As the gatekeeper for outgoing cash flows, Accounts Payable teams are responsible for honoring a business’s financial commitments and paying bills on time. On the balance sheet, Accounts Payable is classified as a liability because it refers to the payments you owe but haven’t paid yet. Yet, the hidden “liability” may be the manual processes dragging down already stretched AP teams.
Most accounting teams still rely on legacy systems to complete manual processes, often resulting in late payments that raise financial risks by consuming resources and hampering growth.
As businesses seek to accelerate invoice processing and payment cycles, AP automation has evolved to boost efficiency and achieve faster, more transparent financial workflows with the help of artificial intelligence and machine learning.
Are you ready to turn your AP challenges into strategic advantages? Dive into this guide to discover the ins and outs of custom AP automation solutions.
Accounts Payable automation streamlines your accounts payables processes, converting manual tasks such as data capture, invoice validation and matching, and payment approvals into automated, efficient digital processes.
Efficiency isn’t just a goal – it’s the standard.
Not only does AP automation improve accuracy and transparency while accelerating processing, but it also reduces the tedious and time-consuming work of validating invoices, managing vendors, and completing payments on time. It allows companies to be proactive in dealing with business challenges and changing market conditions.
You need to pay your bills on time to maintain strong relationships with your vendors, but you also need to manage cash efficiently to have sufficient working capital. It’s a delicate balancing act, made all the more difficult when using inefficient AP processes.
Here are some of the key challenges in manual AP processing:
Besides adding to the workload, these challenges can lead to missing payment deadlines, eliminate eligibility for early payment discounts, and strain relationships with partners. AP staff regularly report working longer hours and facing burnout from increasing invoice volumes.
How do you solve these problems? AP automation.
Accounts Payable process automation translates operational efficiency into time and cost savings. Automation strategies can reduce costs by up to 90%, improve approval times by 89%, and eliminate 70% of vendor queries.
Let’s explore the key benefits.
AP departments get pulled into different directions – processing incoming invoices, resolving vendor queries, handling exceptions, routing invoices for approval, preparing reports, coding invoices, all while trying to stay compliant with applicable policies and regulations. With automation, your AP staff can double their productivity.
AP automation produces faster invoice processing and exception handling. The best in class automated invoice management system supports 90% touchless invoice processing, while invoices with exceptions get routed for manual review before getting paid. Vendor invoices go through the process automatically, creating a more efficient way to deal with a high volume of invoices.
Reducing manual tasks does more than just streamline processes – it helps you maximize resources.
Top performing enterprises tend to need fewer AP employees than bottom performers. The difference? Leveraging technology, implementing the right AP automation processes, and investing in continuous improvement.
Streamlining workflows allow companies to be more efficient, scaling invoice volume while requiring fewer people to handle manual tasks. In turn, enterprises can refocus employees on higher-level tasks to handle higher volumes without having to add additional staff.
Expediting Accounts Payable invoice processing via smart automation lowers your overhead costs and generates significant savings. That savings compounds with companies processing thousands of invoices annually.
Vendors may offer early payment discounts to accelerate payments. Consider it a win-win when vendors can get paid more quickly and businesses can reduce their costs of goods and services. Automated payment processing provides the control and visibility to ensure on-time payments. Organizations can also utilize the visibility that comes with an automation solution to highlight bottlenecks in the payment process, and remove penalties associated with late payments from suppliers.
Payment fraud is more common than you might think – the avenues for financial deception have multiplied, making businesses more vulnerable to fraud and financial loss. Implementing robust financial controls and alerts reduces financial risks and safeguards your company’s assets and reputation.
Accounts Payable automation detects fraudulent activities by continuously monitoring for signs of suspicious activity, such as excessive payments or irregularities. To ensure accuracy, invoice automation matches invoices with purchase orders and goods receipt notes. Companies can confirm that they are getting billed for the right amount and receive what’s been promised.
AP automation prevents unintentional or fraudulent activity like:
By setting up secure vendor portals, AP automation can verify the authenticity of payment requests. Automated workflows also create robust audit trails, eliminating unauthorized approvals or invoice tampering to create greater accountability.
