Automating the End-to-End Process of Accounts Payable | 11 Tips
If you’re considering automating the end-to-end process of accounts payable, but not sure where to start, read this rather long post. To take back all the hours your AP team wastes on manual data entry, I’ve drawn up a list of AP automation tips. By the end of this post, you’ll have a clear understanding of how to automate your AP process…
Automation is the cheapest option vs The cost of doing nothing.
Your business becomes irrelevant. Your competitors leave you standing. You’re done.
What is AP automation?
Accounts payable automation minimizes manual processes by digitizing tasks such as invoice processing, payment approvals, and payment disbursement. Using an AI document processing solution to perform repetitive manual data entry workflows.
Automating the end-to-end process of accounts payable leads to higher rates of accuracy, increased customer retention, and happy vendors. Providing better visibility and more control over essential financial processes.
Manual invoice processing is inefficient, expensive, and boring.
Table of Contents
Benefits of automating the end-to-end process of accounts payable?
Assuming you already know the benefits of going the automation route and just want to read the AP automation tips, I’ve kept this brief.
The main benefit of automating the procurement process is… increased profits. Other benefits of AP automation include…
- Save time – eliminating the manual stages of invoice processing will speed up your workflows end-to-end
- Save money – reduce labor costs, along with the cost of postage, paper usage, document storage, delivery costs, invoice production, etc.
- Improved efficiency – invoice automation reduces approval times and increases productivity
- Improved cash flow management – automation allows companies to track and manage the payment process, avoiding duplicate payments and paying suppliers and vendors on time
- Increased accuracy – fewer humans in the loop reduces the level of errors
- Compliancy – built in rules mean suspicious activities and fraud can be flagged in real time
- Reduce employee churn – no more boring, repetitive tasks to kill your team’s spirit
- Increased visibility – automation allows companies to track payments in real time
Example of accounting automation.
If you’d like to learn more about the many benefits of automating your AP processes can bring, take a look at Best Accounts Payable Automation Software. It goes into detail about the AP process, benefits, which tasks can be automated, ROI, and a whole lot more.
11 tips for automating your AP process
Check out my tips for automating the end-to-end process of accounts payable. AP best practices that’ll not only help you avoid expensive mistakes, they’ll also ensure you reduce costs, create frictionless processes, and drive a healthy ROI.
Let’s go…
1. Align AP automation with your business objectives
Your automation objectives have to align with your business objectives if you want to achieve success. Understanding the objectives, challenges, and priorities will help you find areas where automation will bring value.
With today’s unstable economy, aligning your new technology strategy with your business objectives becomes a priority.
According to KPMG, 66% of organizations have been effective in using digital to advance business strategy. With 50% seeing ROI form AI technology investments.
2. Choose your AP automation goals
Accounts payable automation goals will vary according to your needs and pain points, culture, and overall business strategy, there’s a heap of goals that apply across the board, including…
Increase accuracy
Choose areas where you’d like to see increased data accuracy, with specific time periods for improvement.
Save time
Automate repetitive tasks and standardize operations to free up your team to spend more time on strategic initiatives for competitive growth. Resulting in increased efficiency and employee satisfaction.
Increase early payment discounts
Paying invoices punctually not only affects your cash flow as you’ll benefit from early payment discounts, it also strengthens your reputation with vendors and suppliers.
Reduce costs
Areas in which you can save money can include reduced labor costs, as your team reduces time spent on low-value, repetitive work. Punctual payment of invoices to benefit from early payment discounts.
Improved performance
Performance goals could include…
- Meeting compliance
- Reduced employee churn
- Increased efficiency
- Reduced manual errors
- Reducing costs
Eliminate AP backlogs
Automating your AP processes so they’re faster will eliminate your accounts payable backlog and reach a higher turnover ratio.
Setting firm goals will help you determine what’s working and what isn’t, so you can…
- Share the potential outcome when you pitch to stakeholders
- Measure your success during the project
- Identify which vendor can provide an AP automation solution to suit your business
- Keep your team in the loop throughout your automation journey
3. Create an implementation strategy
You need an implementation plan that explains the details of your automation project. Workflows to be automated, timings, onboarding, training, etc.
4. Choose a project leader
Get yourself a team leader to manage your automation project. A point of contact for progress, challenges, questions, and successes. Someone who’ll oversee the entire process and keep everyone on the same page. Clear communication and reduced bottlenecks.
5. Map your workflows
Improving your AP processes and workflows starts with a full evaluation of your current accounts payable process. Whether you use a whiteboard, workflow mapping software, or Post-it notes, this will help you identify areas that can be automated, communication bottlenecks, and inefficiencies. For instance, if your approval process is slow you could implement automated invoice approval workflows.
Example of a simple accounts payable process map.
Need more information on How to do Workflow Process Mapping, check out our recent blog post.
6. Quiz your AP team
Before you implement any automation in your AP process, you must talk with the people involved. Your AP team. Your investment in new technology should benefit the entire company, particularly those working with your current manual processes.
Ask your AP team…
- What’s working in our existing processes?
- What are the sticking points in our existing processes?
- Which areas could be improved with automation?
- What concerns do you have about automating processes?
7. Get key stakeholders onboard
Making changes to business processes is always a challenge. Add to that the introduction of new technology, and it becomes more complex.
