What is AP automation?
Accounts payable (AP) automation software empowers businesses by reducing manual tasks and freeing up cash flow. You can submit invoices, manage approvals, and process payments through a single platform with swift approvals and better visibility and control over important financial processes and data.
10 Benefits of Accounts Payable (AP) Automation
Automating accounts payable processes adds value while freeing up your team to focus on improving the back office. Here are some of the key benefits of AP automation.
Time savings: Traditionally, invoices would sit on desks or wait in email inboxes for approval. Automated routing cuts through those delays and streamlines the approval process. Specific rules can be applied to the workflow so the right person automatically receives an invoice at the right time with programmable reminders. Dashboards give users a high-level, real-time view of invoice processing, reducing the amount of time it takes to hunt down a status.
Low-cost invoicing: Business process automation saves labor costs and cuts down on hard costs, such as office supplies and postage for interoffice mail. The average monthly cost to process 5,000 invoices manually is $64,500, according to data from APP2P Network. Processing the same number of invoices in an automated operation would cost about $8,850. That’s roughly an 85% savings.
Improved accuracy: Opting for AP automation translates to reduced errors. AP automation software is designed to protect you from some of the most common errors. There’s no need to key in invoice headers or line-item data manually. Furthermore, invoice data is validated against enterprise resource planning (ERP) information, making it easy to catch duplicate payments.
Enhanced insight: With comprehensive dashboards, AP automation software provides a clear window to the payment cycle. It’s easy to see where an invoice is sitting and whom to contact in case of delays. Data can be imported and exported with real-time access — perfect for reporting and analysis, especially at the end of business cycles.
Fraud protection: An estimated 81% of companies were targets of payments fraud in 2019, notes the AFP Payments Fraud and Control Survey. AP automation software can help your business safeguard against fraud by controlling which employees have access to invoice approval and the release of payments. You can build approval workflows with multiple people and increase the chances of catching fraudulent invoices before payment is processed. With such a process management system in place, no single employee serves as the only person tasked with approving payments. This not only helps reduce the chance of fraud, but it also helps you double-check for missing or incorrect data.
Increased transparency of data: Enhanced dashboards make tracking employee productivity easier, which can also come in handy for employee reviews. Managers can tap the tool to track individual and team performance and productivity.
Easy auditing: Comprehensive AP automation software can help you with document management, which can be beneficial for auditing. The system links all documents and messages involved with each transaction while matching invoices with purchase orders and receipts. This searchable audit trail reduces your chances of losing important paperwork. It can also help you maintain regulatory compliance for quarterly or annual filings.
Integration with existing systems: AP automation software can easily integrate with your company’s ERP, databases and major financial systems. There’s no need to log in and out of different applications or re-enter data to multiple systems (and increase chances of error).
Early-payment discounts: Most vendors offer early-payment discounts. And yet, according to the Institute of Finance Management (IOFM), most businesses capture less than 21% of all early-payment discount offers, and 12% of businesses don’t collect any early-payment discounts. There are many reasons these discounts are missed. However, according to PayStream Advisors’ AP & Working Capital Report, 31% of respondents said manual routing of invoices for payment and approval stood in the way of an early-payment discount.
