From lower costs to fewer errors to improved working capital management, accounts payable automation helps companies of any size overcome their biggest accounting challenges.
A vital function for all companies, Accounts Payable (AP) processing has historically been one of the most time-consuming and manually intensive financial management activities for any company. In fact, it’s not at all unusual for accounting clerks to spend hours each day verifying supplier invoices, matching them to purchase orders, and scheduling them for payment at a future date.
By focusing on short-term debts that will be paid off within 12 months or less, AP gives your company the financial liquidity it needs to operate by paying those debts on 30-, 45-, or 60-day payment terms (depending on your agreement with the vendor in question). It also puts your company in the position of having to manage dozens or even hundreds of different invoices, all of which must be received, accounted for, filed, set for payment, and then paid within the allotted terms.
Handled manually, AP processes are prone to error and often require a lot of rework, including searching for and cross-referencing related documents. By automating this process, your company can save time and money, reduce errors, and free up employees to focus on business-critical activities.
One Month of Manual Touches
With the typical lifecycle of an AP invoice spanning one month, the potential for mistakes, misplaced documents, and wasted time during that 30-day period can significantly impact a company’s productivity levels and bottom line. According to CFO, the need for manual intervention is the main reason for high AP processing costs.
“Labor costs typically consume 62% of total AP costs,” the magazine reports, noting that the median cost of processing a single AP invoice is $7.75, with some companies spending anywhere from $12-$30 per invoice. “And what necessitates manual intervention? Data errors in purchase orders (POs), shipping or receiving documents, and invoices that require humans to step in.”
To overcome these challenges, more companies are turning to AP automation, or the digitalization of invoice data, approval processes, and B2B payments. By streamlining processes and minimizing the need for human “touches,” AP automation:
- Converts vendor invoices to a single standard digital format
- Codes and assigns expense-based invoices and routes them to the right people for approvals
- Matches supplier invoices with the correct purchase orders or goods delivery receipts (GDRs)
- Automatically approves payments once the invoices are verified
By managing these and other AP-related tasks, automation effectively transforms an otherwise time-intensive, manual process into a streamlined, frictionless activity that literally takes place behind the scenes as your employees focus on value-added tasks.
And because all data is stored in a centralized, digital repository, you also gain better visibility and control over important financial data — both of which contribute to business continuity and sustainability. These “softer” benefits have become increasingly important in recent months, as companies seek out new efficiencies to help them work through various disruptions.
Using AP Automation to Support Resilience
According to CPA Practice Advisor, AP departments that had yet to automate processes before the global pandemic are now facing “significant disruption” because simple tasks like receiving, processing, and approving paper invoices require on-site teams.
“As companies have learned the hard way — due to political unrest, natural disasters, or the recent COVID-19 pandemic — processes that rely on people versus automation risk significant business disruption,” Sanjoy Malik writes in Forbes. “Companies face a sudden shift in operations, while critical back-office processes like IT security, human resources, and accounts payable must scramble to adapt.”
Historically, automation technology has been the domain of large organizations. And while Malik notes that 89% of small to mid-sized businesses (SMBs) still receive paper invoices, the opportunity to automate the process is very much available to companies of all sizes. “. . . with the introduction of SaaS solutions and a crowded software market,” Malik writes, “technology is accessible to companies of all sizes, providing an ideal way for SMBs to accelerate the AP function.”
Here’s What You’ll Get Out of AP Automation
By using AP automation to . . .
- Match up invoices to POs
- Fast-track the approval process
- Code invoice data in your accounting system
- Pay vendors on time
. . . your company can leverage benefits like:
- Reducing processing time
- Reducing labor requirements
- Cutting down errors
- Enabling seamless data flow
- Getting good visibility into invoice payment cycles
- Supporting good decision-making for managers and leaders
- Improving your business’ working capital management
- Remove the need for Purchase Orders
- Freeing up valuable time
- Saving money
Automating and Centralizing Your AP Function With FourQ
Using Paymaster, FourQ’s automated and centralized invoice management solution, you can quickly eradicate the pain points outlined in this article and start benefiting from an automated, streamlined AP process — rather than letting outstanding invoices pile up, an approach that:
- Increases the administrative effort necessary for payment management
- Increases the amount of late payment fees applied by vendors
- Damages future negotiations around rates and payment terms
A full-service software solution for automating and centralizing the global vendor invoice management process, Paymaster’s key functionalities include invoice receipt, validation, audit (including validating service sets with rates per agreements), approval, payment, and inquiry. By automating these manual AP processes, your company will gain from:
- Increased productivity
- Improved accuracy
- Cost reductions
- No more late fees, penalties, or past-due invoices
- Fewer resources spent on billing investigations, disputes and resolutions, settlements, and reconciliations
- Balance sheet compliance and transparency
Our globally-compliant, automated intercompany accounting and invoice management solutions have been battle-tested in the most complex environments in 120+ countries worldwide. Chances are high that whatever you are seeing, we’ve already seen before. To learn how we can help solve your organization’s AP processing challenges, schedule a free consultation today.