The traditional accounts payable process can be time-consuming and reliant on repetitive manual work. As organizations increasingly focus on digital transformation, many are turning to a paperless accounts payable process.
Learn the benefits of adopting accounts payable automation processes and eliminating paper from the AP workflow.
What is the Accounts Payable Process?
The accounts payable process (also known as the AP process) is a set of steps conducted within an organization to issue payments to suppliers for products received and services rendered. Generally, the accounts payable process involves the following steps:
1. A supplier sends the organization an invoice
2. The invoice is opened and entered into the system
3. The invoice is coded to apply the expense to the appropriate department or project
4. The invoice is matched to the PO to ensure accuracy
5. The invoice is routed to internal stakeholders for approval
6. The invoice is entered into the organization’s enterprise resource planning (ERP) system
7. A check is printed and mailed to the supplier to pay the invoice
8. Once the check is cashed, it’s reconciled with the invoice
9. The invoice and all related documentation are filed
While the specifics of the accounts payable process may vary at different organizations, its essence is similar – the AP team processes invoices and issues payments.
What is the Paperless Accounts Payable Process?
With paperless AP, the process is the same, but many tasks take place digitally. For example, instead of physically routing a folder of invoices around the office, approvers can view an electronic copy of the invoice and click to approve it digitally. Rather than printing, signing, and mailing a physical check, AP teams can pay suppliers via electronic payments.
Paperless accounts payable allows for some tasks to be automated, ultimately saving AP teams valuable resources, including time and money.
The Paper-Based Accounts Payable Process
Traditional AP systems rely heavily on paper for most steps in the accounts payable process, including:
• Receiving paper invoices via mail
• Manual data entry of invoice information in the accounting system
• Physically reviewing and matching invoices to purchase orders and receipts
• Routing invoices around the office for review and approval by stakeholders
• Printing and signing physical checks
• Preparing envelopes for mailing checks
• Reviewing bank statements for remittance data and making updates in the accounting system
• Filing the invoice and related paperwork in physical filing cabinets
• Searching to manually locate invoices when questions arise or during audits
• Fielding supplier calls and conducting research on payment status
These manual steps can result in potential drawbacks, including:
• High error rates
• Risk of lost or misplaced documents
• Hard costs associated with printing, postage, and storage
• Limited visibility into the process
• Wasted time on labor-intensive tasks
The Paperless Accounts Payable Process
Modern paperless AP systems take advantage of technology to streamline tasks, including:
• Receiving invoices electronically
• Leveraging tools driven by machine learning for data entry
• Using AI-powered systems to match invoices to purchase orders and receipts
• Routing invoices for approval digitally
• Filing invoices and related paperwork electronically
• Locating invoices using filters with the click of a button
• Providing AP staff with complete visibility into the AP process
• Giving auditors read-only access to systems so they can find documents without taxing AP staff
• Automating payment processing
• Issuing electronic payments, including virtual credit cards and real-time payments
• Reconciling payments automatically
• Empowering staff to work remotely without stalling the accounts payable process
• Giving suppliers tools to check invoice and payment status on their own
• Detecting and flagging anomalies automatically to help reduce fraud and errors
A paperless AP process offers significant potential advantages to businesses, including:
• Less opportunity for human error and increased accuracy
• Improved security and reduced fraud risk due to automatic anomaly detection
• Enhanced visibility and real-time process tracking
• Sustainability benefits of using less paper
• Cost-savings on hard and soft costs like check stock and staffing
• Ability for AP staff to focus on more strategic initiatives instead of tedious manual work
How Does Accounts Payable Automation Work?
Accounts payable automation involves using technology to create a paperless accounts payable process. It essentially streamlines and digitizes the accounts payable process for finance and accounting teams.
Most AP automation systems use optical character recognition (OCR) to extract information from invoices and enter it into the workflow. These systems can then automatically match invoices against purchase orders and delivery receipts for verification, flagging errors or inconsistencies.
