Accounts Payable (AP) Automation: Strategies, Benefits, & Solutions
What Is AP Automation?
The accounts payable (AP) automation process is defined as the automated capturing, coding, approving, receiving, and processing of invoices, while paying vendors, and managing expenses. While a traditional manual 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. Accounts payable automation also provides visibility and centralized control over the entire AP process and minimizes the risk of fraud, improves cash flow management, and boosts efficiency throughout your organization.
What Are the Benefits of AP Automation and Why is it Important?
With AP automation, businesses can streamline operations and easily address inefficiencies associated with the accounts payable process. It allows companies to save time, reduce human error, and increase productivity. 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 process more work volume with the same size team, eliminating the need to hire additional employees — which is becoming tougher to find and more expensive by the day.
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.
Increased visibility also helps businesses understand their true AP balance. When the process is manual and paper, there may be 50 invoices on the AP clerk’s desk that the controller doesn’t have visibility into. By digitizing the accounts payable process, businesses have a much clearer picture of all invoices outstanding and the overall AP balance.
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 on time and by giving suppliers visibility via their self-service vendor portal. Self-service vendor portals eliminate the back and forth communication from vendors to businesses regarding their payment status and provide vendors with detailed downloadable remittance data for reconciliation in their systems. 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, ROI, and Improve Business Scalability
AP automation also helps companies who are looking to increase cash flow, ROI, 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. In addition, by switching to an automated AP process, and phasing out check payments, your business can significantly cut down on labor and infrastructure costs, which lowers your cost per invoice and improves overall ROI.
How Do You Automate the AP Process?
While there are a few ways to automate the AP process — via e-voicing, automated data entry, automated invoice match, etc. – the best way to automate this process is to leverage an AP automation solution like MineralTree. MineralTree integrates directly with corporate bank accounts and accounting systems in as little as 12 days. The solution keeps overhead to a minimum by paying for itself as quickly as 60 days after the simple implementation and is proven to streamline the entire accounts payable process — from invoice capture to invoice approval, payment authorization, and payment execution.
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. Processes include 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 in a single workflow 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, AP automation solutions will execute payments on your 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, enhanced security, 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.
How to Select the Right AP Software to Automate Your Process
There are a wide variety of AP automation solutions available on the market. However, when deciding which solution is right for you, it’s important to understand that taking a holistic approach to automating accounts payable will set your organization up for success. Investing in a solution that streamlines the end-to-end process will deliver greater efficiency, improve control over cash flow, and enhance protections against fraud.
MineralTree is leading the AP automation solution, providing the most comprehensive approach to automating your accounts payable process. With market-leading features, a simple implementation process, and praise-worthy customer support, MineralTree continues to redefine what is possible in the realm of AP efficiency.
Key Considerations Before Implementing an AP Automation System
As you plan your automated AP transition, there are additional considerations to keep in mind. Here are some key considerations your organization needs to think about before implementing an AP automation system:
Involve the IT Team
We recommend bringing IT in before you commit to buying a solution to ensure there are no compatibility issues with your current environment. If you run into technical issues during the implementation or experience a major issue afterward, your IT team will prove invaluable.
Implement Other Cloud Investments At the Same Time
If you opt for a cloud-based automated AP solution, also consider the timing of other cloud investments. For example, it makes sense to implement AP automation and ERP in the cloud at the same time. Simultaneous implementations limit the time spent in transition when the AP team is less productive as they learn the new processes. They can learn the new AP process as they learn the new ERP system, and as a result, reach optimal efficiency more quickly.
Utilize the Vendor’s Support Team
Established vendors have built a strong foundation of knowledge through facilitating hundreds and thousands of implementations. By keeping the lines of communication open, the vendor can show you how to apply the best practices that increase the likelihood of a smooth transition and avoid the pitfalls that tend to derail implementations.
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 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. Let’s get in touch so we can see if AP Automation is right for your business.
MineralTree Case Studies
AP automation solutions can work across several different industries, including retail, hospitality, healthcare, and software. Below are some case studies from MineralTree in a variety of industries.
The Boston Celtics Leverages AP Automation for a More Accurate Payment Process
For the Boston Celtics, accuracy is an important part of their business. However, their AP team faced many challenges when it came to the on-season since the number of invoices would drastically increase. Their AP team was often at capacity and was looking for a solution to help them better manage their data and the entire process.
The Boston Celtics decided to work with MineralTree and were able to simplify their accounts payable process. Implementation happened mid-season while the Celtics were playing in the Eastern Conference. Although the AP team was nervous about transitioning during the basketball season, the process went smoothly and the team was able to reap some of the following benefits immediately:
- Invoice data was automatically imported and coded into NetSuite with 99.5% accuracy through MineralTree’s process that combines optical character recognition with human review.
