As a small business owner, you might not be thinking a ton about investing in an AP automation platform just yet.
After all, the job for many companies just starting out is to keep the lights on. While doing this often requires a degree of financial savviness or budgeting ability, many small businesses might not think they can justify the cost of AP automation software.
Businesses of all sizes, though, can potentially benefit from implementing an AP automation platform.
For businesses that deal with a large enough number of invoices each month, turning to automation rather than just doing accounts payable work by hand can save time and money.
Today, we’ll look at some of the benefits and what businesses need to get started.
AP Automation Basics
Accounts payable is essentially a form of credit for businesses, allowing them to owe money to their vendors and suppliers on a short-term basis.
Businesses go through the AP process to clear this debt, which can help with cash flow. And once upon a time, this work was generally done by hand or manually through computerized accounting systems.
Over the past decade or so, business has begun to be transformed by AP automation. Now, from the moment a vendor sends an invoice to when payment is remitted and beyond, a company can use a SaaS-based AP automation platform to help with every stage of the process.
How AP Automation Works
When an invoice arrives at a company, that is ideally just the first step of the AP process. The invoice has to be input into the system. Approvals have to be gathered before payment can be made. Then, ideally, there should be some kind of reconciliation to make sure everything went off without a hitch.
AP automation platforms can handle every one of these steps. While some human work will likely be needed at different points, AP automation reduces a lot of the mundane busywork.
Who Uses AP Automation
AP automation is for any business, or owner/operator, who wants to significantly shorten the invoice cycle — and has the budget for the software.
Most tools feature custom pricing, but to get a robust system set up you can expect to spend at least a few thousand dollars.
This is why AP automation tends to be used more by mid-sized or enterprise companies that might get hundreds or thousands of invoices every month. Here, AP automation can become extremely valuable. If a company can save 5-10 minutes per invoice it processes with AP automation, that can become a significant amount of time saved over the course of a month for a midsize or large firm.
This isn’t to say that small businesses can never use AP automation. It’s just a matter of having enough invoices to make the software worth it.
Benefits of AP Automation
Needless to say, accounts payable teams can use AP automation platforms to achieve far greater outcomes than they would have in the days where they were confined to paper-based and manual AP practices.
The benefits of AP automation are wide and varied:
- Accuracy: Automating invoice processing reduces costly human errors inherent in manual methods, improving accuracy and efficiency.
- Savings: Automation significantly lowers the cost per processed invoice, leading to tangible financial benefits for businesses struggling with high volumes.
- Efficiency: Automated systems reduce invoice cycle times, ensuring timely payments without violating vendor terms. A recent survey showed that 83% of firms said AP automation could make their processes more streamlined, efficient or accurate.
- Compliance: Automation simplifies audit trails, ensuring correct approval processes and reducing fraud risks, making compliance easier.
- Insight: Automation generates data-rich reports, enabling better analysis of KPIs, cash flow insights, and purchasing trends for improved decision-making.
- Vendor Satisfaction: Automation speeds up processes, allowing businesses to capture early payment discounts and maintain good relationships with vendors.
- Process Standardization: Automation eliminates tedious tasks, improving teamwork and allowing for standardized workflows tailored to industry needs.
5 Key Features of AP Automation Platforms
AP automation platforms are loaded with tools that can help businesses. Here are five key features of some platforms:
Invoice Capture
One of the peskiest parts of doing AP work can be making sure that an invoice gets into an accounting system. It can take weeks for a paper invoice to arrive in the mail. Or, if a vendor prefers to email their invoice in, an AP clerk might still have to watch their inbox like a hawk to make sure it doesn’t slip by or wind up in their spam folder.
AP automation platforms can snag invoices automatically, though, as they come into inboxes. The platforms can even input the invoices and do G/L coding (a general ledger code is a unique identifier attached to every transaction).
Spend Management Insights via AI and Machine Learning
Artificial intelligence is affecting every part of life, from content creation to stock trading. In AP automation, it can help provide spend management insights.
AP automation platforms take advantage of cutting-edge AI and machine learning tools to go through the myriad transactions that accumulate for businesses. Through this, companies can get another way to look at their most valuable vendor relationships. Companies can also gain good internal insights about how their AP staff or different departments are spending, which enables smarter procurement.
Vendor Portals
When companies use AP automation platforms, they make their vendors a partner in the payment process. One reason for this is that platforms are equipped with portals for vendors where they do things like submit invoices, indicate their preferred method of payment and monitor payment status.
These portals can cut down on anxious calls or emails from vendors about payment status, a notorious timewaster for AP departments.
Savvy software users might also analyze user engagement in these portals to better understand their vendor base. It’s a subtle benefit, but vendor portals provide different types of intent data.
Companies might discover a vendor who is barely using the portal, which presents an opportunity for education and, hopefully, boosting a company’s efficiency by getting their vendor using the portal.
Payments
It used to be that companies had to do their invoice processing in one place and then go elsewhere to make payments. Now, however, some AP automation platforms are becoming one-stop shops, where companies can do their processing and their payments.
The payment capabilities of AP automation systems put businesses at less risk of having different balances between different sets of books. Some of the payment platforms even offer rewards.
Fraud Detection
Invoice fraud plagues businesses of all sizes and can be especially devastating for small businesses. AP automation helps reduce this, with the platforms able to recognize signs of duplicate or fraudulent invoices and stop the problem at its source.
How to Start Using AP Automation
It’s easy to get AP automation platforms up and running. Here are three ways to make it happen:
Decide if Your Company is Ready for AP
As we noted earlier, this is generally about deciding if your company has a sufficient number of invoices to make it logical to invest in AP automation. There’s no shame in continuing to do things by hand or sticking with rudimentary accounting software until this day comes. A good AP automation provider can help a company determine if they have enough invoices.
From there, it’s a matter of preparing staff for a transition. The best AP automation platforms are easy to use and have helpful and friendly support staff, though workers might sometimes fear the unknown. Let them know better days are ahead with the help of a good AP platform.
Implement the Platform Easily
AP automation providers use a SaaS-based approach to help companies get platforms implemented fast and seamlessly.
The platforms can easily tie in with existing software, such as ERP systems. Providers can also work with companies however far along they’ve previously gotten in the automation process, which can sometimes be piecemeal.
Before companies know it, they’ll have a cloud-based AP automation platform where intent data will quickly aggregate.
Start Enjoying the Benefits
A company that successfully implements an AP automation platform is likely to enjoy a wide range of benefits.
They’re likely going to be processing invoices far more quickly, which will free their accounting staff up for more sophisticated, analytical work. They could have easier payments or cleaner financial data.
And at the end of the day, this can make the investment in AP automation well worth it.
Author: Graham Womack is a writer. His work as a journalist has appeared in a wide assortment of publications, including the Washington Post, San Francisco Chronicle and Sacramento Bee. Separate this, he has written extensively for corporate clients about the ever-evolving world of B2B SaaS solutions. Email him at thewomack@gmail.com.
