10 Advantage of Accounts Payable Workflow Automation
Humans are susceptible to making mistakes. Making mistakes in business can be costly and leave businesses of all sizes vulnerable. Over 80% have fallen prey to accounts payable fraud. Even huge companies like Google or Facebook were victims of AP fraud and lost over $100 million. In this post, we discuss accounts payable workflow automation.
A smooth and efficient accounts payable process is crucial for building strong vendor relationships, increasing profits, and mitigating fraudulent payments. Moving from a manual process to an automated AP process can make it easier to pay the right vendors on time. Automating accounts payable workflow automation can help companies avoid fraudulent payments and delays that can negatively impact the bottom line.
Manual AP workflow vs AP workflow automation
What is a Workflow?
A workflow is a sequence or set of steps required to complete a task. The invoice receipt is the beginning of a workflow in accounts payable. Payment is the end.
Manual AP workflow
Manual AP workflow allows the accounting department to receive invoices. These invoices are then entered into the system and sent by hand to the signing authority. After the invoice is approved, a cheque can be cut and payment sent to vendors. There are many errors in manual AP workflows. These include incorrect data entry, delays in approvals, and delays at the signing authority’s desk.
Automated workflow for Accounts Payable
Data from a paper invoice can be captured using optical character recognition (OCR) and then inserted into digital invoice fields. The AP automation software verifies that all data entered matches sales receipts and purchase orders, eliminating the possibility of fraud.
If any mistake is found, it is flagged and sent to the concerned person for rectification/verification. After the invoice has been approved, it is directed to the company’s enterprise resources planning (ERP), or accounting system. Payment can then be made electronically or sent as a cheque.
Cloud-based solutions for automating accounts payable workflows are common. Employees have access to the centralized system, which allows them to view information and determine the stage of the invoice process.
Accounting departments don’t have to chase approvals anymore. This reduces the chance of invoices being stuck on someone’s desk, which saves time. It is possible to avoid bottlenecks in the workflow. With accounts payable workflow automation, invoice matching can flag errors and reduce fraudulent behavior.
Comparison of manual AP vs automated AP workflow
- Manual AP Workflow – Accounting teams may find it overwhelming to deal with the hundreds of invoices on paper that must be reviewed and entered into the system.
- Automated AP Workflow – Paper invoices can be converted quickly using OCR technology. Accounting staff can search for and locate the invoices easily.
- Manual AP Workflow – Incorrect data entry or matches resulting in incorrect payments or fraudulent payments
- Automated AP Workflow – Invoices match purchase orders and sales receipts automatically. Any discrepancies are electronically redirected to the department or person concerned to be reviewed and corrected.
- Manual AP Workflow – Accounting teams must chase down the signing authority for approval. This could lead to paper invoices being lost or stuck under a pile.
- Automated AP Workflow – All invoice approvals are sent automatically to the relevant departments. If there are any delays or clarifications, reminders can be sent.
4. Financial Fraud
- Manual AP Workflow – Human errors in data entry and invoice matching are more common. Fraudsters may steal information from paper invoices, and then invoice the company multiple times.
- Automated AP Workflow – Can detect trends based upon past history and detect duplicate invoices. Vendor names, account info, etc. Before payment is processed, they are checked and verified.
Automation of accounts payable workflows has many benefits
1. Prevent financial fraud
Companies of all sizes need to prevent financial fraud. Fraud occurs in manual accounts payable workflows when vendor X sends an email, but vendor X is not present, and payment is
made with no verification. This can lead to the money being lost forever. Fraudulent payments may also be caused by:
- Wrong data entry
- False billing
- Fraudulent cheques
Using automated accounts payable workflow automation, fraud is possibly be avoided.
OCR allows for 3-way matching between purchase orders and sales receipts. Invoices can be matched with OCR.
Automated invoice approval.
Audit trail for auditors and accounting team to follow.
2. Avoid overpayment
Errors in manual AP workflows can lead to duplicate invoices, vendor verification, data entry, and supplier changes. These common errors can be eliminated with automated accounts payable workflow automation. Accounting can avoid overpayments and maintain cash flow for their day-to-day operations by using this system.