AP automation systems can then electronically route invoices to approvers based on predefined rules set by the company – automatic alerts and reminders can help expedite the process.
After the invoice is approved, AP automation can enable automatic payments based on the suppliers’ preference, including electronic methods like virtual credit cards or traditional paper checks.
Finally, AP automation can automate reconciliation, matching payments to bank statements. Some systems may use this data to create reports that can help inform business decisions, including identifying spending patterns and opportunities for terms negotiation.
Key Differences Between Paper-Based and Paperless AP Processes
The transition to paperless AP can bring business many key differences. Some of the primary differences include the following:
| Paper-based AP | Paperless AP | |
|---|---|---|
| Document handling | Manual handling, filing, and retrieval. High risk of loss or misplacement. | Digital routing. Less risk of loss with backup and recovery options. |
| Document storage | Physical space for filing cabinets. Difficulty locating specific documents. | Digital storage of files. Easy retrieval of documents through search and filters. |
| Processing time | Time-consuming manual entry; delayed approvals from physical routing and processing. | Fast digital processing; instant approvals. |
| Cost | Hard costs like paper, ink, postage, and storage. Soft costs for salaries related to manual processing. | Lower hard and soft costs with no paper and automated processing. |
| Errors | High risk of human errors in data entry and processing. Potential for duplicate payments. | Electronic systems flag discrepancies, helping to reduce errors and overpayment. |
| Visibility | Tracking invoice and payment status is difficult – hard to locate papers within the process. | Teams have real-time, cloud-based status visibility at the click of a button. |
| Reporting | Reports are time-consuming and created manually. | Reports and analytics are generated automatically, providing key performance insights. |
Converting Paper-Based to Paperless Accounts Payable
Many businesses today are recognizing the value of transitioning to paperless AP. If your organization is ready to forgo paper-based AP processes, consider following these steps to start the shift.
1. Assess what’s working and what needs improvement: Evaluate your current workflow to identify inefficiencies and bottlenecks. Define requirements for your new AP process and set priorities (e.g. cost savings, reduced errors, or faster payments).
2. Select the right technology provider: Research AP software. Ensure the system is compatible with your existing technology tools including your accounting software and ERP. Try the system hands-on by requesting a demonstration and trial.
3. Make plans: Develop a roadmap for the implementation, including timelines and milestones. Assign roles and responsibilities across the implementation team.
4. Lay the groundwork: Start the data migration process, design digital workflows, and create approval hierarchies.
5. Create and execute a change management plan: This includes training and educating staff and onboarding suppliers.
6. Launch the new accounts payable process and monitor: Deploy the system and monitor its performance. Request feedback from internal users and suppliers and adjust as necessary.
Customer Stories: Converting AP Processes
Interested in real-world examples of how other businesses shifted from paper-based to paperless AP processes? Check out these customer testimonials.
📈 Construction Business Renovates Invoice Processing and Payments
Robert High Development cut invoice processing time in half and improved supplier satisfaction with secure and efficient payment options.
💻 Private School Modernizes AP Processes with Automation
Christ Church Episcopal School experienced quicker invoice approval and payment processes by moving to paperless AP.
⏲️ Real Estate Brokerage Shaves 4+ Days Off AP Processing Each Week
NAI Earle Furman says its AP processes are “like night and day” since moving to a paperless accounts payable automation process.
More on the Accounts Payable Process
The accounts payable process is a critical part of any organization’s accounting operations. Not only does it ensure bills are paid on time, but it is essential for maintaining financial integrity, operational efficiency, and supplier relationships.
Transitioning from a traditional paper-based accounts payable process to a paperless, automated system offers numerous advantages. Automated AP systems can enhance efficiency by reducing manual data entry and errors, providing real-time tracking and visibility, and streamlining approval workflows. These systems also offer substantial cost savings by eliminating hard and soft costs.
As businesses increasingly prioritize efficiency, adopting a paperless accounts payable process is a strategic choice that can modernize accounting operations.