7 Benefits of AP Automation for Your Small or Mid-Sized Business
Discover the top benefits of AP automation.
Manual processes and back-office paperwork remain production bottlenecks for many small and midsize businesses. Around 55% of companies still tackle their financial data manually, according to this report by PayStream Advisors. Manual processing is time-consuming, costly, and can be error-prone. But it doesn’t have to be that way. Optimizing your accounts payable process and moving beyond manual workflows will help your organization save time, reduce costs, and give you a competitive edge. According to this report by Business Insider, AP automation can cut costs by 81% and improve efficiency by 73%.
So, what is AP Automation?
AP automation, or accounts payable automation, refers to the technology used to digitalize and automate account payable processes and workflows, remove manual tasks, and provide better visibility and control over crucial financial information. It increases the efficiency of AP operations with better information accuracy, complete visibility into AP department performance, and improved uniformity with business and market guidelines.
With the automation of some manual operations like gap analysis and invoice data entry, the AP automation tool quickens and maintains the accuracy of payments. Manual and semi-manual AP processes can be automated, saving time and enhancing control.
How Does AP Automation Work?
AP automation helps companies get invoices, manage approvals, and process payments automatically through one platform. AP automation covers these three components:
🔸 Invoice Receipt – Invoices can be received in two ways – either electronically or transformed from paper to electronic. Methods involved in electronic invoicing are B2B or EDI connections or receipt through a supplier portal, where data transfers electronically. Paper invoices are scanned and processed with artificial intelligence or optical character recognition (OCR) to extract and store the data in the cloud.
🔸Matching and Workflow – After the data is captured, invoices are either compared with purchased orders and goods receipts or automatically sent to the fitting person(s) for review and approval. Following approval, they are directed to the ERP or accounting system for payment.
🔸Archive and Audit – Each invoice is archived securely, and audit trails of entire actions taken on invoices are readily available for financial audit purposes. Electronic archival of invoices also makes searching for it and finding invoices anytime from anywhere relatively easier.
What Are the Main Benefits of AP Automation for Businesses?
Automating your AP processes adds value while enabling your team to focus on essential business tasks. The benefits of accounts payable automation are many. Let us take you through some of the key AP automation benefits to help you assess whether a shift towards this is appropriate for SMBs:
AP Automation Benefit #1: Greater Time Efficiency
Without automation, tasks like processing an invoice, confirming the numbers, and getting all the required signatures and approvals may take weeks. But, with automated AP systems, that timeframe gets reduced to 1-7 days. There are many phases in the lifecycle of invoice processing where you can reduce time and cost and streamline your productivity. For instance:
OCR will automatically index your scanned invoices and cut back the amount of manual data entry required for the department to finish.
The digital filing system helps find and access invoices effortlessly, rather than sifting through physical storage spaces and paper documents.
Cloud-based storage enables AP managers to access invoices more quickly for immediate approvals.
Due to faster individual invoice turnaround times, the AP department will be able to avoid process delays caused by end-of-month invoice bottlenecking.
Payments are routed once they are scheduled, approval workflows run themselves, and invoices are accessed without error, all without manual work. Additionally, since invoice processing advances more quickly, your workforce has more time to focus on analysis and providing productive cash-flow insights to improve organizational efficiency.
AP Automation Benefit #2: Improved Accuracy and Fewer Errors
There is always room for mistakes with manual tasks. Human-made AP process errors are bound to occur from misfiling and misplacing documents to giving the wrong amount. These errors can cost a business in several ways. Backtracking and handling the mistakes take crucial time away from performing essential tasks. Also, there are chances that human error will result in duplicate payments and even overpayment.
Invoices full of errors can cause incredible frustration for employees. With AP automation, the system recognizes the inconsistencies and offers smooth communication by granting each party digital access to files. Multiway AP matching validates data across the board, ensuring accurate bookkeeping. In addition, the document management system will offer reliable routing to enable the AP department to focus on productivity, not only handling exceptions.
AP Automation Benefit #3: Reduced Cost and Optimized Cash Flow
Preventing costly mistakes can be highly beneficial when it comes to your financial invoice processing costs. All these streamlined elements translate into considerable ROI after going through an AP automation overhaul. Retraining your employees on automation software to increase their productivity may take some cooperation and adjustment, but the end results make it worth it. These are a few examples of the AP automation benefits related to cost-efficiency:
Compared to manual invoice processes, automation of invoices imaging can amount to almost 90% savings on processing costs.
Putting an end to printing costs for physically generating paper copies to file emails and electronic receipts.
Reducing storage costs for extensive document filing and benefiting from the perks of a digital storage system.
Getting alerts related to duplicate invoices and reminders of forthcoming due dates allows you to avoid late fees.
Doing well out of early-pay discounts can cut costs by 30% or more.
With an added sense of control over cash flow, your organization can prevent needless costs and maximize potential savings. You will also be able to handle the regular repetitive verification necessary for avoiding inaccurate or fraudulent payments.
AP Automation Benefit #4: Expanded Process Visibility
Manual filing and sifting through the stacks of paper receipts is tedious and time-consuming. AP automation will enhance visibility by showing relevant data exclusively to authorized parties. On the whole, the awareness automation provides is vital to monitor compliance.
What’s more, transparency through each process phase enables you to make more informed decisions about when to pay providers, how to boost efficiency, and the right way to scale operations. The relevant information will be available to all decision-makers, and the digitization of approvals and required forms lowers process maintenance to some clicks.
AP Automation Benefit #5: Improved Customer Satisfaction
On occasions, the manual AP process encounters delays, errors, or other issues that may impact the satisfaction of both internal and external customers. One of the reasons for vendor discontent usually involves late payments caused due to misfiled or misplaced invoices. Accounts payable is vital to internal customers; however, it may not appear that way if exceptions cause costly duplicate payments.
An automated AP system can work significantly on these discrepancies, leading to well-timed operations and better connections with providers due to an increase in speed and control. You will be able to make sure your AP department contributes to company objectives regarding finances and maintaining a positive reputation in the market.
AP Automation Benefit #6: Protection From Fraud
AP Automation can help your company prevent fraud by placing controls on the invoice approval process. You can control which employees have access to invoice approval and the release of payments and build approval workflows with multiple people to decrease the chances of paying out fraudulent invoices. This way, the onus to catch and prevent fraud is not on one employee.
AP Automation Benefit #7: Better Workplace Collaboration
With the speed and transparency of a digital storage system, everyone involved in accessing and approving invoices can have simultaneous access to important files. The simultaneous accessibility enables real-time collaboration and better efficiency when sharing documents, confirming details, and working through mistakes. An automated system reduces manual data entry, which gives AP employees more flexibility to seek out relevant departments and deal with inconsistencies. Plus, it allows time for logging any crucial conversations. Finally, it shows how destroying collaboration barriers can lead to better workplace communication and happier staff.
There’s no doubt about it – automating your AP processes brings a host of benefits for your business. Embracing digital transformation with AP automation software can help SMBs achieve various improvements through time savings, streamlined payable operations, and optimal collaboration.