As an entrepreneur, sometimes it might feel like your whole day is spent paying bills and sending out invoices so you can get paid. But if you’re ready to take off your accounting hat and start growing your business, there are some options available that can help you handle the accounts payable side of your company.
Although accounts payable is a vital part of any company, taking on this responsibility is time-consuming, even if you have a staff involved in handling it. Accounts payable automation (APA) is one possible solution that can help you simplify that process. APA is an optimized digital workflow for automating all invoice data entries, verifying them, handling the invoice approval process and centralizing all accounts payable (AP) operations.
Invoices are routed through the digital workflow based on specific logic configured in the organization’s APA software. The program uses robust protocols and policy compliance to set up a multi-stage approval hierarchy for your organization. The APA system is integrated within a company’s enterprise resource planning (ERP) system(s) to transfer data between the two for a seamless operation.
How It Works
Automation makes the accounts payable process simpler, faster, more accurate and highly efficient. It works based on the following five steps.
Step 1: Automated Invoice Data Entry
APA starts with capturing invoice data in the form of paper, PDF, e-invoice, fax, XML, or other formats into a single digital format and then automatically sending and organizing data to the accounting system. Additionally, two-way synchronization of data between ERP and automation solution allows early-pay discount deadlines to be entered into the accounting system.
Step 2: Automate Purchase Order Matching Process
Next, APA automates invoice verification against the corresponding purchase orders (POs) and verified delivery receipts. It matches each line of PO against the received information to ensure that the goods and services ordered are the same as the products received and billed. Then it flags discrepancies (if found) and sends alerts to the accounts payable department for verification. For indirect expenses where there is no PO available, it directly routes the invoices to the concerned person for approval.
Step 3: Automate Invoice Approval
The verified invoices are automatically routed by the system to the appropriate approver within the organization, with automated reminders for the upcoming deadlines and pending approvals.
Step 4: Automate Payment Execution
Once the payment is authorized, the invoice makes its way to the person who will execute the online payment. The AP system provides the person with clear visibility into all payment due dates with eligible early-pay discount deadlines. It sets automated email reminders about the pending payments to avoid delays.
Approved payments can also be automated by scheduling the payment execution and notifying via email or SMS for every payment made.
Step 5: Automate Record Storage
The AP automation system stores all transaction details and records all events in a digital archive, making the entire process paperless. This way, financial personnel can access the invoice details and track the status of POs, vendor contracts, approvals, due dates, total liabilities and payments — anytime, anywhere, in one place.
Benefits of Accounts Payable Automation
Consider these benefits of using the APA system:
Fraud Protection – Automation significantly reduces the risk of fraud by giving entrepreneurs unprecedented visibility and reporting capabilities into the flow of invoices and transactions across the company.
Eliminate the Delays and Errors of Manual tasks – AP tools capture invoice data with accuracy and streamline the approval process by removing manual tasks.
Real-Time Data Access – AP automation keeps the accounting systems up to date, providing better control over budget spending. It therefore helps management make informed decisions and improve cash flow.
Increase Efficiency – Faster invoice processing and efficient recordkeeping helps entrepreneurs gain process and operational efficiencies, with greater visibility over liabilities.
Save Time and Paper – Invoice automation saves considerable time and manual effort by reducing mailroom activities. It fast-tracks the approval and payment cycles by eliminating the use of paper.
Save Processing Costs – The system enables companies to save by instituting early payment discounts. It cuts down the invoice processing and labor costs, and companies can save on computing time and delay fees.
Ensure Policy Compliance – The system helps to maximize compliance with improved spending visibility.
Improve Supplier Relationship – AP automation provides vendors with a variety of options to send and receive invoices. It helps businesses to issue vendors on-time payments and maintain better terms.
Although APA may not be the right choice for every business, it’s an important consideration to review as you put together your accounts payable action plan.
Source: Escalon Services