- Invoices could automatically be sent to department heads for approvals based on pre-established workflow rules
- Payments can be released regardless of location
BrightView Health Supports Business Growth through AP Automation
BrightView Health provides outpatient medication-assisted treatment in Ohio and Kentucky. They expanded from four treatment centers to 30 in about two years. When Controller Matt Santell joined BrightView, most of the AP process was manual and 65%-80% of invoices were being processed via mail. However, this process was no longer sustainable due to the company’s explosive growth. Their AP team had been able to manage the 3,000 invoices a year this way, but now that number was over 10,000.
BrightView Health decided to partner with MineralTree, in part due to Santell’s experience with the platform. They use the platform to automate invoice approvals and management. Erik Arwood, BrightView’s Accounts Payable Accountant, has been impressed with MineralTree’s OCR technology and the human review process. “It has been astonishing to see just how accurate MineralTree is at capturing the right data,” he said.
In addition, the AP process has been reduced to mere minutes, according to Santell. Their team also used MineralTree to prepare for an upcoming audit, which took their team 20-30 minutes.
AP Automation Misconceptions
Many businesses searching to cut costs company-wide are evaluating AP automation solutions for several reasons — to increase efficiency, reduce time spent on menial, paper-based activities, etc. And finance teams are quickly realizing there is an imminent need for AP automation to bring their processes into the 21st century. As demand continues to grow, let’s set the record straight and bust some common misconceptions surrounding AP automation.
Misconception #1: Traditional AP processes are extremely efficient.
If your current Accounts Payable AP process is still manual, then you are not as efficient as you could be. Research shows that finance leaders spend 49% of their time on transaction processing within the AP department. If you think about it this way, your team is spending close to ten days each month to process and pay vendors.
Misconception #2: CFO’s enjoy signing checks.
In all honesty, no one likes signing checks–and neither do suppliers enjoy processing them. With an automated accounts payable solution, your CFO will have greater visibility into cash flow and operations. Unlike a paper check that can be overlooked or easily lost in the shuffle, automated AP solutions have true segregation of duties and can strengthen fraud protection.
Misconception #3: OCR technology isn’t reliable.
Optical Character Recognition, or OCR technology, enables you to convert scanned documents into editable and searchable data. Software alone cannot always do the job. And while some AP solutions rely solely on OCR technology, others take advantage of both OCR technology and human review. In this scenario, the provider relies on OCR technology to handle the initial data capture. Then, before being submitted for the customer to review, there is an actual person who reviews the document to make sure all the information is correct.
Misconception #4: Mismatched data occurs from adding another system into the accounting platform.
People often think that two different systems can create discrepancies and leave their AP department with mismatched data — and this very well could be the case if the solution chosen does not integrate seamlessly with your accounting system. With seamless integration, businesses can continue to use the accounting system they are familiar with and the workflows they previously created. With an integrated automated AP solution, transaction, approval, and payment information are automatically, and bi-directionally, synched with not only your accounting system but also your bank.
AP Automation FAQs
How Does Payment Automation Work?
Automated payments are the process of having money automatically transferred from your bank to pay an invoice. When discussing AP automation, this process refers to the removal of manual tasks to approve invoices and make payments to vendors.
How Do I Select an Accounts Payable Software?
AP automation software can remove the manual processes associated with vendor payment. These steps include invoice approval, invoice capture, payment approval, payment execution, and PO matching. All of these steps can be automated, however, companies see the most benefits when they opt for an end-to-end AP automation solution.
Can AP Automation Improve the Invoice Approval Process?
AP automation is a great tool for improving the invoice approval process. Invoices can be approved via email, without the need to login to a separate system. Additionally, reminders are sent out automatically via email.
Can AP Automation Be Integrated with EPR Systems?
The short answer is yes! When identifying a solution, be sure that it will integrate directly with your existing ERP system and your bank accounts, so that updates between systems flow automatically. The information you run reports on is always up-to-date — with no extra spreadsheet programming required!
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.
Which ERPs Does MineralTree Integrate with?
MineralTree offers deep integration with many of the leading ERPs and Accounting Systems. Here are just a few of the many ERPs we support: Oracle (NetSuite, EBS, ERP Cloud, JDE, PeopleSoft); SAP, QuickBooks (Desktop, Online); Microsoft Dynamics (Business Central, Great Plains, Finance & Operations) and Sage (Intacct, 50, 100).
How Does AP Automation Make the Payment Process Faster and Easier?
AP automation eliminates the bottleneck that approvers create just by being away from the office. With streamlined payment authorization and execution, invoice payments can be accepted or rejected from any device by any pre-approved employee, which significantly improves efficiency within the payment process. In addition, approved payments can be scheduled for payment, and when they occur they will automatically sync to close the invoice in your accounting system. Remittance details are sent automatically after payments are completed.
