Why Automate Accounts Payable? A Guide to the Prospective Advantages
According to our recent Controllers Council National Survey (March 5-19, 2024, 378 respondents participating across North America), 95% of finance departments are at least partially automated. Survey respondents noted that investment in technology tools, including automation, helps their department increase efficiencies, improve processes, and foster cost savings.
These are just a few accounts payable automation benefits businesses experience when moving from traditional paper-based processes to paperless AP.
Accounts Payable Automation Benefits
AP automation software is designed to offer some general benefits to businesses.
Increased Efficiency and Speed
One of the most immediate and noticeable accounts payable automation benefits is increased efficiency and speed in the AP department. Manual AP processes are often filled with time-consuming tasks such as data entry, invoice matching, and manual approval routing. Automation reduces or eliminates these tasks, enabling faster invoice processing and payment cycles.
Automated systems are designed to process invoices in a fraction of the time it takes to handle them manually, freeing up staff to focus on more strategic work. This increase in speed can enhance productivity and help improve cash flow for the business.
Cost Savings
AP automation can deliver cost savings for businesses, particularly related to processing costs and late payment fees. Manual processing involves labor-intensive tasks that require time and resources, leading to higher operational costs. By automating these processes, businesses can reduce the hours spent on AP tasks, lowering labor expenses.
Additionally, automation can help AP teams pay invoices on time, reducing the risk of late payment fees, which can quickly add up and strain the company’s finances.
Enhanced Accuracy and Error Reduction
Manual data entry is prone to human error, which can lead to costly mistakes in the AP process. AP automation minimizes these errors by automating data capture and validation using technologies like optical character recognition (OCR) which help check that invoice information is accurately recorded.
This accounts payable automation benefit not only helps reduce the risk of duplicate payments and missed invoices but can also enhance the reliability of financial records.
Improved Record Keeping and Audit Readiness
Accurate and organized record-keeping is important for compliance and audit preparation. Accounts payable automation ensures that all invoices, payments, and related documents are stored in a centralized, digital repository. This makes it easy to retrieve any document needed for audits or compliance checks, reducing the time and effort required.
Automated systems also provide detailed audit trails, offering transparency into each step of the AP process. Improved record-keeping not only simplifies audits but also enhances overall financial transparency and accountability.
Data and Analytics for Strategic Decision-Making
In today’s data-driven world, timely access to information is an important part of making informed decisions. Accounts payable automation can provide timely visibility into financial data, allowing businesses to monitor cash flow, track spending, and identify trends as they happen.
Timely access to data is one of the accounts payable automation benefits that empowers financial leaders to make strategic decisions that can improve operational efficiency, optimize working capital, and support long-term business goals. Additionally, the ability to generate custom reports enables businesses to respond quickly to changing market conditions.
Support for Business Growth and Scalability
As businesses grow, their financial processes must scale accordingly. Manual AP processes can become a bottleneck, hindering growth and expansion. Automated AP tools can provide the scalability needed to handle increased transaction volumes without sacrificing efficiency or accuracy.
Automated systems are designed to easily adapt to the growing needs of the business, allowing companies to scale their operations without adding resources.
Automated Invoice Processing Benefits
While the overall benefits of accounts payable automation apply to invoice processing, automating this part of the AP workflow has some unique advantages.
Unified AP Workflow
Automation can centralize and streamline the entire invoice process, from receipt to approval, helping keep everyone on the team on the same page. A unified workflow reduces the likelihood of errors, miscommunication, and delays, as all relevant information is easily accessible within a single system. This not only supports operational efficiency but fosters better collaboration within the team.
More Time for Strategic Work
Because of the time-saving benefits of accounts payable automation, teams can free up time for strategic initiatives. With routine and repetitive tasks automated, AP team members can shift their focus from manual data entry and chasing approvals to higher-value activities. This can drive greater business impact and ultimately improve employee satisfaction. By engaging in more meaningful, strategic work, employees may feel more fulfilled and motivated, leading to increased job satisfaction and retention.
Remote Workflows and Faster Approvals
Automation enables remote workflows and approvals, a critical feature with more people working in flexible remote and hybrid environments. Automated systems can allow invoices to be processed, reviewed, and approved from anywhere, at any time. This flexibility ensures that business operations continue smoothly, even when team members work remotely or across different locations.
Remote workflows also contribute to faster approvals, as the system can automatically route invoices to the appropriate approvers, who can review and approve them without the need for physical paperwork or in-person meetings. This not only accelerates the approval process but also helps suppliers get paid on time.
Automated Payment Benefits
Payment automation is another part of the AP process that offers unique benefits.
On-Time Payments
Automated systems are programmed to process payments according to pre-set schedules, which can help reduce the risk of late payments. This not only helps businesses avoid costly late fees, but it can help businesses take advantage of early payment discounts offered by suppliers. These discounts can add up over time, resulting in substantial cost savings.
Better Security and Reduced Fraud Risk
Manual, paper-based payment processes are vulnerable to errors and crimes like check fraud. Automated payment systems typically incorporate advanced security features such as encryption, secure authentication, and fraud detection algorithms that minimize risk. By reducing human intervention in the payment process, automation also limits the opportunities for internal fraud, helping make financial operations more secure.
Stronger Supplier Relationships
Strengthening supplier relationships is another key benefit of payment automation. With timely and accurate payments, businesses can build trust and reliability with their suppliers. Automated systems can also offer flexible payment options to suppliers, such as virtual credit cards or bank transfers, making it easier for suppliers to receive payments according to their preferences. This flexibility, combined with the assurance of timely payments, can lead to better terms and more collaborative relationships with suppliers.
Remote Payment Execution
In traditional settings, AP teams need to be physically present in the office to print, sign, and mail checks. However, cloud-based automated systems allow AP staff to process and approve payments from anywhere with an internet connection. This capability is particularly valuable given today’s remote and hybrid work environments. AP automation not only enhances flexibility but also supports business continuity, as payments can be issued without disruption regardless of where the team is located.
Final Thoughts
Accounts payable automation benefits can have significant impacts on businesses, including increased efficiency and accuracy, cost savings, and enhanced security. Automation promotes on-time payments, reducing late fees and enabling early payment discounts. It also supports remote workflows, allowing teams to process invoices and payments from anywhere, promoting business continuity.
By reducing manual errors and minimizing fraud risks, automation streamlines financial operations and helps businesses scale more effectively, making it a valuable investment for long-term success.
Ready to take advantage of these accounts payable automation benefits in your organization? Book a demo with one of our AP automation experts to learn more about AvidXchange.