In addition to external risks, financial risks also come from an overworked AP team painstakingly keying in information. Digitizing invoices, enabling data enrichment and touchless invoice processing prevents data entry errors, which results in lower exception rates and faster invoice processing. By improving invoice matching accuracy, you reduce time-consuming manual reconciliation, missed payments, and late fees or penalties.
As invoice volume continues to increase, AP teams are working longer hours. Most AP teams spend time and resources on automatable chores such as entering invoice data, chasing down approvers, and reconciling payments. These tasks cause frustration and burnout.
With more employees seeking a healthy work-life balance, companies are under pressure to improve working conditions. Automation relieves much of the stress for AP staff and lets them focus on the rewarding elements of work and strategic priorities that add more value. It is consistently highlighted in customer testimonials that automation creates happier AP teams.
Automating Accounts Payable also creates 100% visibility for greater transparency. AP data is centralized to provide a single source of truth with data available to any authorized user. A secure, intelligent archive supports enhanced compliance and accountability.
In addition to enabling regulatory compliance, AP process automation ensures compliance with your spending and payment policies. For example, automated workflows enforce company policies on spending limits and approved vendors before payments are made.
Complete audit trails on invoice routings, approvals, exceptions, and payments make it easy to track down bottlenecks in the system and see the status of any invoice at any time. Real-time reporting also provides insights into your efficiency.
Working remotely has become a new normal for companies, although it presents additional challenges for AP teams, especially if you rely on paper invoices. AP automation makes it easy for authorized employees to securely access information across different geographies and time zones.
Paperless AP departments also have another advantage – less paper translates to a lower carbon footprint. Reducing paper consumption from paper invoices and manual processing helps companies meet sustainability goals. Electronic payments also eliminate costs of check writing and postage – not to mention the time to print, address, and prepare them.
Accounts Payable teams lay the groundwork for productive vendor relationships by honoring financial commitments and building trust. By digitizing and optimizing Procure-to-Pay processes, Accounts Payable software speeds up invoice processing and payment, improving vendor cash flow and the working relationship.
Limiting interaction with vendors to a secure channel makes it easier to document all vendor communication, reduces the chances of receiving duplicate invoices, increases visibility into invoice status, and lowers fraud risk. Vendors can upload invoices, check invoice status, and send inquiries through this portal. Businesses that implement an automation solution can reduce vendor queries by 70%.
In theory, AP teams are sitting on a mountain of data, but without organization and accessibility, it’s just a pile of numbers.
Many businesses find that automation saves so much time that they finally have the time to step back and look at the bigger picture. With everything digitized and centralized, you can perform data analytics, review key business metrics, manage reporting, and uncover trends. Not only can advanced analytics inform data-driven decisions, but it also clearly illustrates the profound impact automation has on cost efficiency and cash management.
The typical Accounts Payable cycle begins with invoice receipt and data capture, followed by coding, matching, approval, payment, as well as reporting and analytics. These accounts payable processes are ripe for automation, offering both efficiency and accuracy in return.
Invoice processing begins when the company receives a vendor invoice, either in paper or electronic formats. Data extraction using Smart Data Capture software reduces the chance of manual entry errors. Vendor portals also simplify information exchange.
At this stage, Accounts Payable software checks for duplicate invoices or inconsistent data to minimize errors and flag unusual transactions. Built-in fraud monitoring and detection analyzes invoice information – the amount, vendor, items purchased, and other data – to find anomalies or inconsistencies, such as ghost vendors or unusual amounts and payment frequencies.
The power of invoice automation lies in its smart matching and validation features. Matching identifies discrepancies, duplicates, errors, and even inconsistencies, like when an order is invoiced as separate smaller units (i.e. 12 bottles per box instead of one box). The system verifies two main types of invoices:
The power of the matching engine has been transformed with the application of machine learning. Utilizing millions of real data from Industry, Operations, Organizations, and Suppliers, the AutoML Machine Learning engine ‘learns’ and improves based on 250+ match ‘patterns’ and applies this automation to Smart Matching models, including tolerance, aggregation, and confidence match criteria. In addition, the coding and routing of invoices are also optimized by AutoML based on continuous learned patterns.
