Accounts payable automation (AP automation) is a revolutionary technology that makes accounts payable processes easier and more effective while minimizing resource costs. There’s a good reason the AP automation market is on the rise: it is expected to hit over $8B by 2034, up from its already enormous value of ~$3B.
AP automation uses artificial intelligence (AI) and related technologies to eliminate human input in key accounts payable processes, like invoice approval and payment processing. This mitigates pain points like time management, accuracy issues, limited visibility, and risks related to fraud or regulatory compliance.
Below, we’ll discuss more details about AP automation, how it works, its benefits, and why it’s critical to automate the AP process—along with some suggestions for how.
What is accounts payable automation?
Accounts payable automation is an accounting management approach that streamlines and optimizes processes by automating what would normally be human inputs. Human errors are unavoidable, so removing those variables will increase accuracy and consistency across the board.
While traditional quality control or quality assurance methods add costs or extend processes, AP automation actually reduces overall time spent while also ensuring greater quality—a win-win.
Benefits of accounts payable automation
Accounts payable automation allows businesses to get more out of their invoicing and other financial processes while spending less time and money on them.
The benefits of accounts payable automation include (but are certainly not limited to):
- Increased efficiency and productivity across AP, finance, and other teams
- Reduced errors and increased accuracy from minimized human input
- Faster invoice processing, including notifications in near-real time
- Improved cash flow management for day-to-day funds and projections
- Cost savings from quicker closings, lower resource costs, and fewer errors
- Enhanced security and fraud prevention, including streamlined compliance
- Better vendor relationships and fewer potential conflicts from errors
- Real-time financial reporting and data analytics with custom dashboards
- Seamless integration with existing management and accounting systems
- Improved employee satisfaction with easy-to-navigate user interfaces
- Reduced paper use and waste, eliminating non-essential paper invoices
These are key reasons every business should be automating its AP function.
How accounts payable automation works
In a nutshell, AP automation works like most other automation. It leverages AI and machine learning (ML) technology to recognize patterns in data entry and processing and then replicate them without the need for human input.
However, some specifics of invoice processing automation and other AP tasks make AP automation unique.
Capturing and validating invoice data
AP automation starts with automatic data capture. Intake for invoices and other documents starts with email, scanning, or digital upload. The AP automation tool uses optical character recognition (OCR) or an equivalent feature to extract the key information, removing time-consuming and potentially erroneous human inputs.
Then, the AP automation tool cross-references the data with purchase orders (PO), delivery receipts, or other sources to verify the information. It validates the invoice once it assures vendor information, amounts, and terms are clear.
Any discrepancies are flagged for human review during this process, ensuring that duplicates or overpayments are less likely to occur. This is critical—even among top-performing companies, about 1% of all disbursements are erroneous.
Automating invoice approval processes
Once invoices are validated, automated workflows route them to the appropriate department(s) or individual(s) that need to see them. This eliminates the extra step of a human checking for validation and then pushing out notifications to the team.
Instead, notifications are sent automatically to any/all devices connected to the platform.
In practice, stakeholders have near-instant access to key information on their most handy device—their desktop, laptop, phone, or tablet. They can easily review and approve invoices from these devices on the go.
Scheduling payment and disbursements
Beyond intake, automated AP allows finance teams to schedule payments based on a vendor’s terms, the company’s cash flow policies, and other variables.
This is true for all common payment types. Automated AP can handle ACH transfers, checks, virtual credit cards, and more. These payment options can be pre-set for automatic handling, and the system will trigger payments on agreed-upon due dates. This setup ensures timely, accurate payments without manual data entry.
In addition, real-time status updates are provided to both internal teams and external stakeholders (i.e., vendors) for transparency and accountability.
Recordkeeping and reporting
Payment may close the loop on a given transaction, but it’s far from the end of AP automation functionality. AP automation software also provides a wide range of recordkeeping and analytics functions, starting with secure storage for invoices, approvals, and critical related details. This information is protected per regulatory standards, protected from harm, and optimized for reports.
