Accounts Payable automation or document management system: What’s best for you?
Future-forward finance professionals imagine a world where technology handles granular, time-consuming work. What do financial reports from last year predict? Is an employee expense within company policy? Algorithms have the answer. And leaders are using it to power the rest of the company.
94% say finance automation helped their company navigate challenges during pandemic.
Historically, finance teams relied on manual processes to manage operations. But the future of work looks very different in a remote and hybrid economy. Tasks that previously consumed hours can easily be carried out using cloud automation — allowing companies to cut costs, allocate more time to staff, reduce errors and improve security.
The good news is that businesses are no longer on the fence when it comes to automation.
But who’s automating what?
The biggest concerns during the pandemic were lack of access to physical documents, and makeshift tools causing delays, errors, and overtime in accounting. A survey of 600 finance professionals found that 63% were forced to visit the office during COVID-19 for reasons related to manual work such as pulling files and collecting invoices and checks. Lost/missing invoices, data entry errors, and an overwhelming amount of paper further disrupted the flow of AP operations.
To resolve the existing and emerging challenges, finance teams can implement the following two solutions:
- A 360-degree accounts payable solution
- Document management system (DMS)
Each targets specific processes within accounting. DMS’ primary goal is to digitize and organize documents and save them in a database where that documents can be searched for and retrieved.
An Accounts Payable automation software replaces manual steps with technology (ie, data entry, approval routing, payment processing). The outcome is that staff’s time and effort that used to be spent on manual processes can be applied to different aspects of your business.
What is 360-degree Accounts Payable automation?
An accounts payable software that automates the full purchase order to payment cycle on a central platform is a 360-degree AP solution. Data from all AP workflows — POs, invoices, payments and expenses — flows seamlessly within the software. It integrates with your organization’s main financial systems such as Netsuite, QuickBooks, Microsoft Dynamics, or Sage, eliminating double data entry and other manual tasks.
A 360-degree AP software brings a holistic approach to finance, replacing paper, loose spreadsheets and makeshift solutions with a single software. This removes information silos, giving your organization full control over your AP.
What are the benefits?
Automated approval routing for all workflows: Automation lets you create a highly customized approval matrix, based on your preferred criteria such as department, amount, vendor, etc. The approver can sign-off invoices via web or mobile, request clarification, or reject an invoice specifying why. Automatic follow-ups leave the software to do the chasing, freeing up your staff’s time.
Removes data entry and errors with AI-powered tech: Artificial intelligence (AI) and machine learning (ML)-based technology extracts invoice information, so accountants can skip coding line item details including descriptions, unit costs and quantities. Software such as Quadient Accounts Payable Automation by Beanworks AP automation provides more than 99% accuracy and reduces data entry time by over 80%.
Protects against AP fraud and abuse: An AP software catches discrepancies such as duplicate invoices and coding errors that are hard to flag manually. One organization was able to catch USD $10,000 in overpayments including credits and duplicate payments. Companies can also improve controls against internal fraud by limiting user access.
Reduces cost and saves time: Research points that manually processing one invoice can cost as much as US$15. Automation brings this down to US$3 or less by cutting down labor-intensive tasks. Organizations that have automated their AP have saved 60-80% of the costs associated with processing an invoice. What’s more, companies that automated during the pandemic saved an average of US $35,000.
Where does it fall short?
Individual tools might have more functionality: A dedicated tool that only targets a specific workflow might have more flexibility than one that combines them. Although, this might result in more manual work as you’ll have to update data in other systems.
A solution that fits your needs can be difficult to find: Choosing the right fit solution can be challenging because most don’t have all the workflows or integration points.
“I was struggling to track approvals for the 600 invoices that I was handling every month. It was tricky to keep track of invoices that were pending permission and those that were approved, particularly when sign-offs were needed from more than one person.” Before automation
Here are best practices to enhance your AP without automation:
- Set up at least two levels of approval for security
- Separate approvals for invoices and payments to avoid fraud and abuse
- Start by automating one area, such as data entry, document management or workflow tools
- Limit sensitive data to flow through authorized channels only
- Move data to a single secure online location
Quadient AP works best for businesses processing 100+ invoices per month. Pricing starts at US $99
Businesses opt for a 360-degree automation solution to house all their AP processes in one secure and easy-to-access location. Quadient AP automation offers all the above benefits through these features:
- AI-powered data capture
- Centralized AP for multiple locations or legal entities
- Automated PO to invoices matching
- Unlimited users at no additional cost
- Multiple payment channels – VCC, ACH/EFT
“My favorite part about Quadient AP is the auto-capture function because it means that I don’t have to manually input invoices anymore, and yet, capture more detailed information in my accounting system. This also allows me to review incoming expenses and catch any unusual transactions. Overall, time spent on AP has gone down from 30 hours per week to six hours.” After automation
What is a document management system?