Machine Learning (ML) is a game-changer in automating both PO and Non-PO invoicing, with full transparency and auditability. Manual invoice processing can cost $16 per invoice, whereas high automation that is driven by AutoML reduces processing costs by over 90%
Take SoftCo’s Smart Matching Challenge to test the speed and accuracy of invoice automation on your invoices.
This efficiency extends to handling surcharges and exceptions. Automation speeds up the process of dealing with unexpected charges and exception handling.
Since the COVID-19 pandemic, AP teams have been grappling with the rise of unanticipated fees and surcharges. Invoices present these add-on fees, such as fuel surcharges, signature-on delivery fees and peak season shipping charges, in different formats and ways. Some fees may be split between multiple invoices, making it harder for AP departments to match invoices to the correct purchase order.
Automated AP makes it easier to manage unexpected charges by learning from previous transactions. You can customize rules to determine the tolerance level for variances between the PO and invoice amount. The software also suggests categories for recording surcharges based on previous transactions. Typically, the process of exception handling can be slow with multiple screens and clicks. Strong AP automation solutions dramatically increase exception handling and enhance usability by facilitating queries in just six clicks.
Assigning invoices to the correct account codes and routing invoices for approval occurs within automated AP systems with limited manual intervention.
With Smart Coding driven by Automated Machine Learning, AP software learns from previous transactions and identifies patterns to assign applicable account codes to invoices. This intelligence eliminates reliance on manual review or domain experts for routine transactions, and dramatically speeds up coding and invoice processing in Accounts Payable. When invoices are routed for approval, industry-leading AP automation solutions facilitate on-the-go approvals through email and mobile functionality.
Similarly, AutoML-driven Smart Routing routes invoices from one approver to the next. Instead of manually chasing down multiple approvers, the software facilitates cloud-accessible workflows for faster processing. Top-of-the line AP automation software uses AutoML to continuously learn and improve coding and routing suggestions.
For example, when an invoice is routed for manual approval by a member of the AP team, the AutoML technology learns the path, and member, that the invoice went through for approval. When a similar invoice that previously would have been made an exception enters the system again, Smart Coding automatically routes and approves, leading to significant time and cost savings.
Automated Accounts Payable vendor workflows make it easier to onboard, evaluate, and communicate with vendors while ensuring compliance with regulations like the Anti-Money Laundering Act. An intuitive portal supports procurement optimization, efficient invoice processing, contract management, spend management and faster approvals and payments. Industry leading AP solutions allow users to work directly with preferred vendors; optimizing payments, reducing costs and eliminating administration. Cloud-based solutions ensure vendors have full online visibility of all orders, invoices and queries.
ERP systems were designed to help manage supply chain, HR, accounting and finance processes, though modern ERP systems don’t support critical Accounts Payable functions like invoice matching, smart coding and contract compliance.
Industry-leading AP Automation solutions seamlessly integrate with existing ERP solutions by supporting secure data exchange through web services or data files in any format, such as XML, Text or JSON exchange, over sFTP or a VPN connection. By integrating with and complementing existing ERP systems, AP automation improves compliance, invoice matching, and data analysis while supporting accounting and finance.
Following invoice validation and approval, AP automation optimizes payments by delivering access to more payment options, mitigating fraud risks, reducing costs, and offering complete visibility into the status of each payment.
After integration with your bank and ERP, successful automation handles payments effortlessly through a single workflow for all payment types, ensuring a smooth and secure transaction process. When customers deposit funds before authorization, best-in-class payment platforms take on liability for payment completion. As a result, you avoid sharing sensitive bank details, which provides an additional layer of security against fraudulent activities. Payments are made fully encrypted, reducing the chance of security breaches.
Automated payment processing isn’t just about completing transactions anymore. Modern solutions can offer virtual cards with rebates and integrate with payment gateways to enable seamless payment of approved invoices.
No cycle is complete without a feedback loop to evaluate progress and identify areas for improvement. Accumulated data provides vital insights to improve forecasting and proactive decision-making.
