It is 2021 and a few small and medium businesses still adhere to manual and semi-automated Accounts Payable for their payment obligations. But having worked with hundreds of business, Back Office Accountants can attest that the lack of proper know-how is one reason most businesses take a step back in the automating AP, which can be detrimental for their growth in the longer run.
If you are one of those businesses, you can seek help from our AP specialists at Back Office Accountants, right away but before you do, it helps to get a fair deal of idea about Accounts Payable automation and this blog is just does that for you.
Automating Accounts Payable – Two Pillars:
While AP involves a lot of steps, it can be broadly classified into step parts when it comes to automation: Invoice processing and payment method automation. In this blog, we divide invoice process automation into 3 broad independent steps and give information about payment automation methods. Read on:
Automation of Invoice Processing:
Invoice processing naturally occupies a significant part of the Accounts Payable process which is why it must be the priority in automation for every business. Many businesses still adhere to conventional invoice processing methods that involve cluttered & chaotic process that cost time and money for the AP team. Given that invoice processing can be divided into sub-categories, each step can be automated to reduce time, costs productivity and efficiency of the process.
Invoice Capture, Arrival & Categorization:
Vendors may use multiple formats like PDF, XML, DOC, PNG, TIFF, fax files or even manual paper to send invoices and naturally, it takes a lot of effort and time to sort, classify and categorize them just to read the necessary information and when you have a large volume of the invoice it may take forever, just to start the data entry. Fortunately, this complex and manual step can be solved by resorting to e-mail invoices which makes it easy to automate the sorting and categorization of these invoices.
In case your vendors stick to manual invoices, Accounts Payable systems that identify handwritten invoices using OCR are also available to automate the data entry, which often is the most time-taking and error-prone step in an AP process.
Invoice Routing & Approval:
Even after getting all the work done, the invoice has to go through a series of approvals by different people before being posted for payment to ensure validity and this naturally stretches the invoice processing time. For example, billing validity has to be checked by purchasing department and final approvals must be given by the supervisors and sometimes a CFO – a business that adopts a manual AP has to make sure each paper invoice goes from desk to desk to get the payments done.
If you are a business whose processing time and cost are impacted by the invoice routing and approval steps, you can massively benefit from the automation of AP where the entire routing process is simplified, communication is streamlined and invoice approval is accelerated.
Invoice Matching and Verification:
Two-way, three-way or four-way match is performed to match the invoices with relevant documentation before the payment process. A manual system that already takes a lot of time to reach this step further can take a lot of time to verify and match. An automated AP system makes this process a breeze by automatically verifying the captured invoice data with the data in purchase orders, receiving and accepting reports and other relevant documentation. Automating the matching and verification cuts the common AP bottlenecks, reduces errors and accelerate the payment process.
Automating Payment Methods:
The simplest method to kick-start your automation is to automate your payment methods. Switching from paper-based payment methods to one centralized digital payment platform that supports versatile payment options accelerate payment processing, reduces the chances of fraud.
Automating payment also gives your business a greater chance to accrue discount vouchers and other cashback schemes and not to forget it is crucial for remote accounting services. Given how many small and medium business struggle with a centralized and automated payment platform simply setting-up one can reduce your cost, operation bottlenecks, provides a secure trail for internal audit, saves time and lends productivity to your AP department.
If your AP department uses multiple bank accounts from different banking partners, payment automation with one centralized platform makes the whole process simple and hassle-free. Different types of payment automation services are offered by banking partners, ERPs or SaaS services for AP automation. ERPs and a few SaaS may not offer full-support when it comes to supplier on-boarding, so you must pay close attention to the automation options available to you for better integration with your AP goals and existing AP process and this applies to all the above 4 steps.
Automating Accounts Payable – Locating the Pain Point in Workflow:
A fully customized automated solution scans the e-mail invoices to make digital entries, routes and categorizes them, alerts the concerned AP team member to accelerate the approval process. In case the vendor adopts a manual invoice method, there are also add-on AP solutions that provide better integration. A perfectly integrated automated invoice process improves approval times, automates the work-flows, saves time and money, enhances security and makes remote invoice processing possible.
Business can automate invoice processing with an add-on module for an existing ERP system or with invoice handling services provided by SaaS. There are many invoice automation solutions but choosing the right fit that aligns with your goals and integrate with your existing process in the key.
This often starts with locating the pain point in the AP workflow. In case you are short of the right AP expertise in automation, we recommend you seek help from remote accounting firms like Back Office Accountants.
Accounts Payable Services by Back Office Accountants:
If you are a small and medium business that is looking to reap all the benefits of automating the Accounts Payable process but all the work of choosing the right AP automation is too much for you, there is an affordable way out too.
You can simply benefit from AP automation by simply outsourcing Accounts Payable to remote accounting firms like us at Back-Office Accountants. Being one of the best remote accounting firms, we specialize in Outsourced Accounts Payable Services for small and medium businesses. Our Accounts Payable experts fully equipped with advanced automated AP software and tools to provide the perfect AP solution that saves your time, cost and help you achieve your working capital and cash flow goals, at an affordable cost. You can find our Accounts Payable Specialists here: https://www.backofficeaccountants.com/