Accounts payable (AP) is a critical business function, responsible for protecting cash flow, maintaining good relationships with vendors, and ensuring compliance with financial regulations. However, the traditional manual approach to AP can be time-consuming and error-prone, meaning AP teams are spending valuable time on tedious tasks such as data entry, reconciliation, and chasing approvals.
It’s no surprise that MineralTree’s State of AP Report identified the AP function as the No. 1 digital transformation priority for finance leaders. Modern accounts payable software solutions can help businesses transform their AP function, automate AP processes, and overcome manual inefficiencies. However, not all AP automation technology is made equally — nor are they equally suitable for your specific business needs. It’s important to do your research and consider several important factors before choosing a solution.
An Overview of Accounts Payable Software Solutions
Accounts payable software solutions, often referred to as AP software or AP automation tools, are technology platforms designed to streamline and automate the AP process within an organization. These solutions offer a wide range of features and capabilities aimed at simplifying invoice handling, approval workflows, payment processing, and vendor management.
AP software solutions ultimately help improve operational efficiency, reduce manual errors, and manage cash flow while maintaining positive supplier relationships. The proof is in the pudding. AP automation tool adoption rates are growing rapidly, with 1 in 5 respondents saying they’ve fully automated their AP processes and nearly 40% planning further automation, according to MineralTree’s State of AP Report.
What Are the Types of Accounts Payable Software?
There are several types of accounts payable software solutions, each with its strengths and limitations. It’s important to understand these differences to choose the right solution for your business needs. Here are the three main solution types:
Point solutions are specialized AP automation tools that focus on a specific task, such as invoice approval or payment processing. While they offer robust features, they don’t cover the entire AP process. Companies often adopt multiple point solutions, but this can lead to increased costs, time commitment, and maintenance needs.
Enterprise Resource Planning (ERP) systems are comprehensive software platforms that cover various business functions, including accounting and finance. While ERP systems can manage a wide range of tasks, they are not specifically designed for AP automation. Their built-in AP features may be limited and lack the advanced features of specialized AP software. Fortunately, many ERPs offer add-on integrations with specialized AP software solutions.
Let’s take a closer look at some well-known ERPs:
Oracle NetSuite was one of the first ERP systems built for the cloud and is known for its scalability and flexibility. NetSuite has tools and modules that automate parts of the AP process but requires additional customization for end-to-end AP automation.
Sage Intacct is known for helping growing companies transform their back-office operation. Intacct does have the ability to automate certain parts of the accounts payable process, but the level of customization needed for end-to-end AP automation can come with a hefty price tag.
QuickBooks is known for its simplicity and is widely used by small to mid-sized businesses. While it offers features that support bookkeeping, financial reporting, and inventory management, its AP functionality is relatively bare-bones. In its standard configuration, QuickBooks AP requires extensive manual effort and lacks automation and approval workflows.
Microsoft Dynamics GP:
Microsoft Dynamics GP, formerly known as Great Plains, provides some AP functionality to help businesses scale their operations. Integrating an additional AP automation solution to your GP environment can improve visibility, reduce manual data entry, cut processing costs, and prevent duplicate invoices.
Oracle ERP Cloud:
Oracle ERP Cloud helps companies accelerate efficiency by leveraging built-in machine learning for predictive planning and forecasting. It supports some AP processes, including invoice and payment processing, and vendor management, and also provides insights into reporting and analytics.
JD Edwards EnterpriseOne:
JD Edwards EnterpriseOne is a comprehensive ERP solution and a prime choice for companies with complex AP needs that process 10,000+ monthly invoices. However, combining these modules with an AP automation platform can offer additional efficiencies which can result in significant savings for large enterprises.
AP Automation Tools
AP automation tools are specialized software solutions designed to streamline and automate the entire AP process from start to finish. These tools are often highly customizable and can integrate seamlessly with existing accounting systems and ERPs to provide better visibility, eliminate redundancy, and maximize efficiency. By automating the full AP workflow, these tools offer a streamlined, error-free approach to managing vendor invoices, approvals, payments, and vendor relationships.
Considerations for Finding the Best AP Solution for Your Business
Choosing the right AP software solution is a critical decision that can have a major impact on your business’s financial operations and ability to scale back-office processes over time. Getting it right the first time can save you time, frustration, and money, and prevent the need to switch to a new solution in the future.
To ensure you make the best choice, here are some key considerations:
1. True Bi-Directional Syncing
It’s important for your AP solution to sync data with your ERP or accounting system in real time. Two-way syncing, also known as bi-directional syncing, eliminates the need for manual data entry and reduces the risk of errors. Without it, data can become siloed and inconsistent, leading to costly mistakes like duplicate payments. Bidirectional syncing enhances accuracy, saves time, and maintains data consistency. However, not all tools have true bi-directional syncing between the ERP and the AP automation tool. It’s important that updates in either platform be reflected in both places in near real-time. Bi-directional syncing often works best with an API-based integration, as opposed to a file-based integration reliant on exporting/importing files.
2. Accurate Invoice Capture
Your AP automation solution should guarantee accurate invoice capture. Optical Character Recognition (OCR) technology is commonly used to automatically extract data from invoices, but it’s only about 60% accurate on its own. What sets some solutions apart is an additional layer of human review. For example, MineralTree uses OCR technology combined with human review to achieve up to 99.5% accuracy in invoice capture. This two-layer approach helps catch potential errors and ensures fast and accurate invoice processing.
