There are several traits that all modern businesses should strive for, with both efficiency and accuracy ranking high. Therefore, increasing and maintaining high efficiency and accuracy is essential for any company that wants to deliver strong growth and expand beyond its current offering, which is possible with AP Automation.
One particular area that can benefit significantly from both these qualities is the accounts payable (AP) process. In the past, accounts payable and managing financial data have been time-consuming and at risk of errors, thanks to a reliance on manual data entry and paper invoices.
However, modern businesses can turn around their accounts payable systems with the implementation of AP automation, which has the potential to revolutionize the entire invoicing process.
Therefore, read this post to learn more about AP Automation, how it works, and its role in accounting. After reading this post, you will better know the proper roles of this automation process and why your business needs it in 2024!
Before we can explore the essential role of AP automation within business, it is crucial to understand precisely what it is. In short, it’s the use of technology for streamlining and automating the processes of handling invoices and the payment of suppliers and vendors.
AP automation solutions can generate, capture, transmit, and process digital invoices without significant human input. This naturally carries some major benefits for your finance team, as well as helping to modernize businesses to keep up with the competition in the increasingly globalized market.
By now, you understand the primary objective of AP Automation. However, how does it work? Moreover, how do you introduce this automation to your business’s accounting process?
AP Automation tasks place over five steps, which are:
The first step of AP automation deals with automatically recording all your invoices. Here, you use the Optical Character Recognition (OCR) technology.
This technology automatically scans all your invoices (paper) and creates a digital copy. Moreover, it also supports e-invoicing, where it can record digital invoices automatically.
Since transactions are a two-way process, both the buyer and the seller will have purchase and sale receipts, respectively.
Therefore, if you get an invoice for purchasing something from another company, your AP automation tool will automatically detect whether you received the products.
As such, if your purchase invoice doesn’t match the products you received stored in your inventory warehouse, it will automatically flag the invoice and alert you.
After your APA tool approves the invoice, the respective departments will receive the digital invoices.
For example, if you bought raw materials for production, the invoice details will be sent to your supply manager. However, if you get an invoice for cleaning services, it will be sent to their respective administrators. Moreover, they will have to approve the invoice from their end (manually).
After your invoices get manual approval, your APA software will begin the payment process. Therefore, all your payments are rightfully approved and processed automatically. Overall, this enhances your cash flow management.
Finally, after the APA software completes the payment, it will cross-check the payment status with your business’s bank account statements. This step is carried out to ensure that the payments are thriving and there are no accounting errors.
One of the most significant benefits any business implementing AP automation can see is an overall error reduction and improved invoicing accuracy.
As the automation software handles invoices automatically, the need for manual data entry is primarily eliminated. In addition, the inherent risk of human error is also negated.
Therefore, cutting out manual data entry from the invoicing process reduces the chances of discrepancies sneaking into financial records. Moreover, it reduces the effect of more significant problems that mistakes can cause.
Moreover, accurate and reliable digital invoices make it more likely for payments to be made promptly and on time. This effect is an immediate positive for any business’s balance sheet.
Reducing manual data entry isn’t the only benefit of using AP automation. AP automation software is often configured to seamlessly integrate with other backend systems. This includes processes like customer relationship management (CRM) and enterprise resource planning (ERP) software.
This creates a more efficient data flow between a business’s systems, ensuring no siloing of critical financial data.
All in all, this adds up to more robust cash flow management within the company. Without costly payment delays and with greater oversight of invoicing data, stakeholders can maintain a more accurate overview of the business finances.
Therefore, APA can lead to future investment back into the team and a lower risk of adverse financial surprises.
The use of AP automation is essential for any business that wants to grow and succeed in the modern business world.
Solid financial management is one of the most critical pillars of future business growth. This statement is true because it has the potential to make or break a company’s plans.
Without the support of AP automation software, a business risks falling behind its competition and being left in the past.
Moreover, the increasing digitalization of the modern world makes one thing clear. Any companies that fail to embrace digital solutions to support their team and improve their operations may face further roadblocks.
Therefore, implementing an AP automation solution is something serious businesses must recognize in the current business landscape. AP automation can potentially improve a company’s outlook by reducing the strain on your finance team and improving the entire invoicing process.
Thank you for reading this post! Please comment below if you wish to learn more about AP Automation!
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A self-proclaimed Swiftian, Instagram-holic, and blogger, Subhasree eats, breathes, and sleeps pop culture. When she is not imagining dates with Iron Man on Stark Tower (yes, she has the biggest crush on RDJ, which she won’t admit), she can be seen tweeting about the latest trends. Always the first one to break viral news, Subhasree is addicted to social media, and leaves out no opportunity of blogging about the same. She is our go-to source for the latest algorithm updates and our resident editor.
