Accounts Payable (AP) Automation: Strategies, Benefits, & Solutions
What is Accounts Payable (AP) Automation?
Accounts payable (AP) automation refers to the automated process of receiving and processing invoices, paying vendors, and managing expenses. While a traditional approach to accounts payable is time-consuming, tedious, and error-prone, automation takes efficiency to the next level. It streamlines the end-to-end accounts payable process, from invoice capture to coding through processing payments — all while integrating with your existing ERP solution. Automation also provides visibility and centralized control over the entire AP process and minimizes the risk of fraud, improves cash flow, and boosts efficiency throughout your organization.
How Does AP Automation Software Work?
While many AP automation solutions address a single pain point in the accounts payable workflow, the right software takes into account the unique challenges stakeholders face at each step of the process with a complete end-to-end solution. At MineralTree, AP automation improves the AP process by addressing the following:
Automated Data Capture & Coding
Both header and line-level information is automatically extracted from invoices and are coded at near-perfect accuracy. There are several ways to initiate the capture process including the use of a dedicated email inbox for electronic invoices or a PO box service for mailed invoices, manually uploading invoices to MineralTree, and uploading and syncing directly into your ERP. Any invoice captured by MineralTree will automatically sync back to your ERP system, maintaining it as your system of record. With MineralTree, duplicate invoices are automatically detected and flagged for review, saving time and preventing duplicate payments that require reconciliation.
With an AP automation solution, you have the flexibility to define approval rules to automatically route invoices to specific approvers in real-time. Invoice approvers can then make approvals from anywhere, even on mobile. Organizations can also utilize important payment controls such as segregation of duties, two-factor authentication, and dual approvals to add more security and further protect against payment fraud.
Automated Purchase Order (PO) Matching:
Purchase Orders allow organizations to bypass the tedious approval process which sometimes involves people across departments, including hard-to-reach department heads. Rather than collecting everyone’s “stamp of approval” for every invoice that is received, automated PO matching links invoices with their corresponding POs, allowing the invoice to bypass approvals and go directly to payment scheduling and execution. Mismatched invoices that fall outside of pre-defined thresholds are routed through an exception handling workflow for resolution.
Automatic Payment Scheduling and Routing for Approval
Automating payments is a great time saver for AP departments. Many organizations start out by automating their payments as a gradual gateway towards end-to-end efficiency. For many automation solutions, execution can be automated across payment types. You can also select your preferred payment dates to have control over cash flow and take advantage of early payment discounts. By utilizing automatic approval routing and simple payment scheduling, you can dramatically increase efficiency and decrease the time it takes to get a payment out the door. It’s also likely that vendor relationships will be strengthened when payments arrive accurately, securely, and on time.
Payment Method Flexibility
Typically, organizations can choose their preferred payment method and the AP automation solution will execute payments on their behalf to streamline the process. Some solutions will help you optimize your payment methods, which can lead to quicker payment completion, the ability to earn cash-back rebates, and more. With MineralTree, organizations gain seamless support over multiple payment types, including check, ACH, virtual card, and international/FX payments in one workflow. After a payment is complete, electronic remittance details are sent to vendors. A great automation solution will sync this data back into your accounting system so that there are no discrepancies between the platforms.
All approval and payment details are automatically stored in one central repository that can be accessed by authorized users at their convenience. This kind of logging helps teams easily conduct internal audits or supply outside auditors with necessary information upon request.
What Are the Benefits of AP Automation?
With AP automation, businesses can streamline operations and easily address inefficiencies associated with the accounts payable process. AP automation solutions offer the following benefits.
Save Time and Increase Efficiency
AP automation allows organizations to save time and increase efficiency by completely streamlining each step in the AP process. Instead of having to manually input invoice data, write paper checks, and chase down team members for signatures and approvals, everything is done digitally. With this extra time, your team can focus on higher value projects that drive revenue and move the business forward.
