Accounts payable teams have an opportunity to move their entire company forward.
Accounts payable plays a crucial role in business operations in ways many companies are only just starting to realize. We all know that this job function is what keep the lights on in your office, but it also has a direct impact on cash flow management, security against fraud, and vendor relationships across the company.
However, whether the impact accounts payable is making on these key functions is positive or negative depends entirely on the way an AP team goes about their work.
The sad reality is that most accounts payable teams barely even have time to think about things like cash flow optimization and fraud prevention. The reason? Manual accounts payable processes will limit accounts payable teams to accomplishing little more than getting the bills paid; sometimes on time, and sometimes late.
Across the entire life of an invoice, from receipt to payment, there are simply too many points within manual accounts payable processes that require AP staff to intervene. Each of these points of manual intervention can drag out the process of paying an invoice for weeks, when it actually doesn’t need to take longer than a day or two. And every intervention opens the door for errors that will cost additional time to iron out during month-end close.
It shouldn’t be this way for AP teams, and it doesn’t have to be. Disruptive technology has enabled accounting teams to eliminate a lot of unnecessary manual intervention that teams have been allowing to drag down operational efficiency.
While automating as many steps as possible should be the goal for teams seeking optimal efficiency, automating these three steps in the accounts payable process provides the most far-reaching benefits.
1. Invoice Approvals / Matching
Invoices arrive via email, regular mail, fax or a vendor website portal and needed to either be approved by the department heads responsible for them, or matched to a corresponding purchase order.
The process of collecting approvals for many accounting teams today involves juggling dozens of email threads and trips around the office to hand off and follow up on outstanding approvals. While a process like this can get the job done (most of the time), it’s incredibly difficult to keep track of. If a vendor calls to check in on the status of an invoice, sometimes simply locating where the invoice is in the approval process can take days.
If your company uses purchase orders to bypass the need for collecting approvals, you still have your work cut out for you. Reviewing every invoice in comparison to its corresponding purchase order, going line item by line items, is also a very manual and tedious process.
Automating the invoice approval and PO matching process eliminates the need for human intervention at this step of the process, unless it is necessary. Invoices can be automatically routed to the appropriate approver, with automated follow-ups that remind them of upcoming deadlines. Likewise, automated purchase order matching using algorithms to rapidly compare invoices to their corresponding POs, and flag mismatches for further review.
2. Invoice data entry
Then, there’s the monumental task of getting all invoice data coded accurately into your accounting system. Manually typing in data not only requires a lot of time spent on work that is less than thrilling for you staff, but it also opens the door for errors. These errors may or may not escape unnoticed into the books until month-end close, and according to 1-10-100 Rule, the cost of every error is 10x greater to remediate than it is to prevent. Even a small number of mistakes that is entirely reasonable for any individual person to make can be creating extravagant costs that are easily avoidable.
By automating the invoice data entry process, there is no longer a time-cost that comes with getting all of the invoice data coded into your accounting system. In fact, you don’t even need to upload an excel spreadsheet. Solutions like MineralTree integrate directly with your ERP, and all data that gets captured automatically syncs over to your accounting system. Additionally, best-in-class automation tools are coding invoice data at 99.5% accuracy, drastically cutting back the number of errors that are holding teams up in their month-end close.
3 . Payment Execution
Once the payment is authorized, the invoice makes its way to the person who will cut the check or execute the online bank payment. This person needs to have clear visibility into all payment due dates, including all eligible early-pay discount deadlines. With hundreds of invoices being processed on a monthly basis at many companies, keeping track of all of these different deadlines is a challenge. But if they all are not closely monitored, it’s easy to disappoint your vendors with late payments and deprive your short-term cash flow of early-pay discounts
In spite of the well-documented associated fraud risks, paper checks remain the primary way that businesses choose to pay vendors. But paying by check is not only risky, it’s also costly. Aberdeen Group reports that paying by paper check costs businesses $7.78 per check.
By automating the execution of payments, approved payments can be scheduled and automatically sent out on the proper date. AP Automation also provides one central location to choose any payment option, making it much simpler to pay electronically and cut the costs and risks that come with every payment. Additionally, a two-way sync with your ERP and automation solution allows early-pay discount deadlines entered into your accounting system to appear in your AP automation solution as you are scheduling payments.
Which Steps Should I Automate?
While investing in “point solutions” that address individual components of the AP process can help you address the inefficiencies of one step, the best way to automate is by taking a holistic approach.
Automating all of the steps together into one optimized workflow provides improved efficiency at each step, but also provides the benefits that come with one cohesive AP process, including:
- Centralization of all accounts payable operations
- Automatic preservation of all approval and payment details
- Simplified transitions between each step of accounts payable
MineralTree is an AP Automation solution that takes an end-to-end approach to automating accounts payable. Businesses that invest in MineralTree Invoice-to-Pay see a 60% increase in efficiency, and also drastically reduce their exposure to fraud by building simple, repeatable, and scalable payment controls into their every vendor payment processes.
To learn more about what your end-to-end AP process can look like with automation, Contact MineralTree for a personalized demo.