Top 7 strategies for AP automation in finance

According to a CEO World Magazine report, AP professionals typically spend about 25% of their workdays on manual tasks. These included typing invoice information, correcting errors, and dealing with inquiries about invoices and payments. 

To solve this, AP automation or Accounts Payable automation leverages smart software. It takes tedious, time-consuming tasks off your plate, freeing up significant time and resources.

As per Business Insider estimates, automation accelerates invoice processing cycles by a remarkable 73%. 

This also translates into significant cost savings for businesses, with invoice automation estimated to save an average of $35,000 annually.

In this blog post, we will discuss how automating these steps in the AP process can streamline operations and free up time for finance and purchasing departments.

What is AP automation?

AP automation relies on an array of tools or optimized processes to make accounts payable tasks easier and faster by reducing manual work. This usually involves special software that can handle purchase orders and invoices digitally.

Some software can even read invoices and automatically pull out relevant and vital information. The main goals of automating accounts payable are to speed up the process, make fewer mistakes, and help the company grow more efficiently. This also makes it easier to track and control important financial information.

This automation helps businesses identify cost-cutting opportunities, improve vendor relationships, and save valuable resources. 

The process of AP automation involves three key steps:

1. OCR/AI-driven data capture: Invoices and purchase orders are scanned into a system that uses OCR (Optical Character Recognition) or AI (Artificial Intelligence) to capture the data. This data is then stored in a structured database for analysis.
2. Accuracy validation: The invoice data is checked against purchase orders to ensure accuracy.
3. Invoice approval process: After validation, invoices are sent for review, approval, and payment.

Benefits of AP automation

Here's why you should consider automating AP workflow:

1. Personalize your processes

Consider customizing your invoicing process to improve your AP department’s efficiency and match your company's unique workflow. By setting up your automation software to focus on areas that boost productivity, you can foster a culture of growth using software tailored to fit your AP process.

For instance:

• If you receive invoices through various channels such as email, fax, and mail, using OCR technology for data capture and quick compilation can significantly boost your AP efficiency. 
• Alternatively, if your invoices require specific approval routes, you can set up the automated workflow to follow the most efficient path.
• You can also use settings to balance AP staff workloads. This could involve routing invoices to different employees for shared responsibilities or granting exclusive access to involve more parties in a specific project. 

Having this level of control can streamline your processes effectively.

2. Speed up invoice processing

Accounts payable automation can make handling invoices much faster, reducing the time needed from weeks to just minutes. This means tasks like checking invoice details, getting approvals, and completing paperwork can be done much quicker. 

With AI-driven software, invoices can be automatically matched with purchase orders (PO) and the goods received note (GNR), which helps prevent delays and makes it easier to manage cash flow.

3. Expand process visibility

Manual receipt management is a time-consuming hassle. Automation simplifies the process, providing authorized users with organized electronic data for easy compliance monitoring.

For instance, better control and transparency in invoicing can help you avoid cash flow problems due to incomplete accruals or under-reported expenses. You can quickly identify and address any issues; all the necessary data will be easily accessible.

Process transparency empowers you to make informed decisions about vendor payments, efficiency, and scaling. Decision-makers across departments can easily access relevant data, while digitized approvals facilitate management.

4. Improve data accuracy and reduce errors

OCR-powered AP automation can significantly reduce the chance of human errors, leading to more than 99% accuracy in handling invoice data. This eliminates the mistakes common in manual processes, preventing accounting issues and delays that disrupt other business operations.

5. Cut costs by a significant number

While AP automation involves some upfront investment and training, the long-term benefits significantly outweigh these initial costs. Here's why:

• Duplicate payment prevention: The software safeguards against costly duplicate payments, a common issue with manual processes, by automatically flagging potential duplicates.
• Early payment advantage: Additionally, you could qualify for early payment discounts by streamlining payments, further boosting your bottom line.
• Cost-effective storage: Storing receipts and invoices digitally in the cloud or on your servers is cheaper than printing and storing them on paper.
• Fraud detection: A suitable accounts payable automation software can quickly identify and alert you to any suspicious payments.

Source

Challenges with manual AP process and how does AP automation solve it?

Challenges of manual AP workflow

Costly mistakes

A study by the American Productivity & Quality Center (APQC) found that companies that stick to manual processes can pay 5x more per invoice than those that use modern methods. These mistakes, such as paying a bill by 3x or 5x or spending a wrong amount, can burn a hole in the company’s budget. 

Missed opportunities

One prominent problem with manual workflow is that it takes time to keep track of everything. This makes it easy to miss chances to save money, like discounts for paying early or late fees. 

Vulnerability to fraud

Manual systems are easy targets for fraudsters. This is a major concern since nearly half of all business fraud involves messing with expenses, including fake invoices, according to the Association of Certified Fraud Examiners (ACFE).

