Accounts Payable Automation: Definition, Best Practices, and Tips
Automate your AP processes to experience faster payment and effortless management while saving time and money. Here are the AP workflow best practices that guide the way to a stronger bottom line while improving efficiency and performance.
Did You Know!
Account Payable Automation can save up to 70-80% time for small and midsize businesses.
Regarding invoice processing, integrating AP automation software and some best AP practices allow your company to work smarter, not just harder. Plus, it lets your team recoup hours now spent on manual data entry.
In layman’s terms, you’ll gush down less time hunting down the status of any given transaction - because everything will be on your dashboard, routed automatically by workflow rules.
As a result, businesses that make Accounts Payable (AP) automation their top pick find their processes moving faster and with minimal errors. There is also improved visibility, which helps in protecting against any potential threats.
So, before we get started with AP automation best practices, let’s have a quick rundown - “what is AP Automation”?
What is Accounts Payable (AP) automation?
Accounts Payable automation, popularly known as AP automation, includes tools or processes that automate the manual aspects of accounts payable processing. Instead of a finance team member putting the data manually, the complete process occurs digitally, starting from invoices and purchase orders.
And, with everything automated in accounts payable, you are able to save time and money while securing your business from costly slip-ups. However, you need to be mindful of pairing the software with smart processes.
And the best part is - you don’t need massive budgets or big IT investments to benefit from automation.
Follow these ten key accounts payable practices to significantly increase efficiency, improve compliance, and manifold productivity of your business.
10 Key AP Automation Best Practices
Like most financial leaders, if you are also on the fence about “How can our accounts payable team become more efficient?
”The answer is - “AP automation and its best practices”.
# Practice 1: Get Buy-in
There is conventional trepidation when one thinks about change. But for account payable automation to be successful, every finance team member needs to be onboard and on the same page.
Besides, who knows CFOs may want to sit down with team members and talk them through the switch. Shed light on different ways AP automation will make their job easier while benefiting the business.
💡 Related Read: A CFO’s Guide to Financial Automation
# Practice 2: Put New Invoices ASAP
According to Aberdeen Group, AP automation can exceptionally reduce days payable outstanding (DPO) by an average of 5.55 days.
But, this reduction depends on when an invoice is entered into the system. For example, if you are still receiving paper invoices, you’ll need to scan them in the right manner.
So, get your team to put new invoices into the system the day they arrive. This way, you can easily keep track of transactions and realize the maximum DPO benefit.
# Practice 3: Don’t Go Head Over Heels to Automate
We know there’s a lot that can be automated, but that eventually doesn’t mean you have to unleash it all at once. It may be advisable to roll out automated processes gradually, with time to troubleshoot in between phases.
While automation solves challenges, improper setup can also open doors for some big demurs. Plus, there will be a learning curve too. So, by going slow and giving your team to adapt to new processes, you can ensure the maximum benefits of automation going ahead.
Do consider feedback and use it in your conversations with your vendor. Make sure any proposed solution includes your team’s real-life challenges. Documenting these discussions will surely help you make a concrete business case for AP automation software.
# Practice 4: Assign an AP Automation Manager
It's important to have a point of contact for everything varying from your software solution provider, especially when implementing automation.
This person will oversee all the initiative's behind-the-scenes aspects and ensure automation flows are set up optimally. In addition, this person caters as a point of contact for internal stakeholders if any software issues arise. While day-to-day management rests with finance, the project manager is responsible for program management tasks, like monitoring and optimization, and providing regular reports on improving and maintaining efficiency.
# Practice 5: Ensure Vendors and Suppliers are on the Same Page
What is equally important as having your team completely on board is - “communicating with your suppliers”.
Many AP automation systems allow you to set up a vendor access portal. There, your verified vendors and suppliers can update their information, check on the status of invoices and find answers to frequently asked questions. Additionally, you can make a list of suppliers from which you regularly make voluminous purchases and vendors for whom you are a big customer; all this requires constant communication with them and updates for any change.
