Let’s kick off with a recap on what accounts payable (AP) automation is and define its value proposition for businesses.
In a nutshell, AP is a business process ripe for automation. Gartner defines this as automation of the capture, validation and processing of invoices. Such solutions attempt to automatically match invoices to purchase orders (POs) and contracts, or automatically code those invoices that would not have a PO.
Payment management, ranging from OK to pay, to complete invoice payment, is also included. The expanded scope of AP automation software includes advanced capabilities, such as automated multiway matching, fraud detection and cash management.
Historically, generating and paying invoices has been done by hand from end-to-end. CPA Practice Advisor notes that when the pandemic hit, it quickly became apparent that the manual approach was untenable.
It reports that nowhere was the pain felt as strongly as in accounts payable, saying that conducting business, paying suppliers and managing cash flow suddenly hinged upon having someone in finance being physically available to go into the office to retrieve invoices, route them for approvals, pick up cheques, prepare payment runs, etc.
It confirms that accounting and finance professionals are only too aware that manual AP operations are problematic. They are in agreement that the amount of time and cost inefficiencies, plus the errors associated with manual processes, simply don’t add up to good business practices.
Time is money, and reducing invoice cycle times and manual tasks can lower costs.
AP automation software is the deployment of tools and clear processes to help eliminate as much of this manual work as possible.
Forbes states that only 10% of businesses have fully automated their AP processes. Recently, companies have focused more on automating revenue-generating activities, such as sales, marketing and product development.
But time is money, and reducing invoice cycle times and manual tasks can lower costs. Companies using AP automation can see 81% lower processing costs and 73% faster processing cycle times.
Forbes highlights the fact that manual processes obscure visibility, adding it’s more important today than ever before for companies to be able to see where their invoices and payments are in the process, as well as outstanding liabilities and available cash flow.
Without this, companies will lack the necessary agility to manage payment, cash flow and spend effectively – all which are critical in today’s business environment.
But getting to the crux of the matter and choosing the right AP automation software can significantly impact a company’s operational efficiency and financial management.
An IDC study advises technology buyers to choose AP tools that align with the digital needs of their enterprise. IDC emphasises the importance of user experience, integration capabilities and strategic vendor selection to enhance financial management practices.
I outline in the following the most important criteria for businesses to consider when selecting an AP automation system that will help companies to make an informed decision to yield a successful outcome.
I recommend companies commence by evaluating their current AP processes and identifying the pain points. Specifically, what are the challenges the business is facing? Common issues include slow processing times, high error rates and lack of visibility into invoice statuses.
Next, goals need to be defined. It is necessary to clearly outline what the company hopes to achieve through automation. This could include reduced processing times, improved accuracy, or enhanced compliance.
When evaluating AP automation tools, businesses need to consider the following essential features:
Invoice processing: Look for tools that offer automated data capture using optical character recognition to minimise manual entry.
Approval workflows: Ensure the software allows customisable workflows for invoice approvals, which can streamline the process.
Payment processing: Check if the automation tool supports various payment methods.
Integration capabilities: The tool should seamlessly integrate with existing ERP and accounting systems to maintain data consistency.
Analytics and reporting: Real-time analytics can provide insights into AP processes, helping to identify bottlenecks and improve efficiency.
Cost analysis: Evaluate the total cost of ownership, including implementation fees, subscription costs, and any additional expenses for support and maintenance.
Return on investment: Conduct a cost-benefit analysis to estimate the potential savings and efficiency gains from automation.
Vendor support: Strong customer support is crucial for addressing issues during and after implementation. Ensure the vendor offers adequate training and resources.
To summarise, choosing the right AP automation tool requires careful consideration of an organisation’s specific needs and business goals.
By assessing current processes, evaluating key features and conducting thorough research, it is possible to select a solution that enhances efficiency through advanced invoice capture and AI-driven processing.
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