Organizations have to effectively manage the four key phases in accounts payable– invoice capture, approval, payment authorization and execution. Managing these steps manually increases the chances of errors and limits visibility into invoice payments. Let us see the key steps involved in the accounts payable process and the challenges they face in managing business processes manually. We will also look into how automating accounts payable processes would simplify accounts payable processes while effectively managing cash flow.
The Complete AP Process
Maximizing cash flow is important for long-term business success. Efficiently processing invoices can help maximize cashflow and maintains vendor relationships with prospects. Accounts payable manages four distinct steps:
The invoice arrives through email or vendor portal and has to be entered into the accounting system. The manual data entry would result in errors as only numbers are to be entered. This delays the process of invoice reconciliation.
Invoices then need to be routed to the business units to verify the delivery of products or services. The invoice will then be routed through different people to sign off on the approval.
Once the invoice is approved, it has to be sent to the finance department to authorize the payment and the issue date.
Once the payment is authorized, the invoice gets routed to the person who makes the payment. It’s easy to miss payment deadlines and loose early-payment discounts.
How Manually Managing The Process Limits Visibility?
The key drawback of managing the AP process manually is the lack of visibility into invoice status. Business wants to know when the vendors will be paid or where exactly is the invoice in the four-step process. The cost of trying to find out where exactly is the invoice can add up and increases the overall cost of the company. The lack of visibility makes it difficult to find the data to determine the invoice status can debilitate the company’s operations. In turn, the relationships with vendors can be ruined, which negatively impacts the business units.
Automation To Mitigate Costs And Improve Efficiency
By taking a holistic approach to accounts payable and automating the end-to-end process, businesses can address various challenges associated with the accounts payable process. AP automation can reduce errors and minimize human intervention in managing the AP process:
Invoices can be captured automatically and routed directly into the ERP systems. The invoice data such as line items, amounts and codes are automatically extracted using optical character recognition technology. Invoices are populated and the data is synced to the accounting system with no data entry.
For approval, automated workflows send approval requests with the invoice attached and approvers are determined based on invoice amounts. Approvers can approve or reject invoice payments from any device.
All the approved payments go immediately on a scheduled date. Approval records, invoices, receipts and payment records are attached to the invoice.
Human intervention is another key factor. Though the system does everything automatically, someone has to keep an eye on what’s happening. AP automation makes the process easy to manage and identifies invoices that need to be reviewed.
Improved Efficiency And Vendor Relationships
By automating the key phases of the accounts payable process, businesses can reduce the time management spend on chasing the information and processing invoices. They can minimize the amount of time spent on keying invoices into the accounting system. This reduces resource costs and most importantly eliminates the need to rekey errors in invoices and does not need any manual intervention.
Another benefit of automating the AP process is to get the payments to vendors on time. Consistently, paying vendors on time makes it more flexible to delay a payment. The automated AP process provides better visibility into payments, early payment discounts and late payment penalties. This simplifies cash flows and helps you in making decisions for making payment. The increased efficiency and visibility enables businesses to go with the best payment method for vendor.
Investing in AP Automation
When investing in automated solution, it is important to ensure that the solution will address the accounts payable process end-to-end. From document scanning to approval workflow and purchase order management to integrated payables, automated AP solution can seamlessly manage the entire workflow with ease.