10 Key Benefits of Accounts Payable Automation

A wide majority of businesses continue to depend on manual, paper-based accounting processes, which become a significant cost burden in terms of time and money. But in today’s fast-paced business environment, such accounting processes are no longer sustainable. As companies grow, and become more conscious of costs, it becomes essential for them to upgrade existing accounting processes to streamline operations, save time and reduce errors. One place to start is Accounts Payable - often overlooked but highly critical to ensure a business continues to get access to critical goods and services on time. 

What is accounts payable automation?

Accounts Payable or AP automation automates the process from invoice capture to payment processing. AP software solutions eliminate manual tasks like data entry, approval routing, and payment processing. 

How does accounts payable automation work?

AP software solutions use Optical Character Recognition (OCR) technology to scan invoices and extract all relevant information. It then leverages the power of AI to route invoices to appropriate users and departments for approval and once approved, it initiates the payment process. AP software also integrates with a company’s accounting system and syncs every single invoice and transaction back to the ERP. 

Benefits of Accounts Payable Automation

Automating the traditional, labor-intensive, and inefficient payables processes can yield significant cost savings. Here are some of the key benefits of AP automation - 

1. Faster processing

Accounts payable personnel spend ~80% of their time on routine and manual tasks like capturing data from invoices and purchase orders, tracking down managers for approvals, answering queries, enforcing rules, and more. With such manual processes, the time taken to process a single invoice can be anywhere from 7 to 10 minutes. With AP automation, the processing time can be reduced to just a few minutes, saving the company hundreds of hours per year.

2. Reduced errors

Traditional AP processing is prone to errors as personnel manually key in invoice header and line-item level information into their accounting system. With more than 50% of invoices being received in a manual format, even a 1% error rate can prove to be costly. AP automation automatically extracts invoice data and even matches it against your Purchase Orders and other accounting information to ensure the accuracy of data. 

3. Increased visibility

With real-time visibility into the invoice approval and payment process, AP automation helps companies track payments and identify any issues quickly. It prevents delays in approvals as AP personnel don’t need to hunt down an invoice to check where it is sitting and what is causing a delay. 

4. Improved compliance

With a centralized system for tracking and storing invoices, an AP automation solution helps you maintain compliance with regulatory requirements and is beneficial for auditing. They also provide data trails of every action on an invoice, when it was actioned upon and by whom.

5. Better cashflow management

AP automation helps companies improve cashflow management. With regular reminders for invoice due dates, these systems help ensure timely payments and avoid late payment fees. These systems also help capture early-payment discounts offered by vendors which otherwise may have been missed due to manual routing of invoices.

6. Improved supplier relationships

Manual processing of invoices makes maintaining good supplier relationships very challenging. Your company’s access to critical goods and services can be impacted if payments are late or invoices are lost. AP automation helps to improve relationships by ensuring accurate and on-time invoice payments.

7. Cost savings

Processing an invoice manually typically costs anywhere from $15 to $30 per invoice. This cost includes labor costs as well as direct costs like office supplies and postage. AP automation can save anywhere between 70 to 85% of these costs. A company processing 5,000 invoices manually would be able to save upwards of $52,500 by automating AP.

8. Increased productivity

AP automation frees up the time of AP personnel from manual, low-value activities and allows them to focus on more strategic tasks. With personnel working on more important tasks without being overloaded, morale along with the productivity of employees improves.

9. Integrate with existing systems

The biggest blocker to technology adoption in most companies is change management. AP automation however eliminates the need to move away from your existing accounting software by integrating with your ERP, and other major databases. This ensures information is not hidden in silos and is available to all stakeholders for improved decision-making. 

10. Scalability 

Processing invoices manually is an extremely labor-intensive activity. As businesses grow and invoice volumes increase, finance teams would be forced to add additional headcount. With AP automation, companies can scale operations easily without investing in additional resources and without sacrificing efficiency or accuracy. 

Choosing the right AP Automation solution for your business

Before you choose any AP Automation solution, it is important to review the needs of your business. What are the pain points of your accounting team? Will a solution integrate with your existing tech infrastructure and minimize double entry of data? While making a purchase it’s important to keep in mind that the best accounts payable software, like ClearTech, will support every possible AP need of your business.