You are tired of wasting time manually entering invoices into your accounting software.
Your company is growing and you’re struggling to keep up with the increasing number of invoices.
The accounts payable department has been requesting the need for an automated accounting system but you are not sure what that would even entail.
However, you know that automating the accounts payable process can have a major impact on the company's bottom line — freeing up time and resources that can be better spent elsewhere.
As a business owner, you are all about stewarding your company’s resources well.
This guide was made just for you.
Keep reading to learn how to automate your accounts payable process, so you can spend more time on what matters most and will benefit your business.
What Is the Typical AP Process of a Small Business?
The average small business typically receives its invoices by paper.
Then, there may be a manual process for receiving and logging invoices in the accounting software after the invoices are received, such as:
- The invoices are then sent to an administrative assistant or bookkeeper, who makes sure the goods match what was ordered and inputs the information into accounting software.
- The business owner then signs the checks for those invoices.
- The checks are then mailed out to the appropriate parties.
How Can I Improve My AP Efficiency?
One way to improve your AP efficiency is to automate your process.
This can save time and resources that can be better spent elsewhere. There are a variety of ways to automate your AP process, and the basics of how to do so will be discussed in this article.
What Is an AP Automation System?
An AP automation system is software that streamlines and automates the accounts payable process. A system that includes tasks such as processing:
- Purchase orders
- Invoices; and
- Accountant reporting
AP automation systems can be used by businesses of all sizes, but they're especially beneficial for small to medium-sized businesses.
Curtis Smith, a business finance expert, describes a fully automated AP system involving "a three-way match" that includes the following:
- The business creates a purchase order and sends it to the vendor electronically.
- The vendor ships the goods to the business and the receiving person logs the invoice and receiving document into the procurement software, ensuring they match.
- The software then matches the purchase order, invoice, and receiving document and creates a payment via ACH for authorization.
From creating the initial purchase order to processing payment, automating as much of the process as possible is ideal.
This can be done by using software that handles much of the paperwork and manual matching.
Alternatively, AI technology can be employed to automate the process even further by matching scanned receiving documents with vendor information and purchase orders. This way, businesses can rely on technology instead of various parties to handle the majority of the work.
When Should You Automate Your AP System?
A small to medium-sized business that has 500 or more transactions per month could benefit from automating its AP system.
By automating their AP system, small to medium-sized businesses would be able to:
- Streamline their invoicing process
- Improve efficiencies; and
- Reduce costs
Automating would ultimately allow the business to run more efficiently and focus on other aspects of its operations, such as:
- Increasing profitability by freeing up capital, which can be invested in growing the business;
- Improving cash flow management and reducing late payments; and/or
- Reducing administrative costs
How Should You Automate Your AP System?
It is advisable to go with a service that has experience in rolling out automation of AP systems, rather than trying to do it on your own and patch it together.
To successfully implement an AI system within a business, it is important to understand there are both physical and technological assets required.
For example, employees will need:
- Access to phones or scanners with the right technology to scan documents
- The process must be designed and documented thoroughly, and employees must be trained on how to implement it correctly; and
- Strong leadership and advocacy are necessary to ensure that the transition is successful
Streamline Your Processes With These 7 Accounts Payable Automation Solutions
If your accounts payable department is struggling to keep up with the volume of invoices, you're not alone.
Many businesses cannot process invoices as quickly as they would like.
So what options are available for small to medium-sized businesses that want to streamline their accounts payable processes?
We will look at seven AP solutions that can streamline accounting processes and help businesses get caught up.
#1: Hire Off-Shore
Although automated solutions can help to streamline business, jumping straight to full automation may not be the best option.
Instead, businesses can take a hybrid approach by outsourcing tasks like …
- Document scanning
- Data entry; and
- Linking to internal systems
… to low-cost workers offshore.
Offshore companies can help businesses free up their own employees to focus on other tasks.
In addition, offshore companies can often provide services at a lower cost than businesses could provide themselves.
If you're considering hiring an offshore company to help with your automated accounts payable, be sure to do your research and choose a reputable company with an excellent track record.
