What is Accounts Payable Automation?

Accounts payable (AP) professionals are all too familiar with the frustrations of manual processes.  

Hours spent keying data, chasing down approvals, fixing errors, and trying to keep track of things can leave AP professionals feeling overburdened.  Not to mention the potential for errors and delays can lead to strained relationships with suppliers, missed discounts, and even compliance risks. 

This is where AP automation comes in.  

This article explains how automation transforms workflows by automating tedious invoice-to-pay tasks, improving accuracy, and giving AP back valuable time to focus on more strategic activities.

How AP Automation Works

AP automation simplifies the entire invoice-to-pay process, from receiving an invoice and extracting data to routing invoices for approval and posting invoices to an organization’s system of record. 

Here’s how AP automation solutions typically work:

• Invoice receipt.  Supplier invoices often arrive in various formats – some by mail, others via email, supplier portal, or secure file transfer – leading to a disorganized workflow.  AP automation solutions centralize invoice receipt and ensure that every invoice, no matter the format, is captured and digitized for easy processing.  For example, invoices sent as paper through the U.S. Postal Service are digitized and aggregated with digitally submitted invoices.  This reduces the risk of lost or delayed invoices and speeds up processing.

• Invoice data capture.  Few back-office tasks are as time-consuming and error prone as manually keying the information on invoices.  A single typo or transposed number can result in downstream exceptions, erroneous payments to suppliers, and delayed financial closing.  AP automation solutions use artificial intelligence (AI), optical character recognition (OCR), intelligence character recognition (ICR) and other technologies to extract the vendor’s name, due date, amount, and other header and line-item details from invoices with a high accuracy.

• Invoice matching.  In a manual process, matching an invoice to a purchase order or proof-of-delivery document can take hours, especially if discrepancies exist.  With AP automation, the software performs this matching automatically, ensuring that only correct and validated invoices move forward in the process.  If any data is missing or incorrect, it triggers an exception handling workflow that notifies the relevant team members for resolution.

• Invoice approval.  When you rely on manual approvals, invoices can sit in email inboxes or on desks for days.  Automated approval workflows ensure that invoices are routed to the right individuals or departments, according to your organization’s preset rules, approval thresholds, and policies.  Notifications and reminders can be set up to alert approvers and automatically escalate invoices, minimizing delays and bottlenecks.  And invoices are tracked in real-time.

• Posting.  Approved invoices can be automatically uploaded to an organization’s enterprise resource planning (ERP) or accounting software system.  In cases where an invoice matches a PO, invoices can be posted to an ERP without any human intervention (or touch-free).

• Reporting.  Generating reports manually is time-consuming and prone to errors.  With automation, AP teams gain access to real-time dashboards and customizable reports that provide valuable insights into invoice processing times, payment cycles, and spending trends.

By centralizing invoice receipt, automating data capture and matching, and simplifying approvals, AP automation ensures that invoices flow smoothly with minimal human intervention. 

What AP Tasks Can Be Automated?

The key to successful AP automation is understanding which tasks can be automated.

• Invoice receipt and capture.  All incoming invoices can be captured electronically, including paper invoices converted through scanning technology such as ibml’s software.

• Invoice matching.  AP automation matches invoices with POs (two-way matching) and delivery receipts (three-way matching), ensuring all elements align before an invoice is paid.

• Approval routing.  AP automation systems automatically route invoices to the correct people or departments for approval based on predefined rules, helping to meet payment deadlines.

• Expense coding.  AP automation solutions use intelligent algorithms to automatically assign general ledger (GL) expense codes, ensuring that invoices are categorized correctly.

• Payment processing.  With AP automation, payments can be processed automatically based on payment terms and methods, improving accuracy and ensuring timely payments.

From capturing invoices electronically and matching them to POs to routing invoices for approval and initiating supplier payments, AP automation streamlines each step of the invoice-to-pay process. 

Benefits of AP Automation

Organizations can achieve a lot of benefits from AP automation.  Here’s a closer look:

• Increased efficiency.  Instead of spending hours manually entering invoice data, chasing approvals, and matching invoices, your AP team can redirect their efforts toward more valuable tasks like analyzing data for new opportunities to capture early pay discounts.

• Cost savings.  Eliminating manual processes reduces the risk of time wasted fixing errors, lessens the need for overtime, and makes it easier for organizations to scale their AP function without the need to hire additional staff – all of which contribute to major cost savings.

