It’s true that AP automation is becoming more popular, with about 31% of all businesses having automated their accounts payable processes. But do the math, and the stark truth is that 69% of all businesses are still stuck with a manual accounts payable workflow. And this just can’t stand at all.
The shift from this manual approach does seem very likely, as the massive increase in remote work will invariably affect the $22 trillion B2B payment market in the US. The overwhelming need for digitalization becomes obvious with the huge number of invoices matched with an increasingly smaller accounting department.
Something’s got to give, and automation is the inevitable result. There’s simply no other way to boost the current efficiencies of old-school manual accounts payable processes.
Defining AP Automation
Basically, this is the use of automation tools and software to replace human employees in the accounts payable workflow. The use of this technology then streamlines the entire process, optimizing financial systems and enhancing the cross-collaboration of various teams. The automation tools help in consolidating the various steps involved, thereby reducing costs, boosting efficiency, and offering the user company a distinct competitive advantage over the majority of its competitors.
Automation as a whole has become much more common in the business world, as it is used in many different fields and in various departments. Automation is especially common in the following:
- Law enforcement
The AP Automation Process
So, how does AP Automation actually work? In simple terms, the task it performs is to convert paper invoices into a standardized digital format. The AP automation then sends the digitalized invoices through a virtual workflow that ends with the payment for the suppliers.
The whole process starts with the use of OCR (optical character recognition) which extracts the digital invoices from paper documents. Modern OCR technology is quite advanced, and the accuracy is almost perfect. It can even recognize handwritten text. With machine learning and AI factors built in, the accuracy of the OCR technology actually improves its accuracy over time.
With the use of the automated process, there is no more need for manual input. The data extraction is much more efficient—it takes a shorter amount of time, errors are fewer, and employees can use their skills elsewhere.
Specific Accounts Payable Tasks that Are Ideal for Automation
For companies new or just starting with AP automation, this tool can be easily used for the following task, and the benefits will be quick and obvious:
Data entry done manually is extremely time-consuming, and prone to errors. It’s to be expected when you have fallible workers manually transferring the data from various types of source documents.
But with automation, the entire process goes much more quickly. What’s more, the AP tools are generally prone to fewer errors, and they get even better with time.
In 3-way purchase order matching, the AP tools allow you to match invoices and their supporting documents. That means you can match the purchase orders with their corresponding shipping receipts.
The business can establish its own rules to properly set the right general ledger code for each invoice. This boosts the functionality and efficiency of the approval process.
The automation of the AP process also results in faster approvals. The AP automation tool allows for electronic routing to all the needed approvers in the invoice processing cycle.
What Are the Benefits of AP Automation?
There are several good reasons to automate the accounts payable process. But they all boil down to one basic goal—AP automation results in higher profits. And that’s actually the end goal of most businesses.
A Streamlined Process
Basically, the whole accounts payable process goes a lot more smoothly than ever before. The automation can include just about every step of the process, from the management of the invoices to processing the payments to suppliers.
And with the automation tools in place, human workers can focus on more important (and less tedious) tasks, for which they’re better suited because of their actual skills. They can focus on value-added activities such as innovating for growth and dealing with dispute management (which goes better with some human touch).
Better Efficiency and Accuracy
Humans are prone to mistakes, but automation tools can do their tasks more accurately and with fewer mistakes. What’s more, they get even more accurate as they learn using machine learning and AI components.
It doesn’t take long before there are hardly any mistakes at all. And even when there are a few mistakes, the inconsistencies in the data are quickly identified so they’re also quickly corrected.
What’s more, the speed at which they complete the various steps of the AP process is simply much faster with humans in the mix. There are no bottlenecks at all.
With faster speed and fewer mistakes, business relationships with partners are vendors invariably become even better.
With the shortening of the processing time and the use of paper, along with the reduction of errors, you get fewer late payments. You might even enjoy early payment discounts offered by some of your vendors. In fact, with a great record of making early (or at least on-time) payments, you might be able to negotiate lower prices in the future.
With greater visibility and transparency, your business can gain more trust. A tool like an invoice automation software allows both vendors and employees to access invoice information such as invoice status, payments, and purchase orders.
This greatly reduces the risk of fraud and allows for more detailed reports regarding the flow of invoices and transactions.
The software can also monitor all compliance requirements, and this leads to a more effective audit trail.
All in all, AP automation just makes too much sense.