With centralized data and seamless integration, AP automation software enables faster year-end close and strategic reports. The AP automation solution can generate reports based on various criteria like vendor type, expense category, or a particular time frame. You can also access reports on KPIs and AP performance metrics like processing time per invoice, days payable outstanding, processing time per invoice, spend per vendor, vendor performance, and total early payment discounts captured.
Accounts Payable automation puts an end to inefficient and time-consuming manual processes by using a combination of advanced technologies. It delivers powerful results with the help of these technologies.
Artificial intelligence is revolutionizing Accounts Payable – its practical applications reduce manual labor in finance processes and boost efficiency. Let’s start with a brief overview of the related technologies.
Machine Learning (ML) is a game-changer in automating both PO and Non-PO invoicing, with full transparency and auditability. Manual invoice processing cost $16 per invoice, whereas high automation driven by AutoML reduces processing costs by over 90%. Utilizing millions of real data from Industry, Operations, Organizations, and Suppliers, the AutoML Machine Learning engine ‘learns’ and improves based on 250+ match ‘patterns’ and applies this automation to Smart Matching models, including tolerance, aggregation, and confidence match criteria. In addition, the coding and routing of invoices are also optimized by AutoML based on continuous learned patterns.
Exceptions are flagged for review, and the results provide more insight to the system. As Accounts Payable teams increase interactions with the software by correcting errors, modifying accounting or project codes or changing routing workflows, the software becomes better at providing accurate information.
Superior automation solutions leverage the power of AutoML to learn from feedback instantaneously and support 90% touchless processing. The system provides a confidence level on invoice matching, and AP teams can fine tune the confidence threshold they are comfortable sending through without human intervention.
AI is a full-fledged partner for the AP team and not a replacement. Anti-Fraud technology applies industry-best practices (DMARC/DKIM/SPF) to flag potential fraud such as phishing and tailors the system to the unique needs of each Accounts Payable team with enhanced security, such as Two-Factor Authentication (2FA) and Single Sign-On (SSO).
Invoices may arrive electronically via a standardized electronic data interchange (EDI) or e-invoicing platform where vendors and customers securely exchange information. Vendor portals within AP automation solutions also supply a flexible e-invoicing platform to share data. eInvoicing removes all of the manual steps associated with standard invoices, where users may create a PDF, email it, key in data and send to an automation system, eInvoices generate an invoice and send it directly through to the AP Automation solution for Data Capture.
Smart Data Capture is often one of the first technologies employed on the road to automation.
Smart Data Capture extracts information from an image or a file and converts it into a digital format that can populate a database or automated AP software. It can handle multiple languages and types of inputs, like paper, email, or electronic. Invoice scanning and extraction eliminates manual data entry and reduces potential errors.
An Application Programming Interface (API) bridges communication between software systems. AP automation solutions use API integrations to exchange real-time information with other business apps like your ERP system, accounting system, or payment gateway. The SmartConnect platform seamlessly integrates with existing ERP systems by securely exchanging data in any format, such as XML, Text or JSON via RESTful web services of data file exchange over sFTP. SoftCo SmartConnect provides seamless certified integrations with multiple ERPs, including Microsoft, SAP, Sage and Infor.
Integrated systems maintain up-to-date information, and businesses can automate more complex workflows. As businesses evolve and scale, APIs can also easily integrate with new tools.
At the end of the day, AI-enhanced automation benefits the people in an organization by empowering them with better information, support, and even more time. The primary beneficiaries include:
Historically, AP teams have been forced to wade knee-deep through the nitty gritty details of invoice matching. With AP automation software, these teams enjoy:
The IT team supports the company’s technological infrastructure and relies on AP automation’s:
CFOs or Controllers, who are responsible for the overall financial accuracy and compliance of an organization, stand to gain:
For the executive team, accounts payable automation helps maintain cash flows, improves forecasts, and ultimately boosts the organization’s bottom line. Benefits include:
To stay competitive, businesses often update their supply chains with new vendors globally as products and services evolve and scale. International purchases may be subject to foreign and domestic tax laws and regulations, internal cost control measures, and shifting approval processes. The information, format, and details on invoices are constantly subject to change. Tackling these challenges requires a dynamic system, though many industries have specific challenges.
