Accounts payable (AP) automation helps businesses protect their performance and profitability. It brings rigour and governance to purchasing and payment practices, mitigating risk and benefiting the bottom line. Here’s how:
Avoid costly delays
When automating, a firm must allocate clear roles and responsibilities
to individuals for authorising purchases, coding and approving invoices, and managing exceptions. With individuals identified and held accountable for their tasks, invoice management becomes more efficient. This helps to bring down processing time and cost, increase throughput, and avoid unnecessary spend on late fees and charges.
Reduce human error
If invoices meet certain criteria, they can go straight to the ERP or finance system for payment without any human intervention. Touchless processing can also be achieved for purchase order invoices if payment details match (or are within a set variance) with purchase orders and receipts in the system.
Automation reduces AP operating costs while also diminishing the risk of human error slowing processing times.
Restrict unapproved spending
AP automation helps to curtail unapproved spending by bringing transparency and accountability into purchasing and payments. A procure-to-pay solution puts upfront controls in place: purchase requisitions need to be authorised by the appropriate manager to generate the purchase order. With the spend pre-approved it can be accounted for, resulting in more accurate financial reporting.
Secure preferential pricing
Automation organises accounts payable, facilitating procurement through a preferred supplier list. This can help reduce spend and mitigate risk. Spending more with a supplier often means the buyer can negotiate better contracts, securing:
- lower prices,
- longer payment terms,
- bulk or early-bird discounts,
- periodic rebates.
Contracts provide both parties protection; with a service level agreement in place, the buyer can monitor supplier performance and have recourse should the vendor not meet the standards required.
Enforce supplier compliance
It’s safer and more time efficient to deal with preferred suppliers who have a strong relationship with the business and a clear commitment to company policies. This can protect against compliance breaches that could leave buying organisations exposed to risk.
Contracted suppliers need to maintain and make available current insurance, Workplace Health and Safety, environmental and quality assurance certificates, as required. It may present risk to the buyer if this up-to-date documentation is not easily retrievable on the buyer’s system.
Build strong supplier relationships
Automating accounts payable ensures suppliers are paid on time and that the process of onboarding them and working with them is as streamlined as possible. With clear AP procedures in place, buyers can set guidelines
around how they receive invoices, refusing to pay any that contain errors or do not meet their specifications. This helps to reduce back and forth communication and lower the rate of exceptions, which are costly to the business in terms of time better spent on higher value work.
Protect the brand
Paying suppliers on time is vitally important to protecting continuity of supply and continuing to deliver quality service to customers. It’s also critical to protect the brand from the corporate social responsibility failings of having long payment terms and making late payments to suppliers. This is now vitally important for large businesses who, from this year, have a regulatory requirement to publicly report on their payment times to small businesses.
Ensure business continuity
With automation, accounts payable can run efficiently and effectively offsite, facilitating communication and collaboration from users in different locations. This is vitally important to ensuring ongoing supply and supporting business continuity across the broader organisation.
The pandemic presented a major challenge for businesses processing a large volume of invoices manually. Not only did the invoice approval process slow, which cost businesses money, but scammers capitalised on the disruption by issuing fake invoices; many were accidentally paid.
Protect against fraud
In normal times as well as during periods of widespread disruption, invoice fraud is a constant problem. The threat can come from scammers, hackers, vendors or employees who exploit the many weak points in a manual accounts payable process.
AP automation ensures that fraudulent invoices are not inadvertently paid by enforcing compliance checks on all payments. Further, with a centralised accounts payable function and clear payment procedures, there should be no room for rogue payment requests from executives. This is typically the case in business email compromise scams where cybercriminals hack the email of senior management and instruct employees to authorise payments.
Eliminate duplicated payments
An AP automation solution checks for duplicate invoices or line items in both its system and in the company’s Enterprise Resource Planning system. Workflow will stop for payments identified as duplicates, except if those in the system have the status ‘Rejected’.
Estimates calculate that the rate of duplication in invoice payments can be as high as 3%. This constitutes a major over-spend that can be time-consuming and difficult for accounts payable to recoup.
Achieve accurate financial reporting
With AP automation, every invoice is logged in the system, providing
Finance visibility of all payables. This helps with accurate financial forecasting, working capital optimisation, and strategic decision making to boost the bottom line.
If manually processing invoices, the payables account balance may not be accurate. As a result, the true financial position of the business is unknown, undermining effective decision making and presenting a risk to the business.
Future-proof the business
Manual data entry is unnecessary in the modern workplace given the technology exists to perform the work faster, cheaper, and with a greater degree of accuracy than a person can.
Further, surveys show employees want AI for administrative work. A survey
conducted by visual tool Monday.com found that over 32% would eliminate repetitive administrative tasks if they could, and over 70% would like data entry automated.
As a result, automation can make a company a better place to work, reducing staff turnover and helping to ensure a business’ long-term commercial viability.