Limits to scalability

As a business grows, sticking to manual processes doesn't work. The more invoices a company gets, the more time and money it costs to process them. This isn't a good strategy for growth, as 25.6% of companies need accounts payable automation software. 

In addition, 73.1% of accounts payable teams need help to ensure their purchase orders and invoices match.

How AP automation helps

Streamlined, agile processes

Automated accounts payable (AP) systems rely on advanced tech like OCR to read invoices and AI to make data-driven decisions. It speeds up the whole process and reduces mistakes. 

For example, an enterprise used AP automation to cut its invoice processing time from weeks to just a few days, saving 60% on costs.

Real-time visibility

These automated systems also make it easier to see what's going on with your money in real-time, which helps with planning and managing cash flow. 

Cost savings

Using AP automation can help businesses pay all their bills on time and save about $2.5 per bill in processing costs.

Fraud Prevention

Plus, they have built-in checks to help stop fraud, which is a big relief for businesses worried about losing money this way.

7 Strategies to automate AP process

Here are seven strategies for achieving effective AP automation:

1. Consolidate invoice receipt

Start by bringing together all the invoice receipts. To simplify the collection process, use a single email address or portal for all invoices. This ensures that all invoices are captured in one place, reducing the chance of lost or overlooked invoices.

2. Implement electronic invoicing

Encourage suppliers to send electronic invoices (EDI, e-invoicing solutions, or even simple PDF via email). This significantly reduces manual data entry and errors, simplifying integration into your AP system. 

Plus, e-invoicing offers the added benefit of being an eco-friendly alternative, reducing paper use and storage needs.

3. Leverage OCR technology

OCR technology eliminates tedious manual entry, speeds up processing, and enhances accuracy. The software verifies invoice validity by cross-referencing extracted data with purchase orders and delivery receipts, preventing fraudulent or incorrect payments.

4. Adopt AP automation software

Choose AP automation software designed to integrate with your existing ERP system seamlessly. Prioritize features like automated invoice matching (purchase orders/receipts), streamlined approval workflows, and real-time reporting. This integration maximizes efficiency, boosts accuracy, and reduces processing times.

As a SaaS buying and optimization platform, Spendflo can handle your AP automation end-to-end. It can:

• Automate import & validation: For streamlined invoice management, Spendflo pulls invoices directly into the system and verifies the accuracy of the data.‍
• Offer invoice-PO matching: The system automatically compares invoices against corresponding purchase orders for discrepancies.‍
• Serve as one place for AP records: As a centralized document storage, Spendflo stores purchase orders, invoices, and other important documents securely in a centralized location.‍
• Streamline approvals: The tool also uses customizable workflows to obtain and track manager approvals quickly and easily.

5. Establish electronic workflows for invoice approval

Create electronic workflows to automate the approval process. Define rules based on the invoice amount, vendor, or type of expense to route invoices to the appropriate approvers automatically. This reduces the time spent on manual routing and follow-ups. 

Here's how it works: 

1. When an invoice arrives, it's uploaded into the digital system instead of passing it around physically. 
2. The system then automatically sends it to the right people or departments for approval based on specific criteria like the invoice amount or vendor. 
3. This ensures that the appropriate individuals review each invoice. 

Digital approval workflows provide real-time visibility for faster approvals. Approvers get instant notifications, enabling them to review and act on invoices from anywhere. This creates a complete audit trail for easy compliance.

6. Integrate payments with AP automation

Integrate electronic payments into your AP system to automate the payment process. Payment methods like ACH (Automated Clearing House), wire transfers, or virtual credit cards can be used to streamline payments. This speeds up the payment process, enhances security, and enables better cash flow management. 

By tracking payment deadlines and integrating with accounting tools, teams optimize cash flow for better financial management. Real-time payment tracking and detailed reports offer insights for improved analysis and decision-making.

7. Regularly monitor and analyze AP processes

Utilize your AP solution's built-in monitoring and reporting tools. Track key metrics like processing time, cost per invoice, and early payment discounts. This data-driven approach allows you to refine and optimize your AP processes continuously.

Top 5 tools for AP automation

Here are the five top cloud-based AP automation software options and their main advantages you should know:

1. Oracle Netsuite

Oracle NetSuite optimizes cash flow and efficiency in accounts payable. It automates invoice management, calculates discounts, prevents duplicate payments, and provides real-time tracking to minimize lost documents. This powerful tool streamlines accruals, simplifies record retrieval and ensures accurate financial reporting for increased profitability.