AP automation overcomes unique challenges in each industry through customized solutions.
High invoice volume across multiple locations, receiving invoices in multiple languages and currencies, and dealing with surcharges are some of the biggest AP issues for retailers.
AP automation allows large retail companies to make timely vendor payments to ensure well-stocked shelves while maintaining proper costing of inventories of Goods for Resale and Goods Not for Resale.
AP departments in the aviation industry struggle with allocating costs while managing high volumes of transactions coming from global networks of customers and vendors like air navigation service providers, airports, and other vendors. AP automation uses intelligent technologies to validate direct operating costs and allocate them to determine the true cost of goods and services and improve decision-making.
Complex supplier networks, multiple ordering systems, unique spend categories, and a high volume of invoices from various channels are among the most pressing struggles for manufacturing companies. Customizable AP automation solutions allow manufacturing companies to improve scalability by solving issues in the payables department. Introducing smart technologies results in automated inventory management, stronger vendor relationships, faster invoice payments, and better exception handling.
Companies operating in the renewable energy sector manage business entities across multiple territories and tax jurisdictions. AP teams have to manage expenses in multiple currencies and allocate costs by location. Implementing AP automation software improves spend management by ensuring compliance with policies to work only with pre-approved vendors, increasing visibility into all expenses, and reducing time spent on month-end close.
Seasonal demand, perishable inventory, invoices from various locations, and multiple approvers are key challenges for the food and beverage industry. Automated AP streamlines invoice approvals, accelerates invoice routing, improves inventory management, and processes a high volume of transactions during peak seasons.
Strict regulations for financial institutions bog down AP departments in the financial services industry. AP automation enables better compliance with AML and SOX guidelines, along with GDPR for secure data handling. Storing information in a secure, centralized location also improves data management, allowing financial institutions to retain records within required periods and access records when needed.
Construction companies run into multiple AP challenges, such as handling payment variability, ensuring compliance with regulations and internal policies, and enhancing cash flow management. AP automation for the construction industry focuses on areas like compliance, accurate accruals, better control over contract-based spending, and a faster financial close.
Transaction volume, complex operational procedures, and internal policies add to the complexity of managing payables in the transport & logistics company. AP automation solutions for this industry focus on using pre-approved spending to track costs in real-time, enhancing budgeting capabilities, improving cash flow management, and allowing management to understand cost patterns and trends.
We get it – change isn’t always easy, but you’ll be able to spot signs that it’s time to move from a manual to an automated payables solution.
Organizations that continue to employ manual Accounts Payable processes are unable to scale operations without facing a choice of incurring significant processing costs, or implementing an AP automation solution. Fully manual processes can cost up to $16 to process, whilst fully automated solutions can bring the costs down by 89% to $1.77.
Manual, paper-based invoice approvals are not scalable. When invoice volumes double, your existing AP team will struggle to keep up. A drinks distributor with international offices decided to automate AP processes when invoice transactions reached 60,000 a year. Through automation, the company achieved 100% visibility, increased compliance, and reduced invoice resolution time by 80%, resulting in better vendor relationships.
Many companies today have some level of automation, for example through using OCR, but many still rely on spreadsheets and paper communication to complete the accounts payable process.
A US company with a spreadsheet and email-based AP process faced errors in invoice, coding, and approvals. Routine accounting was taking too long to complete, and the company lacked invoice visibility. With automation, the company saved hundreds of employee hours per year, improved cash flows, and shortened the month-end and year-end close for the business.
Introducing automation as part of a system upgrade creates an opportunity to modernize and streamline existing processes. Cost-saving initiatives of the Finnish Government in 2016 focused on the entire procure-to-pay process. Through automation in accounts payable, the government reduced invoice processing costs by 80%.
Most organizations take four days to schedule payments from the date of invoice receipt. Bottom performers take seven days. Anything longer than this indicates extreme inefficiencies in the AP process.
