The Institute of Finance Management (IOFM) puts the cost of manually processing a single vendor invoice at $10-23 per invoice. In today's business world, automation is essential for staying competitive. Automating processes like accounts payable (AP) can have a significant impact on the speed and accuracy of your operations and can reduce the cost of processing invoices by up to 80%.  In this article, we will explore the types of automation available, their benefits, and their considerations.

Automation solutions for accounts payable cover a range of tools, which may be found as stand-alone products or combined in a comprehensive software solution.

Optical character recognition software

Optical character recognition (OCR) software is an innovative technology designed to scan all aspects of an invoice, vendor contract, or other documents, then digitize such information and store it to allow for easy text searching later. During the digitization process, OCR software also cross-references all scanned information to ensure there are no duplicate entries, and if there are, these errors are forwarded to the appropriate parties for further processing or correction.

Invoice processing software

In terms of invoice processing software, there are two important aspects that need to be kept in mind: processing structured and unstructured data. Structured data is the type of data most often found in spreadsheets and other files that can be easily analyzed and searched for information; unstructured data is all the other important data that is raw and unorganized, like emails, social media files, PDFs, and more. A reliable AP automation software will be able to process both types of data and digitize it to be accessed when required.

Automated approval processes

Invoice approval is a big part of the AP process, as there are some complicated steps involved. First, you’ll receive vendor invoices, then you need to match these invoices against the existing purchase orders and receiving reports you have in your system and forward them for approval.

Once it’s approved the vendor is paid. However, when automating this process, it goes much more smoothly because you can cut a lot of time, as well as labor and eliminate manual data entry and manual three-way matches. Invoices are captured via automated technology and then automatically approved and paid if no issues are found.

Payment systems

Automated AP platforms make payments much easier by providing your enterprise with tools to capture incoming invoices and the data they contain automatically, then ensure all the relevant records match (purchase orders, etc.) before automatically sending payment to vendors. Not only does this enable AP team members to focus on more value-based tasks by eliminating the need for manual labor, but it also reduces late payment penalties, double payments, and other errors commonly associated with manual payment processing.

Vendor portals & self-service solutions

Another great feature offered by the AP automation process is that today’s leading software provides vendor portals and self-service, enabling vendors to enter important information without the need for your AP department to lift a finger. These buyer/supplier tools streamline processes and improve relationships across the board.

Manual accounts payable process overview 

As mentioned above, the manual accounts payable process relies heavily on manual data entry and manual three-way match checks by your AP staff. However, many of the accounting processes take place outside of your enterprise’s actual accounting system and are then recorded manually in its ERP software. Additionally, when it comes to invoice approvals, processing requires either paper or emailed invoices that are difficult to track and follow up on if not properly organized. 

Automated accounts payable processes overview

Automated AP systems are designed to streamline processes by improving data accuracy via bi-directional data capture and transfer, in addition to automating most of the most time-consuming manual processes. Data is recorded using the OCR technology mentioned above to ensure 99.5% accuracy. Invoice approvals are also automated. 

Although there are some downsides to the AP automation process, such as potential implementation and integration issues, that vary from solution to solution, these pale in comparison to the benefits for your accounts payable department. Some of the leading advantages of accounts payable process automation include:

• Cost savings: Since automating the AP process saves valuable time and enables your team to focus on more important tasks, as well as minimizing duplicate entries and eliminating human error (like duplicate payments), you’ll benefit from extensive cost savings.
• Tighter oversight: Automating the AP workflow places all your most important data (vendor information, invoices, payroll, petty cash, etc.) under one umbrella, so you’ll have clearer oversight of your company’s financial processes. This ensures that nothing falls between the cracks and minimizes the loss of important documents.
• Fraud control: AP automation provides real-time insight into your accounting and bookkeeping processes, meaning you have everything you need to see what’s happening in your enterprise. Security teams can easily catch any financial fraud, and automation makes performing internal audits much easier.

Establish clear internal controls & policies for AP departments

One of the most important aspects of successfully implementing automated AP processes is training your team at every level on how to use them. Additionally, it’s your chance to clearly outline all of your accounting and bookkeeping policies and implement internal controls to improve oversight. Doing so will ensure that all team members are aware of what’s expected, know how to best use the new AP software, and are aware of the policies for such use.

Integrate with your existing ERP system, if possible

As mentioned briefly above, most AP automation software can be integrated with your ERP system, helping you better keep track of client information and payments. Integrating these solutions will not only help you reduce operating costs but also provide better accuracy, visibility, and enhanced flexibility and scalability.

Choose the right technology solution for your business needs

No two companies are exactly alike, and there is a range of AP automation solutions out there, so it’s important to choose the right one for your business. The best way to do so is to think of your short and long-term goals for automating the AP workflow and the tools you need to best accomplish these goals. Whether you want to scale your business and grow in the coming years or gain tighter control of cash flow, the right AP software can help you do so.

Cost & complexity of implementation processes

Depending on your enterprise, implementing AP software can be a complex and costly process, especially if your company relies on many external third-party software vendors to perform accounting and bookkeeping procedures, invoicing, vendor tracking, etc. However, many of today’s most advanced AP automation platforms can easily integrate with a wide variety of programs and cloud services, providing a healthy ROI relatively quickly.

Resistance to change from staff & vendors

Often, when implementing automated processes there can be resistance or hesitancy among staff members and vendors, especially if they’ve been accustomed to doing things the old way for many years. That’s why communicating and demonstrating the benefits early on is essential. Once team members and vendors realize how much time and money can be saved via automation, they’re more likely to embrace it.

Businesses looking for operational cost savings will find immediate opportunities to automate AP processes that are still being completed manually today.  With cost savings of up to 80% per invoice, considering the volume of invoices processed every year, automating these steps can save a considerable amount, allowing AP teams to reallocate resources to higher-value activities. Improved cash flow management and vendor relationships will also contribute to the bottom line.