Going ahead, they’ll appreciate being kept informed even as you free your AP team with frequent customer service calls.
# Practice 6: Handhold First-Mover Advantage
The first-mover advantage in AP automation is “early-payment discounts”.
According to PayStream Advisors 2017 AP & Working Capital Report, 31% of respondents said manual routing of invoices for payment and approval was a big challenge in achieving at least some savings.
But, with AP automation, there comes a change. These systems make it a lot easier for finance to optimize cash management and boost approvals.
# Practice 7: Establish Your Workflows
AP automation proves to help you put a workflow system in place to ensure employees clearly understand their responsibilities. This way, everyone on the accounts payable team is on the same page, especially when it comes to meeting deadlines.
If and when bottlenecks happen, you can check your automation software dashboard to see where there is some obstacle in approvals and nudge that employee to move the process along.
# Practice 8: Integrate Your Systems
Do you have any idea of the tools your finance team depends on?
The AP automation system you choose should be wholly integrated, or able to be integrated, with what your team used to run accounts payable. Now, it’s an inescapable factor in enterprise resource planning (ERP), customer relationship management and many other core finance systems.
There’s no more need for your team to enter information more than once or log in and out of the software throughout the day. Besides, by integrating tools like this into your system, you further minimize the learning curve and get access to end-to-end data that can be turned into informative reports.
# Practice 9: Keep Track of the Metrics
AP automation software offers real-time data at the click of a button that you can compile in a dashboard and combine into business insights. Using this data, you can keep an eye on cash flow while surveying what’s working and what’s not.
For example, you may find out from your scale that a workflow needs reconfiguration. Therefore, there could be too many steps, or too few, to complete a task efficiently.
# Practice 10: Analyze, Iterate, and Optimize Constantly
It’s never a bullseye on the first time. Like most other things, accounts payable automation is also a continuously evolving journey. So, you should also brace your workflows to maximize efficiency.
Even though you have documented the workflows and have insights, you’ll find people have different opinions after using the system for a while. They’ll have feedback and suggestions for changes and improvements.
So, you might be wondering what to do.
Go back and interview real users, ask them about their experiences - what truly helped them, and what could make their lives easier. Put to use the best suggestions - nothing delights customers more than making a difference.
To help you start, workflow analysis software is a safe bet that enables you to pinpoint bottlenecks with graphical reports and dashboards identified in the process. After all, being armed with real data can bring about real and meaningful organizational changes.
Embracing Change & Growth
It's the 21st century, and it's important to pace up with the speed of change. Slow, manual AP automation processes curate your business and organization at a backfoot in a competitive and dynamic business world.
Fortunately, simple and pocket-friendly solutions are available to help you reap the massive efficiency benefits of accounts payable automation without requiring huge, upfront investments in software and IT staff. To find out exactly how well account payable software can work for your business, start with a talk.
Frequently Asked Questions
Have a question in mind? We are here to answer.
What is Accounts Payable Automation?
Accounts payable automation is the use of software to automate the tasks involved in accounts payable, such as invoice processing, payment processing, and reconciliation. This can help businesses save time and money, improve accuracy, and reduce the risk of errors.
What are the benefits of Accounts Payable Automation?
There are many benefits to accounts payable automation, including:
- Save time and money
- Improve accuracy
- Reduce the risk of fraud
- Improve cash flow
What are the best practices for Accounts Payable Automation?
There are a number of best practices for accounts payable automation, including:
- Choose the right software
- Implement the software properly
- Monitor the process
What are some tips for Accounts Payable Automation?
Here are some tips for accounts payable automation:
- Use a centralized system: A centralized system will help you keep track of all your invoices and payments.
- Automate as much as possible: The more you can automate, the less manual work you will have to do.
- Define clear rules: Set up clear rules for how invoices are processed and payments are made.
- Keep Track of the process: Monitor the process on an ongoing basis to make sure that it is running smoothly.