An international distributor of building materials processed over 300,000 invoices a year. It took about 40 days to pay a vendor invoice due to a manual, paper-based process. Introducing automation allowed the company to reduce labor costs, reduce approval time by 75%, achieved straight-through processing rates of 75%, and freed up the capacity of the AP department by 50%. With significant cost savings, the company achieved ROI in year one.
An audit might reveal accounting and internal control issues that have substantial financial consequences. An apparel retailer reported a £3.9 million error as a result of incorrect inventory accounting from an overly complicated cost allocation process. Implementing an AP automation solution standardized processes to create a sustainable and effective control environment for the long term.
A toy company struggled with managing a growing supplier base following significant organic growth and business acquisitions. Routing invoices for manual approval across multiple locations resulted in payment delays. Inefficient manual processes resulted in higher costs and made it almost impossible to work remotely. Through automation, the business reduced invoice approval time by 30% in the first three months.
If you’re looking to get executive buy-in for AP automation, you’ll need a solid game plan.
As with all types of major transformations, you might face some hurdles and resistance to change.
That’s where a detailed plan showing potential savings and a timeline for seeing a return on the investment can help sway opinions. Here are some tips to persuade business leaders to support automation initiatives.
Start by laying out the current costs, especially those associated with traditional, manual AP methods.
This should cover everything from direct costs like salaries and equipment upkeep to indirect ones like the financial hits from mistakes or missed chances for early payment discounts. Loop in your IT department to discuss gaps in infrastructure and security.
With a clear picture of your current status, it’s easier to spotlight the savings AP automation can bring.
Identify technology requirements for automation and how long it will take to roll out the new technology. Discussing solutions with providers can help you determine estimated timelines.
Before taking the leap, it’s a good idea to double-check that the AP automation solution you’re considering comes with solid support and a realistic setup timeline – best in class solutions deliver integration within 12 weeks.
Consider using the SoftCo ROI calculator to determine the tangible benefits of an investment in AP automation. A projected ROI can help to gauge the financial impact of this transition and back up your proposal.
Think about it: less manual work could mean you need fewer hands on deck, or it could free up your team to tackle bigger, more important tasks. Faster invoice approvals also mean you’re more likely to snag those early payment discounts.
Every project needs a standard for measuring success. AP automation can be evaluated using both qualitative and non-qualitative indicators. But the most common ways to measure success include the following:
Matching delivers the greatest savings for the AP team. It is the most important financial success factor of an AP automation project. If an invoice goes ‘straight through’ the AP process, with no need for human intervention, it provides over $10 savings per invoice versus manual processing. That’s equivalent to $500,000 in savings for an organization handling 50,000 invoices annually.
However, many suppliers provide exaggerated claims of ‘straight through’ rates. Reality only bites after the project is live. This is why leading analyst Gartner recommends an ‘in-context’ live demo using a customer’s own critical cases to assess the real automation, up front. By presenting the supplier with a batch of challenging invoices with little notice and running them though the AP solution, the customer can distinguish between the claims and the reality!
SoftCo has the best Matching engine in the market. With only 2 hours’ notice the SoftCo Smart Matching engine achieves 70% straight through processing. This rate increases to over 90% in a full implementation including our new Machine Learning technology, AutoML, which brings automation to another level.
AP automation solves finance challenges with faster invoice and payment processing, improved cost control, and reduced risks, all while overcoming staffing shortages.
Finding the right Accounts Payable software allows companies to scale and thrive while achieving operational efficiency. By transitioning to AP automation, businesses can mitigate challenges, realize significant cost savings, foster better vendor relationships, and redirect employee focus to more strategic endeavors.
SoftCo has proven experience in automating financial processes with one million users worldwide. SoftCo’s Smart Matching technology addresses the most complex scenarios, delivering an industry-leading 90% Straight-Through processing. With this comprehensive platform, organizations can increase productivity, reduce costs, and meet compliance obligations.
By automating Procure-to-Pay, Accounts Payable, payments, vendor management, and contract management, SoftCo streamlines operations, enabling you to grow your business. Explore our resources to learn about shifting to a smarter accounts payable process.
Request a demo and see how SoftCo can transform your accounts payable workflows to maximize efficiency and cost savings.