A document management software (DMS) allows users to receive, store, manage and retrieve documents electronically. Physical copies of documents can be uploaded directly into the system with a scanner or imported online. The software makes storage, organization, and retrieval of documents a smooth and easy process.
Most DMS solutions come with built-in search engines. Depending on user access, only the assigned individuals can view or modify sensitive information. Some DMS solutions offer extended capabilities such as routing and scanning multiple documents. Companies implement DMS software to benefit from ease of access, centralized storage, online search and retrieval options, and security features.
What are the benefits?
Reduces physical storage: A DMS solution frees your finance team from the hassle of storing and maintaining physical documents. This helps you save storage costs, which also adds up as your documentation increases. According to one study, it costs about US $25,000 to fill a 4-drawer file cabinet and US $2,100 per year to maintain it.
Streamlines search and retrieval: Digitized documents make accessing and finding documents easy. Depending on the scope of the software, you can add filters, folders, tags, etc to organize data. With a simple keyword search, you can locate records via the web and mobile.
Enhances security: A cloud-based system makes up for the security control that paper lacks. You can modify access permission to control who can view, update, and delete records.
Improves accessibility: As more employees move to a remote and hybrid work model it’s important to have real-time access to documents. 2021 research, State of Accounts Payable, revealed that 63% of finance professionals were forced to go to the office during the pandemic. 62% are still facing this issue.
The limitations?
The London Borough of Hackney serves its constituents with several essential services. With the increasing cost of real estate, it was becoming impractical to maintain the physical space required to store documents. Storing physical documents while maintaining access and security became increasingly difficult.
Before implementing EDM
Ongoing maintenance: While a DMS software electronically stores documents, it still requires manual interference to organize data based on your needs. As your business and the volume of data grow, updating and maintaining the software can become a time-consuming process.
Long implementation cycle: It’s important to note that while you may be ready to adopt a DMS system, it can take up to 3-6 months to implement the software.
Limited to document storage: It doesn’t directly address challenges other than document storage. They don’t have an out-of-the-box workflow to support the workflows such as payments, expenses submissions, approvals etc.
You can still enhance your document management without using a cloud-based solution. Here are some best practices:
- Develop a file naming strategy
- Optimize files with metadata
- Devise a good folder structure
- Explore a data purge plan based on industry regulations
- Invest in a backup and disaster recovery solution
One of the biggest benefits of document management software is its ability to scale up and down to meet your business’s ever-changing needs. Here are a few DMS solutions that can be used to simplify your document management:
Features:
- OCR technology for automated data capture
- Automatic notifications to users regarding updates such as document review
- Integrates with most ERP solutions
- Search and retrieve documents via web or mobile
DocLink: Works for businesses of all sizes. Pricing starts at US $500 per feature.
Quadient Electronic Document Management System (EDM): Works for businesses of all sizes. Pricing is available upon request.
Features:
- Digitize paper documents
- Archive documents and facilitate online search
- Extract data from paper and digital documents
- Route documents through defined workflows
With Quadient AP’s EDM solution, Hackney began a council wide migration from physical documents to a document management software that scans and captures documents for digital storage. The solution also provides the option to set security parameters for each document to ensure access is restricted where appropriate.
After implementing EDM
Read the full case study here.
A transformational tool
Both solutions will add value to any business and reduce, or even eliminate the dependency on paper. However, while both create a return on investment and improve operations, they are different by virtue of each product’s goals.
An AP automation software is designed to resolve common accounting challenges, hence offers features like 3-way matching, digitized payments, automated approvals and anomaly detection. A document management solution serves a wider range of departments therefore malleable to suit your needs.
The best solution is one that matches your financial needs and meets your business goals.
Learn more about what AP automation can do for your business.
