Successful companies proactively seek ways to streamline their business processes workflows and implement innovations that increase efficiency and improve resource management. According to a 2018 study conducted by McKinsey, 57% of Finance activities can be fully automated. Finance departments can benefit significantly from increased control over their processes and access to better communication tools. There’s considerable potential for enhancement, in particular, in accounts payable (AP) workflows.
As companies expand, taking care of vendor payments, employee reimbursements, and dozens of other outgoing costs often grows complicated, and the process becomes inefficient. The explosion of payment options has introduced system compatibility issues and similar risks that slow down business. For CFOs and AP teams to meet these challenges, they need to deeply understand their accounts payable process and go after innovative solutions to standardize, centralize, and automate it. Therefore, leveraging accounts payable automation is a great strategy.
What is Accounts Payable?
Accounts payable is the process that deals with invoices that vendors or suppliers have issued to the company in exchange for the products or services they’ve provided. AP appears on the company balance sheets under current liabilities, and we could consider them short-term loans that must be paid off, usually within 15 to 45 days.
AP teams are responsible for purchase orders (PO), vendor relationships, employee reimbursements, and paying invoices on time. The team needs to make sure that the service or product is accurate in order to make payment. It usually happens using a three-way match that includes checking the PO, the receiving report, and the vendor invoice.
An efficient and structured accounts payable process must manage the flow of money in and out of a company’s operating budget and control cash flow. In the past, manual accounting tasks were the only option for managing the AP cycle. However, more thorough practices, such as accounts payable automation, are available today to make this work easier.
The Manual Accounts Payable Process
Accounts payable departments are unique to each company. But most job descriptions include the same overarching steps aimed at delivering accurate, on-time payments to ensure smooth business flow.
In general, the full accounts payable cycle follows these steps:
- Vendors or suppliers send invoices to the accounting department.
- The accounting department verifies each invoice against information like product stock data, order history, or other stored data.
- If necessary, the accounting team sends invoices to department heads for approval.
- An AP employee manually enters the payment info into the ERP system or accounting platform and may need to save a physical copy to meet auditing requirements.
- Checks are printed in house or through a third-party and then mailed to the payee — or someone sends them electronically. Each payee may request a different type of payment, which the accounts payable employee must verify.
Bear in mind that this is an overview of the accounts payable duties. In reality, many teams follow 15 or more steps to complete every payment process.
That is why a manual accounts payable process can snowball into large problems. Besides being inefficient, it is also prone to errors, compliance oversights, and unbalanced books. If an error occurs in any step of the process, payment processing slows significantly, resulting in vendor (and employee) dissatisfaction and sizable fines. Over time, slow payments will drive vendors to more reliable new partners that are more efficient in their financial duties.
If there were a good target for automation, it would have to be the labyrinth that is the accounts payable process. Accounts payable automation systems drastically speed up the workflow and help reduce the occurrence of serious issues.
The Automated Accounts Payable Process
Automating the AP processes results in a more streamlined cycle:
- An employee submits invoices to an invoicing platform built with accounts payable automation software.
- Processing and approval occur within the platform.
- The AP team automatically sends the payment to the supplier.
Automation not only increases efficiency but significantly reduces the risk of errors. If errors do occur, you are notified and can address them quickly so outgoing payments still meet due dates.
AP Automation: Why You Should Automate Your Accounts Payable Process
Accounts payable automation software such as Pipefy streamline the full AP cycle, minimize the number of errors, and bring many other benefits to businesses.
In a 2019 survey conducted by IDC and Document Strategy, when professionals answered about what they perceived were the main automation benefits, there were two key takeaways:
- 67% mentioned that process automation improved accuracy and/or reduced errors.
- 64% mentioned that automation improved employee productivity.
Both affirmations are true. Now, let’s take a look at all the ways you can benefit by automating your workflow.
Streamline the AP Process
Automation simplifies complex procurement and payment systems, which benefits everyone involved, especially the AP staff.
As we’ve mentioned, there are numerous tasks involved in the accounts payable cycle, many of which can be eliminated or performed more efficiently if automated. Financial department employees often waste time tracking down payment details, cross-referencing disconnected data stores, or working with incompatible systems.
Automation bypasses unnecessary steps, makes data entry easier, standardizes routine tasks for machines, and allows employees to focus on performing strategic activities instead of repetitive ones.
When employees can take care of an issue with one click, make a purchase order, or process a payment with a few keystrokes, companies save time and reduce the level of expertise required to handle many typical payment handling duties. Automation also saves companies money by limiting extra staff needed to perform cumbersome manual tasks, such as email messages to communicate order status or document management.
