Armed with accounts payable (AP) automation software and some AP best practices, your team can recoup hours now spent on manual data entry. You’ll waste less time hunting down the status of any given transaction—it’s all there on your dashboard, routed automatically by workflow rules.
As a result, businesses that adopt AP automation software find their processes moving faster, with fewer errors. There’s also better visibility, which helps in safeguarding against fraud.
What is AP automation?
Accounts payable automation, or AP automation, consists of tools or processes that automate the manual aspects of accounts payable processing. Rather than a finance team member entering data manually, the entire process happens digitally, starting with invoices and purchase orders.
AP automation can save time and money while protecting your business from costly errors. However, you need to pair the software with smart processes.
10 Key AP Automation Best Practices
Most finance leaders have asked, “How can our accounts payable team become more efficient?” Our answer is AP automation software plus these best practices.
- Get buy-in. There is typically trepidation around change. But for AP
automation to be successful, every member of the finance team needs to be on board and
committed. CFOs may want to sit down with team members one-on-one and talk them through
the switch. Share the ways AP automation will make their jobs easier while benefiting
Take note of any feedback and use it in your conversations with vendors. Make sure any proposed solution covers your team’s real-life pain points. Documenting these discussions can help you make a solid business case for AP automation software.
- Assign an AP automation project manager. It’s critical to have a point of contact for all dealings with your software solution supplier, especially during the implementation phase. This person will oversee all behind-the-scenes aspects of the initiative and ensure automation flows are set up optimally.Additionally, this person serves as a point person for internal stakeholders, should there be any issues with the software. While day-to-day management rests with finance, the project manager is responsible for program management tasks, such as monitoring and optimization, and for providing regular reports on ways to improve and maintain efficiency.
- Enter new invoices ASAP. AP automation can dramatically reduce days payable outstanding (DPO)—by an average of 5.55 days, according to the Aberdeen Group. But that reduction depends on when an invoice is entered into the system. If you are still receiving paper invoices, you’ll need to scan them promptly. Get your team into the habit of entering new invoices into the system the day they arrive. That way, you can better track transactions and realize the maximum DPO benefit.
- Automate in phases. There’s a lot that can be automated, but that doesn’t mean you have to unleash it all at once. It may be best to roll out automated processes gradually, with time to troubleshoot in between phases. While automation solves problems, improper setup can cause even bigger issues. Additionally, there will be a learning curve. By moving slowly and giving your team time to adopt new processes, you can ensure the maximum benefits of automation going forward.
- Keep vendors and suppliers in the loop. Just as important as having your team fully on board is communicating with your suppliers. Many AP automation systems allow you to set up a vendor access portal. There, your approved vendors and suppliers can update their information, check on the status of invoices and find answers to common questions. Make a list of the suppliers from which you regularly make large purchase orders as well as vendors for which you are a major customer and communicate with them early and often about the change. Going forward, they’ll appreciate being kept informed even as you free your AP department from frequent customer service calls.
- Integrate your systems. Which tools does your finance team already depend on? The AP automation system you choose should be fully integrated, or able to be integrated, with what your team uses to run accounts payable. It’s especially critical you factor in enterprise resource planning (ERP), customer relationship management and other core finance systems. You don’t want the team to have to enter information more than once or log in and out of software throughout the day. Additionally, by integrating tools you already use into your new system, you further reduce the learning curve and get access to end-to-end data that can be turned into informative reports.
- Take advantage of early-payment discounts. Most vendors offer early-payment discounts. According to PayStream Advisors’ 2017 AP & Working Capital Report, 31% of respondents said manual routing of invoices for payment and approval stood in the way of achieving at least some of these savings. With AP automation, that shouldn’t be the case. These systems make it easier for finance to optimize cash management and speed approvals.
- Set up workflows. AP automation software can help you put a workflow system in place to ensure employees are clear about their responsibilities. That way, everyone on the accounts payable team is on the same page, especially when it comes to deadlines. If and when bottlenecks occur, you can check your software dashboard to see where something is stuck in approvals and nudge that employee to move the process along.
- Mind the metrics. AP automation software offers real-time data at the click of a button that you can compile in a dashboard and combine into business insights. Using this data, you can keep an eye on cash flow while surveying what’s working and what’s not. For example, you may learn from your metrics that a workflow needs reconfiguring. Perhaps there are too many steps, or too few, to complete a task efficiently.
- Consider contingencies. A natural disaster, server crash or power outage can severely disrupt business operations. But that shouldn’t be the case if you’ve solidified a business continuity plan. So, don’t forget to document AP processes as you automate so that you can, if required, pivot back to manual handling of what had been automated tasks. Make sure your staff is trained on how to perform functions manually, just in case.
Choosing an AP Automation Solution
Before settling, make sure you explore all your AP automation software options, in light of your business’ specific needs and processes. That’s critical to finding the best fit and the maximum time and cost savings and business benefits.
Here are three factors to consider as you shop.
- Point solution versus accounting suite: There are a number of products that focus exclusively on automation. However, depending on your existing software (or lack thereof), you may need these capabilities to be a part of a more comprehensive accounts payable/accounts receivable software suite.
- Integration with accounting suites: If you choose a point solution, it will need to communicate with your business’ existing systems, including ERP. The vendor should be clear as to whether the software integrates without custom development and check on what the level of maintenance is needed with these integrations, like how often, costs and who does it. Check product reviews and talk to peers for insights into the quality of the product’s integration capabilities.
- Accounts payable versus accounts receivable focus: One thing to watch for with point solutions is they may provide greater depth on the accounts payable side or the accounts receivable side. Depending on your business, you may have greater needs on one end over the other. Choose the system with the focus area that best aligns with your business.