Features:

• Integrated business suite encompassing ERP, CRM, and e-commerce
• Better payments control
• Safe storage and quick retrieval of payment records
• Real-time analytics and reporting
• Scalable to support growth
• Offers access to SuiteApps Marketplace to enable seamless integration with other business software

Pros:

• Comprehensive integration reduces the need for separate systems
• Customizable to specific business needs
• Strong global support and infrastructure

Cons:

• Can be expensive for small businesses
• Complex setup and User Interface (UI)
• Limited customization capabilities
• Limited customer support

For pricing, contact Oracle NetSuite support.

2. Tipalti

Tipalti is a cloud-based SaaS solution that simplifies accounts payable for large and medium-sized businesses. It streamlines onboarding, invoice processing, approval workflows, and global vendor payments in various currencies. This platform reduces workload, improves financial controls, and offers self-managed supplier services for efficient AP management.

Features:

• Automated end-to-end payables workflow
• Supplier management
• Tax compliance
• Payment reconciliation
• Self-service supplier onboarding
• Invoice automation
• Multiple currency support

Pros:

• Enhances efficiency and accuracy of the AP process
• Supports global payments in multiple currencies
• Robust compliance features

Cons:

• Can be expensive for smaller operations
• Lack of immediate image generation feature
• Limited customizations and delayed updates
• May require training to leverage all features fully
• Complex payment processing and tax compliance facilities

For pricing, contact Tipalti support.

3. Stampli

Stampli stands out for its real-time invoice processing capability, which automatically uploads invoices for prompt handling. It's the finest user interface (UI) among automation tools, offering simplicity and ease of access. Stampli features a central communication center for quick collaboration and problem-solving with users. Additionally, it supports organizational control through adjustable permissions.

Features:

• AI-driven smart and accurate invoice capture and coding
• Integrated communication center
• Audit ready access
• Customizable approval workflows
• Easy-to-use, intuitive AP automation interface and dashboard
• Multiple device support 
• Full-365 visibility supported by advanced search and reports
• ERP integration

Pros:

• Intuitive user interface
• Reduces invoice processing time
• Enhances collaboration and visibility in AP processes

Cons:

• Limited to invoice management
• Limited functionality in trial mode
• May require integration with existing financial systems
• No feature to seamlessly stamp invoice

For pricing, contact Stampli support

4. Procurify

Procurify is a spend management solution that enables organizations to gain better control over their procurement processes. It provides visibility into spending, streamlines approvals, and enhances financial accountability. It also offers features for supplier performance management, invoice processing, AP automation, and integrations with other key systems.

Features:

• Purchase order management
• Real-time budget tracking
• Customizable approval routing
• Vendor management

Pros:

• User-friendly interface
• Offers extensive training materials and resources through its Procurify Academy knowledge base
• Uses algorithms and AI enhancements to ensure data accuracy and error detection
• Promotes proactive spend management
• Integrates with major accounting software

Cons:

• Primarily suited for small to medium-sized businesses
• Onboarding time is extensive, with a 4- to 6-week timeline for lighter implementation and up to 12 weeks for implementation with NetSuite integration
• Not vendor-agnostic, as direct order processing requires an integration through the platform's PunchOuts add-on
• Complex navigating UI, especially when looking for historical PO data.
• May require additional training for full utilization

For pricing, contact Procurify support

5. Airbase

Airbase is an all-in-one platform for expense management and accounts payable. It simplifies spending management for businesses by handling approvals, payments, finances, and reports in a centralized location. The platform uses OCR and AI to process invoices accurately and make automatic payments.

Features:

• Consolidated platform for all non-payroll expenses
• Automated approval workflows
• Real-time expense tracking and reporting
• Integrates with major ERP systems

Pros:

• Provides a single source of truth for spending management
• Streamlines processes from request to reconciliation
• Offers a simple UI with effective processes for getting users up to speed
• Strong customer service department for handling onboarding and user issues
• Offers strong controls and compliance

Cons:

• Some reconciliation tools are missing for handling prepaid accounts and amortization expenses
• Integration with existing systems can be complex

For pricing, contact Airbase support.

Boost your AP process with Spendflo

Outdated, slow manual tasks should be a thing of the past. Forward-thinking businesses know that automating repetitive, time-consuming tasks makes their teams more productive and efficient.

Accounts payable is an excellent area in which to improve processes. AP automation systems are typically:

• Faster
• Easier to use
• Less likely to have errors
• Cheaper in the long term
• Helps prevent lost bills or paying fraudulent invoices
• Handles exceptions when invoices don't match purchase orders
• Gives real-time updates

To help you accelerate your AP automation, Spendflo can:

• Automatically import and check invoices
• Store important accounts payable (AP) documents in one place, like purchase orders and invoices
• Automatically match invoices with purchase orders
• Use workflows to get and track approvals from managers

To learn more, book your free demo to get the saving analysis!