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How to Automate Accounts Payable Process — 5 Expert Strategies

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Key Takeaways

  1. Switching to e-invoices saves time and reduces errors by standardizing the invoice format.
  2. Intelligent Document Capture (IDC) uses AI to handle data from all types of invoices, cutting down on manual data entry.
  3. Automated workflows and payment scheduling ensure timely approvals and payments, enhancing efficiency and supplier relationships.

For individuals familiar with manual accounts payable (AP) processing, the challenges are well-documented. 

Desks become inundated with a constant flow of invoices, and late payments can cause disruptions to overall business operations. The process itself can be inefficient, and tasks like securing approvals or reconciling discrepancies in invoices are time-consuming for all parties involved.

Furthermore, manually processing invoices incurs a significant cost, with the average invoice costing around $15 to process. These resources could be more strategically allocated to other critical business functions.

Fortunately, advancements in technology offer a solution. Automating the AP process can significantly enhance workflow efficiency, minimise errors, and liberate valuable time for your team.

Bar chart illustrating ePayables technology adoption rates

This guide will walk you through five essential strategies to automate your accounts payable. 

Ready to transform your AP process? Let’s get started.

How to Automate Accounts Payable Process: 5 Strategies From the Experts

When it comes to accounts payable, the more you can automate, the better. 

Let’s explore five effective ways to streamline this process and save significant costs.

Strategy 1: Shift to e-invoices

The accounts payable (AP) process hinges on the smooth receipt and recording of supplier invoices. Inconsistencies in invoice format, however, can introduce inefficiencies and potential errors.

Paper invoices can easily get lost. Digital files (like PDFs, JPEGs, DOCs) each require different steps to open, record, and finalise. 

E-invoices, on the other hand, offer a standardised format that simplifies and streamlines the AP workflow.

By adopting e-invoicing, businesses can eliminate the risk of lost documents and ensure consistent data capture. This reduces manual work for the AP team and also facilitates easier access to expense data for further analysis.

To add, this also reduces the risk of lost invoices and gives your AP team easy access to expense data.

Strategy 2: Unlock Efficiency with Intelligent Document Capture

While Optical Character Recognition (OCR) has been a workhorse for data extraction, some solutions now take efficiency a step further. 

SpendConsole, for example, uses Intelligent Document Capture (IDC) — an AI-powered technology that tackles both structured and unstructured data within invoices, making light work of scanned paper documents, PDFs, and even images captured by a camera.

IDC eliminates the need for time-consuming manual data entry, a task that plagues many AP departments. Studies show that a significant portion (roughly 76%) of office workers spend a large chunk of their day on data entry. This technology frees up your team to focus on higher-value activities, like strategic analysis and supplier relationship management.

By intelligently extracting data from invoices, SpendConsole’s IDC technology ensures greater accuracy compared to traditional OCR. This translates to fewer errors and discrepancies, minimizing the need for manual corrections and rework.  

Additionally, the ability to capture and categorize both structured and unstructured data within invoices strengthens compliance efforts by ensuring all relevant information is captured and readily available.

Strategy 3: Streamline Invoice Approvals Through Automation

“Lengthy invoice and payment approval times… top the list of hurdles impeding AP teams from achieving better results.”

– Ardent & Partners

An efficient accounts payable process relies heavily on a well-defined invoice approval workflow. This typically involves a multi-tiered authorisation structure based on factors like expense amount and category.

By implementing automated workflows, businesses can ensure invoices are routed to the appropriate personnel for timely approvals. These workflows can be further configured with rules and conditions, for example, directing invoices exceeding a specific threshold to senior management for review. 

This not only accelerates the approval process but also reinforces adherence to established company policies. Additionally, automated reminders and notifications minimise delays and 

Strategy 4: Schedule Payments Automatically

Automated payment scheduling allows you to set up payments based on invoice due dates and your company’s cash flow. The system can prioritise payments to take advantage of early payment discounts or avoid late fees.

The primary advantage lies in enhanced efficiency. Automated scheduling guarantees timely payments, fostering positive relationships with suppliers — which can then lead to cost reductions through available early payment discounts. 

Additionally, this approach liberates the AP team from the burden of manual payment date tracking, allowing them to focus on more strategic endeavours.

