The automated accounts payable process can improve your business invoice approval procedures and streamlines its financial operation. It confirms that invoices are approved promptly, and that payment is made. By automating AP, your business can improve workflow management, boost efficiency, achieve maximum accuracy, save time, and reduce manual errors. Moreover, it automates routine tasks such as data entry and billing, which frees up valuable time for workers to focus on more important tasks.
In this blog, we are going to discuss accounts payable automation best practices in detail including automation tools, vendor management, and invoicing. Let’s dive in!
List Of Accounts Payable Automation Best Practices
Any business owner knows that accounts payable (AP) can be a time-consuming and tedious task. Fortunately, there are now several ways to automate the procedure, making it better, more efficient, and more accurate. Here are some of the ap automation best practices:
1. Introducing Automate Invoice Processing
Using manual invoice processing increases the chances of errors, consumes more time, and is relatively expensive. By automating the flow of invoices from creation to payment, you can reduce errors, improve efficiency, and speed up payment times. Benefits of automating your invoice processing:
- Reduced paperwork and data entry: By automating your invoice processing there is no need to manually enter data, which can help to decrease mistakes.
- Improved efficiency: Automating your invoice processing can help to streamline your overall accounting and finance processes, making them more efficient.
- Faster payments: Automating your invoice processing can help to speed up payments, as invoices can be processed and paid more quickly.
Overall, automating your invoice processing can provide significant benefits for your business. By reducing errors, improving efficiency, and speeding up payments, you can make your accounting and finance process more streamlined and effective.
2. Implement A Centralized Ap System
A centralized AP system helps your businesses to streamline their invoicing process. With a central system in place, you can keep track of all invoices in one place, making it easy to see which invoices have been paid and which are still outstanding. This can save you time and money by preventing duplicate invoices from being sent out, and it can also help to avoid late payment fees.
In addition, a centralized AP system can help to track spending, identify trends, and make better payment decisions. By using a central system, businesses can gain greater visibility into their financial picture and can perform audits if needed to make more informed decisions about where to allocate their resources.
3. Secure Vendor Master File
The vendor master file is home to all of your vendor information. This means that all vendor information including contact information, payment terms, and banking details are stored in it. This sole file is responsible for generating payments during the automated AP procedure. So, it must be up-to-date and free from errors.
Without accurate vendor data, it will be a mess and cause several issues, invoices can be delayed or even rejected, leading to unnecessary disruptions in your AP process. By taking the time to clean up your vendor master file, you can ensure a smooth transition through accounts payable integration.
4. Develop An Approval Workflow
A workflow is a series of invoices or other approvals that are routed through a designated process. This process ensures that invoices are reviewed and approved by selected persons before they are paid. It is done to make sure that invoices are paid on time and check no fraud or error is detected. To create an approval workflow, businesses first need to identify the invoices that require approval.
They then need to decide who should approve each invoice and in what order. Once this information is gathered, the business can set up the approval workflow in their AP automation software. So, it’s best to have an AP automation system that can handle some exceptions from time to time such as invoices generated with the purchase order or received in time.
5. Arrange Recurring Payments
Setting up recurring payments with vendors can save you hustle, time, and money. This means by automating payments, businesses can avoid the hassle and costs associated with issuing paper checks. In addition, businesses can take advantage of early payment discounts when they set up recurring payments. Vendors often offer a discount for payments that are received by a certain date, and automated payments can help businesses take advantage of these discounts.
Finally, businesses can avoid late fees by setting up recurring payments. Many vendors charge a late fee for invoices that are not paid on time, but automated payments can help ensure that invoices are paid on time, every time. When it comes to paying vendors, setting up recurring payments is a smart business move.
6. Implement Three-Way Matching
In any business, it is essential to keep track of expenses and income. This is particularly valid for companies that deal with large amounts of inventory. Three-way matching is an accounting payable process that helps businesses to verify that their records are accurate. The first step is to check the purchase order with the vendor invoice. This ensures that the correct items were shipped and that the costs are accurate.
Next, the company compares the vendor invoice to the receiving items report. This ensures that all items were received and that there are no discrepancies. Lastly, compare the receiving report to the actual inventory to ensure all items are accounted for and there are no shortages. By implementing three-way matching, you can ensure accuracy in the records and avoid costly mistakes and improve relations with vendors and suppliers.
7. ERP Integration With AP Automation
One of the most important components of an accounts payable automation system is an electronic invoicing system. This system should be able to receive invoices electronically from your suppliers and route them to the appropriate personnel for approval. It can help you to manage your operations and resources.
Mostly, ERP and AP automation integration provides automation for the following procedures:
- Expense reporting
- Timesheets
- Invoice processing
- Receipts
- VAT capture
By integrating ERP systems with AP automation, it is easy to automate manual processes and connect different departments and data sets. In addition, it helps to lower costs by eliminating the need for duplicate data entry. Moreover, ERP provides clarity into your entire AP process. This way you can see the faults and make changes on time to improve efficiency. As a result, this integration helps to enhance efficiency and accuracy. Moreover, if your business is integrated with ERP systems then there are higher chances you get the most Return on investment (ROI) out of your implementation.
8. Make Automated Payment Schedules
One way to streamline payment management is to install automated payment schedules. It is one of the accounts payable automation best practices. For this, it is important to have an automated software system for managing payments. By setting up a schedule for automatic payments, you can secure those bill payments are made on time each month without any manual effort. In addition, it can also help to simplify the accounting process.
Moreover, automated payment schedules can help to reduce accounting errors and save you time when it comes to reconciling your books. Overall, establishing automated payment schedules improves the efficiency of your business. To proceed with an automated payment schedule, all you need to do is to provide information like payment date, name of the vendor, bank details, amount to be paid, and the number of invoices to AP software.
9. Monitor And Analyze KPIs
It’s important to monitor and analyze key performance indicators (KPIs) to make informed decisions about your company. It provides insight into whether the company is meeting its goals. After effectively monitoring KPIs, you can track data points. Common KPIs included in Automated payables are
- The cost spent per invoice
- Expenses made
- Days Payable Outstanding (DPO)
- Track the earlier-payment discounts rate
- Payment accuracy rate
By tracking these, you’ll be able to see how your business is performing and identify areas where improvements can be made.
10. Check Duplicate Payments Regularly
When implementing automation, it is important to control accounts procedures to ensure accuracy and prevent fraud. For example, you might require multiple approvals for invoices over a specific payment. By putting these controls, you can help to ensure that your AP process is both efficient and secure. It’s a time taking process if you run AP manually. Because then you need to check the duplicate payments continuously to minimize or eliminate the potential leak in cash flow.
11. Evaluate Your Ap Automation Solution Regularly
It’s important to evaluate your accounts payable automation solution regularly to ensure that it is meeting your needs and providing a return on investment (ROI). Reviewing metrics such as invoice processing time, error rates, and payment terms will give you a good indication of how well your solution is performing.
12. Easy To Track And Manage
A workflow management system can help to streamline your accounts payable process by automating the routing of invoices for approval. This system can also provide visibility into the status of each invoice, making it easy to track and manage the invoice process.
Conclusion
Accounts payable automation is vital for businesses to improve workflow management, boost efficiency, achieve maximum accuracy, save time, and reduce manual errors. Implementing a centralized AP system, approval workflow, recurring payments, and three-way matching are some of the accounts payable automation best practices to make sure you get the most out of accounts payable automation. AP automated systems confirm that invoices are approved promptly and payment is made. By following the top practices mentioned above, your business will be well on its way to streamlining its financial operation!