3. Easy Invoice Approval Process
AP solutions should make the invoice approval process as seamless as possible. Look for a solution that can route invoices for approval based on predefined rules and hierarchies, like sorting by department, amount, or vendor. Invoices should be convenient for reviewers to review and approve, ideally from within their email inbox.
Without an easy invoice approval process, vendor relationships may be in jeopardy. More than half (52.3%) of vendors feel that AP teams don’t respond to payment-related inquiries promptly, according to MineralTree’s State of AP Report. An easy, automated invoice approval process can support faster payments and maintain good vendor relationships.
4. Easy to Scale
As your business grows, so should your AP software solution. Cloud-based AP solutions are ideal because they can easily scale to meet the changing needs of your business, without overpaying for capacity you don’t need. Additionally, you’ll want to find a platform that doesn’t charge extra fees for adding more users or seats. This ensures that your AP teams can collaborate effectively as your organization expands, without incurring significant additional costs.
5. Comprehensive AP Analytics
Real-time AP reporting and analytics are essential for optimizing your AP processes and financial operations. Unlike ERP systems, which only display data after an invoice has been processed, AP automation solutions like MineralTree let you use the data as soon as an invoice is captured, making it much easier to track invoices and accruals.
AP automation tools provide a centralized platform with a dashboard that can display insights into your AP performance. Ultimately, robust analytics capabilities can help you enable better forecasting and decision-making, enabling you to streamline finance processes, save costs, and improve vendor relationships.
6. Offload Vendor Virtual Card Enrollment
Virtual cards are single-use,16-digit credit cards that are pre-loaded with a specific amount of money. They offer businesses a secure and convenient way to make payments, and they can also offer cash-back rebates. However, enrolling vendors and suppliers in virtual card programs can be a time-consuming and tedious process. Look for an AP solution that offers services to enroll vendors in virtual card programs on your behalf, so you can maximize your rebate potential and save time.
7. Multiple Currencies
Cross-border payments create many challenges for AP departments including handling different currencies, maintaining supplier relationships, experiencing unexpected costs, and increased risk of fraud. If your business conducts international transactions, look for an AP solution that can handle multi-currency payments seamlessly. It should be able to simplify currency conversion, sync tax codes from your ERP, and pay vendors in their local currencies, to help you avoid non-compliance and intermediary bank fees.
Case Study: Forge Biologics Chooses an AP Solution to Assist with Explosive Growth
To better understand the transformative impact of an AP automation solution, let’s look at the case of Forge Biologics, a company that supports the development and access to life-changing gene therapies.
As Forge Biologics grew, its manual AP processes struggled to keep up, hindering its supplier relationships. The company made the strategic decision to implement MineralTree. This choice was driven by MineralTree’s flexibility and compatibility with Forge Biologics’ existing QuickBooks software and planned migration to NetSuite.
The partnership has yielded impressive results. MineralTree has significantly improved efficiency, enabling Forge Biologics to pay 90% of invoices electronically, with virtual cards representing over 10% of their total AP spend. This approach has strengthened supplier relationships and generated substantial cash-back rebates, offsetting platform fees and reducing the need to hire additional AP staff.
Choosing the best accounts payable software solution is a crucial step in optimizing your financial operations. Whether you’re a small business or a large enterprise, automating your AP processes can lead to increased efficiency, reduced errors, enhanced supplier relationships, and improved cash flow management.
At MineralTree, our cloud-based, end-to-end AP automation solution is designed to streamline the entire AP process, from invoice capture to payment authorization. We offer the flexibility to integrate seamlessly with your existing systems, whether it’s QuickBooks, NetSuite, or other ERPs. MineralTree can help you triple your current invoice processing volume while reducing your total cost per invoice by up to 80%, helping your AP team scale without adding headcount.
If you’re ready to transform your AP processes and experience the benefits of AP automation, reach out to us for a free demo.
AP Software FAQs
What is an AP automation tool?
An AP automation tool is a specialized software solution designed to streamline and automate the entire accounts payable process within an organization. It encompasses tasks such as invoice handling, approval workflows, payment processing, and vendor management. It enhances efficiency, reduces manual errors, and optimizes cash flow while supporting supplier relationships.
How can I automate accounts payable?
To automate accounts payable, you can implement an AP automation tool or software solution. These tools are designed to streamline the AP process by automating tasks such as invoice capture, approval routing, payment processing, and vendor communication. By integrating with your existing accounting systems or ERPs, AP automation tools eliminate manual data entry and reduce the risk of errors.
How much does AP software cost?
The cost of AP software can vary widely depending on factors such as the complexity of your organization’s AP needs, the specific features and capabilities of the software, and whether you opt for a cloud-based or on-premises solution. Many AP software providers offer pricing models that can include subscription fees, implementation costs, and ongoing support fees. It’s essential to request quotes and compare pricing based on your organization’s needs.
Does QuickBooks have AP automation?
QuickBooks can automate parts of the AP process, but it does not currently provide an end-to-end automated AP workflow. However, Quickbooks and other ERP systems can integrate with specialized AP automation tools like MineralTree to enhance their AP capabilities. MineralTree allows QuickBooks users to automate invoice capture, approval workflows, and payment processing all for improved efficiency and accuracy.