Optimize Invoice Processing and Management
Paper invoices belong to the past, and e-invoicing is how a smart and effective team works today. Suppose you can structure a sound AP system by standardizing the input information, organizing execution, and keeping supplier invoices in a single place. In that case, your company’s invoice management will be much easier.
Using automation software like Pipefy, you can easily store, find, and share invoice data and automatically assign tasks that involve specific purchases. You can automate the screening phase by creating rules and setting responsibilities automatically, depending on the type, amount, or department of the purchase.
The software also enables you to ask for invoice approval automatically, send messages for the approvers when they need to review a purchase order or payment, and notify suppliers, vendors, or employees when the request is approved. This way, you will easily automate your approval process and enhance your team’s productivity and efficiency.
Say Goodbye to Costly Errors
Streamlining complicated procedures with automation brings accuracy in financial reporting that manual processes can’t provide. No matter how much you avoid human errors, they do happen. So if you can automate manual data entry and approval workflows, you will see a decrease in mistakes and processing costs.
Accurate record-keeping has only become more critical in the era of increased regulatory compliance requirements. Errors mean spending more money than you should, delaying required payments, and eroding trust with essential partners.
With automation and built-in database functions, duplicate payments and erroneous entries appear much less frequently, substantially lowering the risk of fines or overpayments. That is a way automation and automation software will help with cost savings and bottleneck monitoring in your AP department.
Enhance Collaboration with Centralization
Every company and department must record tasks, keep track of small project details, and monitor their team’s progress. Centralized automation makes this easy by keeping all of these details neatly in one place, letting managers easily track company projects, prioritize activities, and streamline collaboration.
Centralizing also helps eliminate duplicate assignments and opens up new opportunities — for instance, it’s much easier to spot potential partnerships between employees working on complementary tasks.
Besides, centralizing activities and improving communication by structuring an AP workflow also enriches supplier and vendor relationships. It makes it easier for your team to follow-up with them and send order notifications while accelerating the approvers’ answers.
Never Miss a Due Date Again
With automation, it’s easier than ever to keep track of even the smallest project details. Even if a task escapes your eye, you can set to receive automatic notifications about upcoming deadlines and priority assignments, so you never accidentally miss a due date or make late payments again.
Electronic invoicing and real-time notifications are vital to improving your team’s performance. By providing prompt and efficient service with an automated accounts payable system, you will build trust with your suppliers and partners. Having lasting relationships with them is just as important as the relationships with your clients or customers. When your vendors and suppliers love what you do, they will happily work with you on pricing and inventory. They can also give you early payment discounts, which is excellent for business.
Protect Yourself From Fraud
Nearly 47% of surveyed companies experienced fraud in the past two years, with 13% losing at least $50 million each. In many cases, it happens because of employee mistakes.
Automation helps by reducing human touchpoints, adding substantial visibility, increasing centralization, and bolstering security. Combined with employee training on security developments and trends in payment platforms, automation will significantly reduce your risk of falling victim to fraud.
At the same time, it will improve your payment request process, add valuable standardization at every step and help build your company’s reputation as not only a business that pays on time but also a safe partner. Overall, automation enables accounts payable teams to have safer workflows and protect company and customer data and money.
Customized Automation Tools
When selecting an automation platform to streamline the accounts payable process, look for one that allows for customization. Generic solutions add limited functionality, but a customizable platform offers a better return on your investment because it addresses your unique needs.
Pipefy allows you to customize your process with a long list of features and integrations. Start with the plug-and-play Accounts Payable template, which unlocks your ability to tailor-make your workflow using advanced Pipefy tools that will drive your processes forward through automation, centralization, and standardization.
Looking Ahead: AP Automation Software
You have a few options when it comes to automating your accounts payable process. To decide which way to go, you should focus on what will add the most value to your operation. However, there are two main areas for improvement that are crucial: centralization and organization. Pipefy is the AP automation solution that will help with both of these areas.
Learning how to use Pipefy is straightforward and intuitive. Once your company gets the hang of it, the platform will completely transform the way you handle your entire process. It will increase efficiency, relieve stress among your Finance department, and enhance relationships with partners.
Data capture is super easy with Pipefy because you can set up online forms and even service portals, to receive requests from employees and electronic invoices from suppliers, even if they are not Pipefy users. The platform will also help you standardize phases for your process, which will make it easier for your team, and will enable you to find bottlenecks and opportunities for improvements and automation.
Email communications often take a lot of time, especially when you manually set up routine confirmation and notification emails. Pipefy’s email templates and automation will eliminate these issues so your team won’t have to waste time on repetitive tasks. They will be able to communicate clearly with each other or across departments without leaving the platform.
Finally, Pipefy allows you to monitor your main metrics and cash flow quickly. You can also integrate the platform to your existing ERP tools and accounting system to centralize your work in a single place, while still leveraging the features you need from your other tools.