Reduce Costs and Capitalize on Discounts
AP automation reduces costs by negating the need to spend on resources that are typical of a manual AP process. On average, it costs $12-15 to manually process an invoice and an additional $5 to pay with a paper check. With an automated solution like MineralTree, you can reduce processing costs by 80%.
Additionally, AP automation allows organizations to better take advantage of early payment discounts by having greater control over when you pay invoices. Many vendors offer a discount for paying invoices early, which can be smart to do if you are trying to improve your vendor-supplier relationships or your company’s cash flow.
Increase Control and Visibility
With automation, users have greater control and visibility surrounding the invoice approval process. Internal controls like segregation of duties and two-factor authorization are built into each step of the process along with the ability to assign employees to a given role and prevent authorization for others. Additionally, if you have questions surrounding where an invoice payment stands, authorized users can easily look up the invoice number, see where it is in the process in real-time, who is needed to sign off, and more. Accounts payable teams can unlock their AP data and automate the reporting and analysis of AP KPIs across invoices, payments, and vendors.
Decrease Risk of Fraud
Fraud continues to be a concern for B2B companies with 78% of businesses impacted by payment fraud in 2020. AP automation greatly decreases this risk by creating a centralized space for all AP activity, having built-in payment controls in the AP process, including segregation of duties, dual-factor authentication, and Positive Pay Files, all of which are automated fraud prevention tools. AP automation also eliminates the need for paper checks – the number one target for those who commit fraud – by utilizing electronic payment methods.
Improve Vendor Relationships
Utilizing automated accounts payable software can greatly improve your vendor relationships by making it easier to facilitate secure payments in a timely manner. Each step in the AP process is streamlined and made easier through digitization, cutting out time that is required of a manual process, and largely eliminating the possibility of errors. Additionally, with AP automation, you have the opportunity to take advantage of early payment discounts if that’s in the interest of your company’s cash flow, which can help to strengthen your relationships with vendors.
Increase Cash Flow and Improve Business Scalability
AP automation also helps companies who are looking to increase cash flow and improve their business scalability. With a paper-based system, it’s incredibly hard to keep track of what your cash flow looks like, but with a digitized system, users can gain new insights by monitoring all payments, comparing cash in versus cash out, taking advantage of cash back rebates, and troubleshooting any cash flow problems as they arise.
Why Should Organizations Automate Accounts Payable with MineralTree?
Mineraltree is a complete end-to-end solution that provides simplicity and complete visibility across the entire accounts payable workflow. While many solutions address one or a few different pain points in the AP process, MineralTree software streamlines the entire process. This includes invoice capturing, automatic approval routing, and flexible payments – with an opportunity to use virtual cards like SilverPay to further protect your business against fraud and generate cash-back rebates. With AP automation, your organization can work more efficiently and have confidence that all invoices are being processed safely, and on time.
More Frequently Asked Questions About AP Automation
How Much Does AP Automation Cost?
The cost of AP automation will depend on how complex the system is and how many pain points it addresses. Pricing will also depend on the number of invoices you process, and the average number of monthly payments your company makes. MineralTree’s pricing is based primarily on invoice and payment volume – you will additionally pay an upfront licensing fee and miscellaneous transaction fees associated with various payments. While getting an automated system may seem costly, when you consider how businesses can save as much as 80% of AP costs through automation, it is certainly a worthwhile investment.
How Does Accounts Payable Automation Software Integrate with ERP Systems?
Integrating your AP automation software with your ERP system is a seamless process that can take as little as 12 days. Depending on your organization’s unique needs, you can customize your solution so that billing and payment information is synced while maintaining your current workflow and payment processes.
How Do I Select an Accounts Payable Software?
Not all AP automation solutions are made alike. If you’re looking to implement AP automation in your business, it is important that you research solutions carefully to find a good fit. Be sure to investigate whether the solution integrates with your ERP, look into the solution’s speed of implementation and ease of use (both for accounting and department heads), and evaluate the automation vendor’s payment network to ensure you maximize rebate benefits. Doing your due diligence saves time and money, and allows you to validate that the solution can support your business needs.