• Improved accuracy.  Every manual step introduces the possibility of error, whether it’s entering the wrong amount or paying the same invoice twice.  Automation catches these mistakes before they happen, reducing rework and protecting an organization’s bottom line.

• Faster cycle times.  With manual processes, approval delays and slow payment cycles are common.  AP automation streamlines these processes, allowing you to process invoices faster, take advantage of early payment discounts, and improve cash flow management.

• Streamlined compliance.  Compliance is a key concern for any finance department.  AP automation ensures that your processes are transparent and consistent, reducing the risk of non-compliance.  User access permissions, automated segregation of duties, systematic workflows, complete audit logging, and data encryption safeguard sensitive financial data.

• Enhanced security.  Whether it’s misplacing sensitive documents or duplicate invoices slipping through the cracks, the risks of fraud in a manual environment are high.  AP automation adds layers of security by controlling who has access to invoice and payment data, tracking all actions taken on an invoice, and ensuring that payments are authorized.

AP automation enables organizations to operate more efficiently, accurately, and securely.

What Industries Can Benefit from AP Automation?

AP automation isn’t limited to one industry.  Here are some industries that can particularly benefit:

• Manufacturing.  Manufacturers deal with high transaction volumes and numerous suppliers, which makes managing the invoice-to-pay process a complex task.  Automation simplifies AP processes by reducing the time spent on invoice processing and ensuring accuracy.

• Healthcare.  In the healthcare industry, a single delayed payment can disrupt critical supply chains, potentially impacting patient care.  AP automation ensures that invoices are processed quickly and accurately, keeping suppliers paid and healthcare operations running smoothly.

• Retail.  Retailers often face fluctuating demand, particularly during the holidays.  AP automation helps manage the surge in invoices by enabling retailers to scale their AP process without the need for more staff.  Timely payments also avoid disruptions to supply chains.

• Finance and banking.  Financial institutions must process large volumes of payments while complying with stringent regulations, industry guidelines, and security protocols.  AP automation simplifies compliance and ensures that payments are accurate, timely, and secure.

• Property management.  Managing invoices from contractors and service providers can be overwhelming for property managers.  Categorizing invoices for different properties also is tricky.  AP automation centralizes and standardizes the process, reducing errors and delays.
  

AP automation offers significant advantages across various industries, especially those managing high transaction volumes and complex supply chains.  Regardless of the industry, AP automation helps organizations operate more efficiently, improve cash flow, and enhance supplier relationships.

Introducing ibml’s AP Automation Solution

ibml offers a solution to help organizations in any industry seize the benefits of AP automation. 

• Intelligent data capture.  ibml’s solution captures invoices from various sources – paper or digital – and extracts key data using advanced technology.  Whether you’re dealing with large batches of paper invoices or digital submissions, ibml ensures accurate data capture.

• Automated workflow and approval.  Invoices are digitally routed to the correct individuals or departments for approval, streamlining the workflow and reducing potential bottlenecks.  Approval rules and thresholds can be customized to fit your organization’s requirements.

• Seamless integration.  ibml’s solution integrates with your ERP and financial systems, ensuring smooth implementation and minimizing disruption to your operations.  This seamless integration reduces the need for time-consuming migrations or additional training.

• Real-time reporting and analytics.  ibml’s system provides real-time insights into your AP process, allowing you to make informed decisions and optimize your workflows.  With access to real-time data, you can monitor Key Performance Indicators like invoice cycle times, payment accuracy, and vendor performance, enabling better financial management.

• Scalability and flexibility.  ibml’s AP automation solution is designed to scale as your organization grows, making it ideal for businesses of all sizes across multiple industries.  Whether your AP department is handling hundreds or thousands of invoices a month, ibml’s solution can scale to meet your needs without sacrificing performance or accuracy.

ibml’s AP automation solution can help transform your AP department.  With ibml, your team can become more efficient, accurate, and strategic, driving greater value for your organization.

Conclusion

AP professionals are constantly facing pressure to do more with less, reduce errors, mitigate risks, and maintain smooth vendor relationships.  Manual invoice-to-pay processes only add to this burden.  Automation enables organizations can transform the way their AP department operates.  With a partner like ibml, organizations can rest assured that their invoice-to-pay processes are optimized for success, allowing them to focus on what matters most – driving strategic value for the organization.