Strategy 5: Simplify Matching and Reconciliation

Invoice matching involves pairing the correct invoice with the payment and received goods. Authentication of company IDs and other information is needed before closing the invoice. 

To effectively automate your AP process, you need to set up a system that assigns a unique ID to each party needing payment. This allows for seamless association between the corresponding invoice and payment amount.

With Intelligent Document Capture technology, invoices and supporting documents like purchase orders and receiving receipts are scanned automatically.

This data is then fed into the automation system, which performs three-way matching by comparing total amounts, keywords, and expense categories. This process ensures that payments are made only for authorised goods and services received, while also facilitating the identification of any discrepancies in quantities or pricing.

Choose software that offers automatic bank reconciliation and imports your bank statements.  This functionality allows for seamless upload of bank statements, prompting the system to automatically match transactions with corresponding ledger entries. This way, you get to reduce the time required for book closing, freeing up valuable resources for other critical tasks.

The real cost of manual accounts payable

Person reviewing financial data on a tablet surrounded by documents, showing how to automate accounts payable process for better data management and efficiency.

Manual accounts payable processes come with a host of challenges that can hinder your business’s efficiency and accuracy. Let’s take a closer look at some common issues and what it could mean for your business.

Manual AP Processes Are Fraught With Problems

  • Errors: Manual data entry is prone to mistakes, leading to discrepancies in financial records. The Institute of Finance and Management conducted a survey revealing that 39% of invoices contain errors. 

These errors can range from minor inconveniences, like incorrect billing addresses, to more significant issues such as overpayments or duplicate payments. Such discrepancies not only lead to potential financial losses but can also negatively impact relationships with valued suppliers.

  1. Delays: Inefficient invoice approval processes can lead to delays in payments, potentially causing businesses to miss out on valuable early payment discounts. These delays can have a significant ripple effect throughout the organisation. Disruptions to cash flow can negatively impact financial forecasting and lead to increased costs through late fees.
  2. High Labour Costs: Labour-intensive manual processes weigh heavily on accounts payable teams. They can get stuck with repetitive administrative tasks that increase headcount costs and divert attention from more valuable initiatives. 

Staff members more often find themselves buried in filing paperwork, entering data, and responding to supplier enquiries as transaction volumes rise annually. When experienced employees inevitably face burnout, offboarding and retraining new hires becomes necessary. Institutional knowledge is left with fewer individuals allowing errors to happen often.

Why Automate Accounts Payable?

Changing the way you approach your entire financial process can lead to greater business success. Let’s dive into the key benefits and strategic advantages of automating AP.

Infographic depicting the benefits of accounts payable automation

Time Savings

Automation can drastically cut down the time spent on repetitive tasks. Imagine no longer having to manually enter invoice data or chase approvals. Instead, automation handles these tasks in a fraction of the time, freeing up your team to focus on more strategic activities.

Cost Reduction

Manual accounts payable (AP) processes are inherently susceptible to errors introduced through data entry mistakes. These errors can translate into significant financial losses for businesses. Automation offers a powerful solution by ensuring accurate data entry from the outset, minimising the need for error correction and rework.

Improved Accuracy

With automation, the risk of human error is significantly reduced. Automated systems ensure that data entry is consistent and accurate. This leads to fewer discrepancies and more reliable financial records, which is crucial for audits and financial reporting.

Better Cash Flow Management

Automated AP provides better visibility into your cash flow. With real-time data, you can see exactly where your money is going and when. This enables more strategic financial planning and ensures that you have the funds available when needed.

Enhanced Supplier Relationships

Timely payments foster better relationships with suppliers. When suppliers are paid on time, it builds trust and can lead to more favourable terms in the future. Automation ensures that payments are made promptly, strengthening your supplier partnerships.

By automating your accounts payable process, you’re not just improving efficiency; you’re setting your business up for long-term financial health.

Don’t Get Left Behind

In today’s competitive business landscape, forward-thinking CFOs and finance leaders are increasingly recognising the transformative power of technology and digitalisation. Automating accounts payable (AP) processes can be a game-changer, significantly boosting your operational efficiency.

Taking the leap towards automation. Reach out to experts who can help integrate automated AP processes into your system seamlessly and help you unlock the potential for significant cost savings and improved efficiency. This proactive approach will position your organisation for a streamlined and more prosperous future.

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How to Automate Accounts Payable Process — 5 Expert Strategies
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