How Automation Can Improve Accounts Payable Compliance

In any organization, the accounts payable (AP) department is responsible for handling and processing payments. As a result, it is important that AP teams comply with relevant regulations and standards. Thankfully, an AP automation solution can help keep your business up to date with regulations and maintain compliance by streamlining processes, improving visibility, and reducing risks. Let’s take a closer look.



What is Compliance in Accounts Payable?

Compliance in accounts payable refers to the practice of following laws, regulations, and standards related to handling payments. This includes general accounting principles, tax rules, payment processing protocols, and anti-fraud measures. AP teams must stay up to date on all relevant compliance requirements to properly manage their organization’s finances.

What are the Risks of Poor Compliance in Accounts Payable?

AP teams that fail to comply with relevant regulations can face serious consequences. These include financial penalties, reputational damage, and more. In addition, non-compliance can lead to a range of operational issues such as inaccurate recordkeeping, delayed payments, and fraud prevention failures. Here are the top three risks AP teams face with poor compliance.

1. Tiresome, Expensive Audits

Without AP automation to centralize all of the invoices and related documents, audits are a nightmare for AP teams that must physically sort through stacks of paper to find the docs they need. Audits can already be a time-consuming process, but they become especially expensive if files are difficult to find or locate.

Alternatively, an AP document management system, offered through an AP automation tool, can digitize and store all invoices and related material so staff can quickly locate documents with the click of a button. This is especially important today as more AP teams search for systems that can accommodate hybrid and remote team members.

2. Incorrect Transferring of Information Between Systems

Mistakes made when manually copy coding invoices take a lot of time to correct. This wastes both team time and money, and also causes several challenges later on in the AP workflow when gone unnoticed. Furthermore, this can lead to reporting issues that prevent the AP team from properly closing their books for the term. Human errors made during copy coding may also cause excessive late payments, which weaken supplier relationships and generate expensive late fees. In short, a few small mistakes can quickly add up. Thankfully, AP automation tools minimize human errors and maximize copy coding accuracy for invoices. For example, MineralTree offers a copy coding feature that allows an Accounting Manager to apply coding from the vendor’s previous invoice to the current invoice with the click of a button, to save time.

3. Increased Vulnerability to Fraud

In 2020, over 80% of companies noted that they were targets of an actual or attempted fraud attack. This is the second highest it’s been since 2009. AP automation tools make it easier to spot fraud attacks by cross-referencing vendor information before sending payments. If payment information does not match, the tool alerts the AP team so they can investigate.

If you’re thinking about automating accounts payable, consider using managed services, especially if you have a smaller team. MineralTree offers managed services that come with years of experience and training to deal with phishing and other fraud attempts, allowing your accounts payable team to always be one-step-ahead of cybercriminals.

What are the Challenges in Accounts Payable Compliance?

When it comes to accounts payable compliance, the main challenge for AP teams is staying up to date on all of the rules and regulations. This can be particularly difficult when dealing with different government bodies or multiple vendors.

Reliance on manual processes often leads to apathy or human error that can further complicate matters. Manual processes also offer limited visibility, often resulting in missing (and then late) payments, jeopardizing strategic vendor relationships. This puts teams at risk of not being able to properly close their books by the end of each term and leaves them unprepared to identify fraud risks.

Additional compliance challenges in accounts payable include:

  • Team members not following compliance guidelines. Staff that doesn’t adhere to compliance guidelines can jeopardize the company and put its financial security at risk.

 

  • High employee turnover: The great resignation has prompted many people to leave their jobs this year. As a result, more AP teams are left to uphold compliance expectations without their normal headcounts.

 

  • Hybrid work environments: With more and more teams working remotely, it’s harder for management to align team members.

 

What are the Types of Compliance Regulations in AP?

Accounts payable teams are responsible for making sure all payments are compliant with applicable laws, regulations, and standards. This can vary depending on the country, state, or municipality in which accounts payable are being conducted. Common compliance regulations include:

HIPAA

The Health Insurance Portability and Accountability Act sets standards for protecting sensitive patient information. It requires companies to maintain the privacy of their patients’ medical records. For the AP team, this is particularly relevant when processing patient refunds or rebates. Today, MineralTree is the only SOC2 Plus HIPAA audited provider on the market, allowing healthcare teams to remain compliant as invoices are processed.

PCI DSS

The Payment Card Industry Data Security Standard is a set of standards that ensures credit card data is kept safe and secure.

An auditor verifies that MineralTree meets the operational and technical requirements to process payment transactions. MineralTree is Level 1 verified, which is the highest level of compliance for merchants processing over 6 million transactions annually.

SOC 1

The Service Organization Control 1 standard sets requirements for organizations that provide services. It helps protect customers’ data and accounts from unauthorized access or disclosure.

MineralTree has implemented internal controls to protect their financial data and ensure the integrity of their payments workflow. MineralTree’s Type 2 report is completed every six months.

SOC 2

The Service Organization Control 2 standard sets requirements for organizations that store and transmit customer data. It helps protect customers’ information from unauthorized access or manipulation.

A third-party auditor verifies that MineralTree’s security controls meet AICPA’s five trust service principles for managing and protecting customer data.

KYC

Know Your Customer (KYC) requires organizations to collect and verify customer identity information before completing transactions. The KYC regulations are designed to protect customers from fraud and money laundering. ​​

MineralTree has implemented rigorous security policies, procedures, and tools across our entire organization to ensure that our tool helps companies maintain compliance. For our TotalAP solution, we perform regular audits to maintain HIPAA compliance, as well as SOC 1 Type 2, SOC 2, Type 2, SOC2+, and PCI DSS Level 1 certification. On top of these certifications, MineralTree maintains compliance with the European regulations contained within GDPR. In addition, MineralTree is regularly audited by its financial institution partners, which include some of the largest banks in the U.S.

Why is Automation Essential for Accounts Payable Compliance?

To ensure compliance in accounts payable, organizations must take steps to reduce risk and streamline payment processing. Automating certain tasks can help with this by reducing errors and eliminating manual workflows. Here are some ways automation improves AP compliance:

1. Streamlines Processes

Automation helps streamline manual processes like data entry, invoice approvals, and payment processing. This reduces the number of steps needed to complete a transaction, making it easier for AP teams to stay compliant with regulations.

2. Improves Visibility

Automation provides real-time visibility into payments, invoices, and other documents related to accounts payable. This helps ensure that all processes are completed on time and up to compliance requirements.

3. Provides Real-Time Reporting

Automating certain tasks makes it easier for AP teams to generate reports quickly and accurately. This helps them keep track of their compliance obligations and identify any potential risks before they become problems.

4. Reduces Risk

Automated solutions help reduce the risk of fraud by providing visibility into transactions in real-time and flagging suspicious activity. This helps AP teams stay compliant and protect their organization from potential risks.

Ensure Accounts Payable Compliance with MineralTree

MineralTree’s TotalAP solution helps organizations improve their accounts payable compliance. It streamlines manual processes, provides real-time visibility into payments, and offers powerful tools for fraud prevention and risk mitigation. MineralTree also provides comprehensive customer support to help users get the most out of their automation solution. Request a demo today to learn more.

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Bruno Fagundes

Bruno Fagundes is a Compliance Analyst at MineralTree and has been with the company for about two years. Bruno helped establish the Client Onboarding process for Managed Services with a focus on ensuring MineralTree is compliant with KYC laws and regulations. He is CAMS and CFE certified and worked previously at State Street Corporation in their AML and Sanctions compliance program.