For a smooth implementation, stakeholders must support the change. From your CEO to your team, they need to understand how automation will increase productivity. How changes will support business goals and achieve an ROI.
Work closely with your key decision makers to demonstrate how an automated AP process will reduce inefficiencies and improve your company’s reputation, customer satisfaction, and bottom line.
8. Keep vendors & suppliers happy
It’s vital you maintain strong relationships with your vendors. They’ll be more likely to support any changes you implement to AP workflows if they’ve been kept in the loop.
List the main suppliers with whom you place purchase orders and vendors who consider you a large customer, then let them know what’s going to happen. Some AP automation softwares let you set up a vendor access portal so they can update their details and follow the status of invoices.
9. Choose the right automation software
It’s true. There are a lot of document processing automation software options on the market. It’s important that you choose the one that meets your specific business needs and automation goals.
You should consider the processes you want to automate, cost, features, and whether it’ll integrate with your existing tech stack. Scalability of the software is also a factor so it’ll scale and grow as your company grows.
Here are key questions you should ask a document processing vendor…
- Is the solution customizable?
- What are the security standards?
- Is it cloud-based or on premise?
- What document formats can it process?
- Can I automate the entire AP workflow?
- Is there a strong validation process?
- What technologies does the IDP platform employ?
- What languages does your platform recognize?
- Will it scale with my business?
For more details on key questions, download our Cost Of Doing Nothing eBook, referenced later in this post.
The cost of doing nothing framework – Invoice processing example.
Total AP team expense/Total number of invoices processes = cost per invoice.
10. Centralize AP data
Still working with mountains of paper? Over stuffed filing cabinets? Countless spreadsheets?
Time to play catch up.
You need a single source of truth. A centralized data storage system. This will ensure that your data is accessible to team members. Secure. Current.
11. Track your KPIs
Tracking AP metrics helps you measure and analyze results for improvement. Failing to monitor your KPIs means you could fall down an expensive rabbit hole.
Accounts payable metrics to track include…
Average invoice processing cost
This one’s tough. Not all invoices are straight-through processes. Obviously, manual invoice processing is not only slower, it’s more expensive.
Automating will save you money, but there is still a cost.
Companies with a complex manual accounts payable process flows can spend up to $50 to process one invoice, with a simple manual process costing about $6 to $8 per.
(Late fees + labor costs + postage + missed discounts + human error + data storage costs)
➗
(the number of processed invoices)
〓
Cost of manually processing an invoice
Average invoice processing time
If it takes an age to process an invoice, it means your accounts payable department is stuck performing low-value tasks. Depending on the type and size of your organization, the typical processing time per invoice is three to four days. Worse case scenario? Up to 20 days!
You do the maths!
Discount captures vs offered
An automated AP process ensures invoices are processed faster, which means you can take advantage of early payment discounts. Monitor how many discounts , along with the monetary value, your vendors are offering against how many your business receives.
Automate your AP process and you’ll receive automatic notifications as to when a discount is about to expire, so you can make your payment.
Late payments and penalties
This is a metric you must not ignore.
Your business can lose a lot of money due to late payments and penalties. You’ll also damage vendor relationships and your reputation.
Compare the number of invoices paid on time against those that are late. This is your benchmark to monitor your performance. While 100% punctual payments is a high bar, your goal should be to avoid late payments and penalties.
Supplier inquiries, discrepancies, disputes, fraud
Generative AI is Fueling a Surge in Invoice Fraud… discuss.
If your team is swamped with manual tasks, multiple inefficiencies will surface. Automating your purchasing and procurement processes will minimize the number of supplier interactions, thereby reducing the chances of human error.
Working with manual processes in your accounts payable department makes it vulnerable to invoice fraud. For more information on fake invoices, recognizing red flags, and avoiding being hit by an invoice scam, check out How To Identify Fake Invoices.
Percentage of straight-through invoices
Straight-through invoice processing is when you receive, approve, and pay automatically. This type of invoice is faster and cheaper to process than invoice exceptions.
Invoice exceptions require humans to manually rework before approval. This can lead to late payments, increased costs, and dissatisfied suppliers.
An automated process to deliver invoices into your AP system increases your straight-through invoice processing rate, lowering overall costs.
ROI on accounts payable automation
When considering automation, it’s important to balance the cost reduction with the potential ROI from improving the efficiency of your AP process. Yes, they’ll be financial investment, and it’s crucial that you’re able to prove that this investment is worth it. Compared with the cost of doing nothing.
Don’t sacrifice end-to-end AP process improvements for cost savings. Our Cost Of Doing Nothing | Zero In On Accounting Automation eBook explains the potential damage to your business of sticking with manual document processing. Including team burn out, increased employee churn, reduced revenue, productivity downtime.
Worth a read!
Automating the end-to-end process of accounts payable will improve your AP KPIs. To determine the potential savings, and to convince your boss, use our ROI Calculator to determine the value of automation.
Give our ROI Calculator a spin to see how much you could save.
Takeaway
Automating the end-to-end process of accounts payable will bring awesome benefits to your company. Time saved. Money saved. Sanity saved.
Implementing an automated AP process doesn’t stop there. Use these AP automation tips to continuously review and improve the process.