This process takes a tremendous burden off of the AP staff by offering a new level of transparency to vendors and eliminating the need to respond to the steady stream of inquiries that vendors tend to make on the status of their invoices. Additionally, all payments are preserved within a centralized repository of payments that can be easily viewed and searched in case any vendors claim payment has not been received.
Can AP Automation Improve Supplier Relationships?
Vendors are key stakeholders in the operations of any business. With accounts payable serving as the liaison between a company and its vendors, AP automation makes it easy for AP teams to serve as good stewards of a key relationship for the business, and build a relationship of trust that features high-quality service, discounts, and flexibility in payments.
AP automation simplifies vendor onboarding through a focused enrollment campaign that contacts vendors, gets them onboarded, sets up payment methods, and addresses any payment problems or delays. In addition, AP automation provides enhanced visibility into data analytics and allows real-time visibility into the status of payments and invoices. AP automation also facilitates prompt payments with processes that are smooth and seamless for both your organization and your supplier.
How Does AP Automation Improve Cash Flow?
With AP automation, teams can keep on top of all payment deadlines, including early-pay discount deadlines, and capitalize on opportunities to make early payments that prompt discounts to kick in. It is much easier to ensure that all payments are made on time, enabling businesses to avoid late payment penalties. Additionally, because automation enables more electronic payments – which can facilitate payments faster, automation enables businesses to hang on to large sums of capital that are due for payment as long as possible, and enjoy extended working capital.
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 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, and the capital gained from rebates nearly exceeds the platform fees, it is certainly a worthwhile investment.
Can AP Automation Save Companies Money?
On average, it costs $5.00 per invoice to process a check. Companies are already saving $5,000 with just the first 1,000 invoices. However, there are other costs associated with manual processes outside of paper checks. Companies can reduce errors including duplicate invoices, improve supplier relationships, and protect themselves against fraud. Additionally, 61% of companies note that they can process more invoices with the same amount of people due to their AP automation solution.
How Do I Make the Business Case for AP Automation?
Manual AP processes are time-consuming, require more overhead, and are more prone to human error. Companies who invest in AP automation also see improved vendor relationships due to on-time payments and transparency in the process.
Additionally, due to the pandemic, many offices have become fully remote or now offer a hybrid model. This new approach to business is not conducive to manual processes. In fact, the pandemic was the catalyst for 58% of businesses looking to automate their financial departments. Among companies surveyed, accounts payable was the most important function to automate. To learn more about how to make the business case for AP automation, check out our blog post on the topic.
What are the Traditional Steps in the AP Process?
At the end of the day, each accounts payable team needs to jump through the same hoops and complete the same set of tasks every time they receive an invoice. While there are slight variations between how teams go about completing their work, this is typically how it goes:
Step 1: Manual Invoice Capture
The AP process begins when invoices arrive (via email, regular mail, or fax). From there, all of the information has to be coded into your accounting system. This manual transfer of data consumes the AP team’s time and creates the possibility of input errors, which in turn requires additional staff time to correct. This ultimately slows down the process even more when reconciling invoices with purchase orders.
Step 2: Manual Invoice Approval
Organizations that leverage PO numbers must match their invoices against the original PO number. This can be a cumbersome process if there are no tools in place to help. For companies that don’t use POs, invoices need to be distributed for approval to the department heads that utilize the vendors’ products or services so they can verify receipt and confirm if payment is due. This process is typically done via email or walking from desk to desk, which can be time-consuming for employees.
Depending on the invoice amount, an invoice can travel through multiple people before it arrives in front of the person who can actually sign off on the final approval. This can drag the payment process on for weeks, and makes tracking its progress a pain (if not nearly impossible).
Step 3: Manual Payment Authorization
Once department heads approve each invoice, the AP manager must decide which invoices are getting paid in the next payment run, and then get them in front of the CFO or Controller to authorize the payment for release. This too can extend the timeline for payment if the person authorizing the payments is away from the office. For this reason, payment authorization can easily be the biggest bottleneck in the AP workflow.
Step 4: Manual Payment Execution
After payment authorization, AP teams must execute the payments. This can be done by either mailing checks or setting up electronic payments. Manually, especially while making credit card payments, is not easy since the AP Manager must set up separate payments for each individual vendor, and also carefully manage the process of exposing the entire company to fraud risk by sharing financial information in the process. For this reason, many businesses are missing out on the many benefits that electronic payments can provide. Additionally, if due dates are not diligently monitored, it’s easy to miss deadlines and sacrifice early-pay discount opportunities.