Real-time financial reporting allows organizations to track their cash flow with granular and dynamic accuracy. It ensures compliance with applicable regulations, such as W-2/1099 governance, segments of the Sarbanes Oxley Act, and more.
How to implement accounts payable automation
Implementing AP automation can be challenging, but careful preparation with the following best practices will help ensure long-term success.
Assess current AP processes and set goals
Before implementing new software, you should assess the performance of your current processes and establish goals for how you’d like AP to function.
An industry-wide survey of AP goals found the following to be most pressing:
- Personal goals: Improvement for individual members of the team:
- Broadening knowledge of AP processes and best practices
- Achieving and maintaining relevant financial certifications
- Developing business management and leadership skills
- Networking and participating in societies, conferences, etc.
- Team-wide goals: Improvement through collaboration and synergy:
- Improving efficiency and performance outcomes (i.e., accuracy)
- Reducing costs across invoice processing and management
- Minimizing risks associated with fraud in the AP function
Even goals that automation doesn’t directly touch (i.e., networking) are addressed indirectly, as all team members will have more time and resources to allocate.
Involve key stakeholders
Any individuals who will interface with your new AP automation software should be involved in the implementation process. That starts with gauging their interests, needs, and concerns and engaging them throughout the selection process. It also includes active and dynamic training and early access to familiarize them with key functions and features before they’re expected to use them.
Ultimately, end users who will be directly accountable for AP processes should have a say in how they are designed. Their buy-in is essential to AP automation's success.
Select the right AP automation solution
When comparing AP automation tools, you must consider fundamental features and other elements that make a solution ideal for your needs.
Key features to look for in AP and invoicing automation software, regardless of your business model or other particulars, include guarantees for accuracy and timeliness, data security and regulatory assurance, and robust reporting functionality. In addition, you should look for solutions that fit your specific needs, like integrating with your existing tech stack and financial, human resources (HR), and other systems.
Provide training and support
Another key consideration is preparing all stakeholders for what AP automation will mean in their daily operations. You should provide robust training and support during the implementation process and afterward, including regular assessments to ensure that everybody knows how to use their tools effectively and efficiently.
As mentioned above, this should start with engaging end users during the selection stage. It should continue into live demonstration training and simulation exercises before actual high-stakes financial operations.
It’s also wise to develop a training module for new hires to ensure AP automation familiarity is a part of onboarding.
Monitor performance and optimize your process
As with any software implementation, you need to monitor the performance of your chosen AP automation solution over time to make sure it’s doing what you want.
Whether measuring against goals like the ones above or other, more particular aims, you should develop key performance indicators (KPIs) that show how close (or far) you are from achieving them.
These should be tailored to your tools and current, past, and future financial situation. So, measure particulars rather than setting an easy round target, like a 10% improvement in speed.
As noted above, even top-performing companies pay erroneously 1% of the time. Keeping your error rate below that (say, to 0.5%) can make a huge difference in terms of actual dollars.
Top accounts payable automation software
Before installing a tool, migrating data, and automating processes, you’ll need to find the system that best fits your needs.
Some of the best AP automation solutions available at present include:
- Melio: A good fit for small and growing businesses
- Nanonets: Strong invoice data capture functionality
- DOKKA: Best for strong believers in AI-powered AP
- Centime: Strong comprehensive cash management
- Xero: Great for customized approval workflows
- Settle: A good fit for consumer packaged goods (CPG)
- WisePay: The best fit for all businesses and use cases (Check out our webinar to learn more about why WisePay is the best of the bunch.)
Learn more about WisePay
WisePay is the ideal accounts payable automation solution for businesses of any industry and size. We make it fast and easy to process invoices accurately, minimizing costs and maximizing performance and efficiency.
Plus, our platform is accessible on any device, making insights easy to leverage with customized dashboards for end users. Put simply, we’re the best AP automation solution around.
Reach out to learn more about automating your accounts payable process with WisePay.
