Businesses are continuously seeking for methods to streamline their operations and cut costs in today’s fast-paced digital world. The accounts payable process is one area where many organizations might profit from automation. In this article, we will discuss how to automate accounts payable along with the best AP automation software.
To automate accounts payable, you need to assess your current process, switch to e-invoicing, automate data entry, implement approval workflows, set up payment processing, and monitor and optimize the process. Additionally, setting clear goals, training your team, and continuously improving are essential.
Automation of accounts payable entails employing several best practices to speed up and simplify the payment of suppliers and vendors. The benefits of AP automation are enormous such as minimize the time and resources needed to manage invoices and payments, increase accuracy and compliance, and gain better insight into their cash flow by automating this crucial financial activity.
How to automate accounts payable?
I have dealt with many challenges related to automating accounts payable processes and I’m hereby sharing with you the exact steps that I use and have learned from various personal experience. In addition, you should always aim to follow the latest trends in AP automation to make sure that your processes are always running effectively.
Here are the steps to automate accounts payable:
1- Evaluate your current process
Before initiating any automation project, the first thing to do is to evaluate how the current process is running. That will allow you to pinpoint any bottlenecks such as manual data entry or a lack of visibility into payment status, identify key stakeholders, and remove unnecessary step.
At this stage, you need to play the role of the devil’s advocate by asking about any little detail and question any step whether it is an automated one or human task. This involves understanding how your organization receives, processes, and pays invoices.
At the end of this step, you should have a clear understanding about the baseline of the automation project and come up with clear goals for how to improve the AP process.
2- Create the perfect plan
Once you have assessed how the process is operating, you should come with a plan that will help you break down how to automate accounts payable processes. This plan should include
- The complete vision of the automation process.
- Create flowcharts that will visually represent how each process is being executed.
- Identify key stakeholders and involve them in this transition.
- How you should manage the resistance to change.
- Which systems are available for integration
When finalized, this plan should be shared with the higher management in order to get their buy in and approvals before kicking off the implementation phase.
3- Switch to E-invoicing
Receiving the invoice or payment request from the vendor is the first step in the accounts payable process. This is important to note because an error in invoice processing might cause problems throughout the workflow.
There is no universal way of creating digital invoices and you should cater for any format that is being used by your vendors and make sure that all the information on that invoice can be automatically captured. For example, some vendors still use papers while others will send you an unstructured PDF file containing the payment details.
The first step to agree on with your suppliers and vendors should be the digitization of invoices which means converting paper invoices to digital ones or better directly generate the invoices electronically. This will help you in processing time that you employees need to go through and automate the complete steps.
4- Implement approval workflows
Implementing approval workflows is a crucial step in automating accounts payable. This will allow you to automate the routing of invoices to the appropriate approver for review and approval without any human interference. It also allows you to specific different level of approvals based on several factors such as invoice amount or supplier name.
Remember, your goal is not only to automate the process but also to improve efficiencies by eliminating bottlenecks and delays in the approval cycle. In addition, you should aim for high accuracy of compliance to different rules and regulations which can be automated from greater accuracy.
5- Automate data entry
Manual data entry has proved over the years that is it insufficient and error prone. That is why you must make sure that data entry cycle is automated to save time, reduce errors, and improve efficiency which can lead to decreased delayed payments and other issues.
Usually, organizations use special type of technology that can automatically extract data from the invoices and push them back to your ERP or accounting application without any human touch.
6- Set up payment processing
The process of setting up payment processing, which entails configuring payment mechanisms including ACH, wire transfers, and virtual credit cards as well as payment schedules, must be done once invoices have been accepted.
You can schedule payments to be made automatically using payment processing automation, minimizing the need for manual involvement and lowering the likelihood of mistakes or delays in the processing of payments.
Additionally, this might provide you better insight and control over your accounts payable process and aid in streamlining your cash flow management.
7- Train your team
Before going live with this project, you must ensure that all employees that have actions to take on any AP related process should be trained on the technologies to be used and have clear understanding of the overall process.
Any adjustments to duties and responsibilities that may come from the automation of accounts payable should also be included in training. To help your employees in adjusting to the new digital process, it’s also crucial to offer them ongoing assistance and tools.
Conclusion
The steps to automate accounts payable should be carefully planned for and well executed to increase the chances of successful implementation. My favorite part is indeed seeing the outcome of any automation project being aligned with the initial goals assigned.
