry tools serve their purpose, but you might find they still have the following limitations:

Information silos: Data is still stored in different systems, including files and spreadsheets.

No approval routing: You may still be stuck using email or other systems for approvals.

No payments or purchasing workflow: The problem of data entry could be solved, but you might be left with challenges in other areas.

Document management systems

Manually filing and storing documents can take up a lot of space, and create ongoing storage costs. If you need to make a change on one file, it will have to be updated everywhere that file is stored. These time-consuming tasks result in invoice approvals taking 20 days or more*. With manual filing, you also cannot access documents remotely.

A document management system for AP teams cuts back on the need for paper, by managing and storing documents online. These tools route documents for approval and follow-ups digitally, and you can access them remotely. Some examples of document management systems include DocLink, SharePoint and PaperSave.

What are their limitations?

Document management systems will help reduce your paperwork, but the biggest drawback is that most don’t have an out-of-the-box product that will solve
challenges in other areas, such as data entry or online payments. Maintenance of these systems can be like a full-time job in itself, and each workflow can take about 3-6 months to implement.

Case Study: Providence Water Supply

As we have seen, lack of visibility and control can mean issues go undetected for months or even years. A $13,000+ employee expense fraud went on for 21 years at Providence Water Supply in the US. The purchasing supervisor used her company card for personal shopping. When she admitted she had bought a personal item worth $155 on the card, officials opened an audit. They discovered many other fraudulent transactions going back years, leading to criminal charges – even though she paid back the $155.

All about AP automation

AP processes have specific challenges that can be addressed by automation. These are:

Inefficient processes: Approvals can take time when two or more people need to approve an invoice before it can be paid. This means a lot of companies regularly miss out on early payment discounts or even incur penalties for late payments.

Risk of fraud and errors: Without robust controls and approval channels, AP departments are more susceptible to fraud and errors. The danger is made even more clear when you learn that 76%8 of employees do not call a supplier to check if a change request such as an account number is legitimate.

Inaccurate forecasting: Manual processes often result in a delay in accessing up-to-date information on actual and forecasted spend. If errors do occur that are undetected for a period of time, this can have a serious effect on a business.

Case Study: Bank of America

A few years ago, Bank of America9 disclosed that it had made a significant accounting error – it had $4 billion less than its accountants had calculated. Reportedly, the bank failed to deduct losses in financial instruments that it acquired when it bought an investment management company called Merrill Lynch. The miscalculation went unnoticed for years. When the news broke out, Bank of America shares plunged by 6% causing a heavy dent in their reputation. Human error is inevitable from time to time when manually inputting information.

Why you shouldn’t wait to automate

AP automation brings together all of the benefits of data entry, OCR technology, batch scanning, and document management. And in contrast to standalone document management tools, AP automation can typically be implemented in a few days rather than months.

AP automation software can cut your costs, mitigate the risk of fraud and errors, and give you better visibility and access to your data. Market research firm Levvel has found that the average cost to process a single invoice can be as much as $15.

Companies that have implemented AP software have made savings of between 60 and 80%. That brings the cost down to an average of $3 per invoice, or less. AP software can also flag anomalies and give you greater oversight of your transactions.

Easy AP

In a recent survey10 of 225 CFOs, half of them had not completed any kind of digital transformation in their finance department during the COVID-19 pandemic. But of those that had, 54% performed better on agility, insights, and efficacy. The same percentage was now in a better position to make remote payments as a result. Before implementing your AP automation software, make sure it manages all four AP processes – purchase orders, invoices, payments, and expenses – in one place. This means no stray spreadsheets or random software are being used by individual departments. Look for software that ties all four processes into one single platform.

Quadient AP: All AP workflows in one place

Purchase orders: Purchase order automation gives you automatic matching. It imports POs created in your ERP, and you can also create purchase requisitions directly in the system and automate the approval process in one place.

Invoices: When invoices are stored digitally, you can search them by vendor, GL code, amount, legal entity, or any other information on the invoice. You can customise approval channels and OCR and human verification options minimise data entry errors and fast track AP.

Payments: When payments are outsourced, some payments automation providers assume 100 percent liability for correctly paying vendors. With a secure payments provider, every transaction is insured with a payment guarantee or warranty. Outsourcing payments to a third-party puts them in charge of collecting, updating, and securing sensitive vendor payment data. This reduces the risk to your organisation.

Expenses: One of the top complaints from employees about expenses is the paperwork. With AP software such as Quadient AP, that problem is solved by giving them mobile access. Employees can upload receipts and create expense reports from anywhere. Automatic GL coding saves time, and online access speeds up approvals and payments.

Getting AP software that is the right fit is key: you need to manage all your processes in one place. Do that, and the benefits can include greater efficiency, reduced risk and cost, the flexibility for teams to work remotely, and a better overview of your entire accounts payable process. This allows you to think strategically and offer real value to your business.