#2: Transition To e-Invoicing
Transitioning to e-invoicing can be a great way to streamline your accounts payable processes.
With e-invoicing, businesses can send and receive invoices electronically, which can help:
- Save time and money
- Reduce paper waste; and
- Improve accuracy
If you're considering transitioning to e-invoicing, make sure to:
- Use a reputable and experienced e-invoicing provider
- Ensure that your employees are trained on how to use the system correctly; and
- Make sure you have strong leadership and advocacy in place to ensure a successful transition
#3: Streamline Approvals
With automated accounts payable, one of the most important things you can do is simplify approvals.
Having a streamlined approval process will also save you time and money in the long run.
A few things you can do to automate approvals include:
- Having a clear and concise approval process in place; and
- Training your employees on how to use the approval system
By following these tips, you'll be well on your way to streamlining your accounts payable process.
#4: Create Vendor Portals
If you want to take your accounts payable automation to the next level, consider creating vendor portals.
Vendor portals can save you time and money by allowing you to manage all of your vendors in one place.
In addition, vendor portals can help to improve communication and collaboration between you and your vendors.
Some common features of vendor portals include:
- Multi-language support
- E-invoice submission
- Dynamic discounting; and
- Supply chain management
If you're considering creating a vendor portal, be sure you choose a reputable and experienced vendor portal provider.
#5: Incorporate OCR Technology
While there are several ways to automate your accounts payable, one of the most effective is to incorporate OCR technology.
OCR, or optical character recognition, is a type of technology that can:
- Read images
- Interpret images; and
- Store images
You can use OCR technology to scan and convert paper documents into digital format, making it much easier and faster to process invoices and other payments.
For example, suppose your business processes invoices in both PDF and Word format.
With OCR technology, you can automatically convert PDF invoices into Word format, which will save you time and money.
#6: Go High-Tech, Low-Touch
In today's business world, going high-tech and low-touch is often the best way to get ahead.
Some other high-tech, low-touch options we have yet to mention may include:
- Using cloud-based software
- Setting up automatic payments; and
- Taking advantage of mobile apps
So if you're looking for ways to streamline your accounts payable process, be sure to consider these additional high-tech, low-touch solutions.
#7: Purchase an AP Automation Tool
If you're looking for a way to automate your accounts payable, one of the best solutions is to purchase an AP automation tool.
AP automation tools are designed to streamline the accounts payable process, making it faster and easier to manage invoices and payments.
There are many AP automation tools on the market, so it's important to do your research to find the right one for your business.
But if you're looking for a way to save time and money, an AP automation tool is worth considering.
#8: Use a Cloud-Based Solution
A cloud-based solution can offer many benefits for small to medium-sized businesses.
- There is no need to invest in equipment or install software
- The software can be accessed from any device, whether you're at home or on the go; and
- This makes it ideal for busy businesses that want to keep up with deadlines but don't have time to spare
Cloud-based solutions also offer automatic backup, so there is little worry about data loss or interruption with accounts payable systems on the cloud.
Also, automated cloud-based solutions are available at a fraction of the cost of local installations and can be scaled up as your business grows.
How Your Business Will Benefit From Accounts Payable Automation
There are many benefits to automating your accounts payable process. Perhaps the most obvious benefit is that it will save you time. No longer will you need to enter data manually or keep track of paper invoices.
Besides saving time, automating your accounts payable can also help businesses:
- Improve efficiency and accuracy in accounts payable processes, leading to cost savings for businesses
- Keep track of invoices and payments, and reduce the risk of late payments or missed payments
- Manage vendor relationships and communicate more effectively with vendors; and
- Save time and money, and improve their bottom line
And because it's all digital, you'll also save on storage and processing costs.
Perhaps the biggest benefit of an automated accounts payable system is that it will improve your relationships with vendors.
With a vendor portal, you can easily track invoices and payments, communicate with vendors, and approve new invoices.
This will help to build trust and improve communication between you and your vendors, which can only benefit your business in the long run.