3. An Improved Audit Process
With a manual workflow for account payable, audits can take several weeks to complete, and the accounting team must go through endless paperwork. Automated AP systems make auditing easier and save time by storing all data in one place.
4. Timely Payments
Human error cannot be avoided using a traditional workflow for account payable. Invoices that are not paid on time or in a timely manner can result in penalties and missed payments. This can have a negative impact on profits and vendor relationships. Automating the process can reduce mistakes. It ensures that invoices are matched and verified before they are paid.
5. Increase profitability
Businesses can avoid penalties by setting up an automated AP workflow and making timely payments. It can help vendors build positive relationships by making payments on time. This can lead to discounts on future orders which in turn saves money. OCR technology can also prevent fraudulent payments, which means revenue can be used exactly where it is needed, to increase profits and improve core business objectives.
6. Centralized AP Process
With AP automation, all invoice information can be stored centrally in a database. This allows for easy access to invoices, purchase orders, and payment information. Accounting departments no longer have to look for paperwork related to one order. It can all be found in the central database. This saves time and money. A centralized system allows anyone in the company to easily check the status of an order or payment.
7. Automated invoice approvals
Prior to purchase, it may require the signature/approval of senior staff/managers. A customized automated AP system can be set up to ensure that invoices are routed digitally to the correct department based on the information provided. This eliminates the need to search for the signatory authority for approvals. It also reduces paperwork and saves time.
8. No Data Entry is Required
Extracting data out of invoices can be tedious. All formats of invoices are possible, whether they’re emailed, faxed, or printed. This can lead to data entry errors depending on how many vendors are involved. The software uses OCR to automatically extract and insert the data into tables regardless of format. This eliminates human error & expensive/inefficient manual labor, saves time, and speeds up payment processing.
9. Increase employee morale
An automated centralized system saves time which allows an accounting department to use and improve their skills. Unlike manual AP workflows, where employees spend hours searching for paperwork, verifying data, and verifying invoices from each department, an automated system saves time.
10. Increase your business credit score
Late payments to vendors can result in more than penalties. A business’s credit score can be affected by its payment history. A good credit rating can help you get a loan for your business, apply for a credit card for your business and even find a vendor. Credit scores can impact funding options and may also impact your ability to qualify for business loans with low-interest rates.
How can I automate the accounts payable workflow?
It is best to examine the current process before making any changes. This will help you identify the problems and set expectations for the new system. These steps will help maximize the benefits of an automated AP process.
Evaluate current accounts payable process
It is a good idea to assess the current process before moving to an automated one. This will help you to identify areas where the company is losing money. Is human error the biggest problem in matching purchase orders and invoices? It is much easier to identify the flaws in the current system and set up an automated AP workflow that will be most efficient in meeting the company’s needs.
Talk with employees
It can be difficult to switch from an automated AP process to a manual one at first. This can lead to resistance. To make the transition easier, you should talk to employees who will be using it. You will need to identify which processes are slow, costly, and time-consuming. Ask employees what they want from the new automated AP workflow. Due diligence done in the initial stages will make the transition easy to adopt and use effectively by the accounting/financial/AP team.
Expectations for new AP workflow
It is important to identify your goals in order to choose the best-automated accounts payable system. Are you looking to automate your current workflows, decrease costs, detect fraud, or eliminate errors?
Select the best software for your company
It is easy to choose the right software after analyzing the current AP process. If manual checks of invoices for purchase orders and sales receipts are an area that is prone to errors, then choosing the right software would be a smart decision.
Stop using paper
Switching to electronic invoices can reduce or eliminate fraud, errors, and delays. The new automated AP system can automatically route invoices to the correct person/department if there are frequent bottlenecks in order approvals. It can be approved immediately after it is submitted. Each person involved can also access the central system to see the current stage of the purchase. If approval has been granted, goods/services ordered, invoice prepaid, etc.
Invoices won’t get lost or stuck on someone’s desk if you reduce paper usage.
The right amount of control can make a difference in your business’ growth and profitability. Companies can track invoices, payments, and approvals easily by adopting automated accounts payable workflow automation. All this is done from one central system. This system allows for greater control than paper invoices. Money flows can be easily tracked, spending patterns can be analyzed, and excess spending can be reduced.