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A major component of successfully running any business is maintaining the integrity of your accounting processes. Businesses need products and depend on suppliers every day. The suppliers rely on the organizations to pay them for their goods and services. That’s where accounts payable (AP) plays a key role. AP is just the amount of money your company owes to suppliers that you have yet to pay out to them. It may seem simple on the surface, but AP processes are a highly nuanced, incredibly detailed process that requires significant oversight. An organization’s cash flow depends on accurate and proper AP processes, so finding ways to improve it are critical.
That’s where the need for a software solution comes into play. With AP automation software, managers can reduce problems along the AP process and create a more efficient way to manage accounts and get the bills paid on time. Here are a few reasons why your business may want to consider implementing an AP automation suite at your organization:
The accounts payable process isn’t perfect. Some challenges tend to pop up along the way. Slow processing, matching errors, unauthorized purchases, fraud, theft, double payment, and various other issues are all common problems along a typical AP workflow. Automating your workflow can help reduce these problems while increasing and optimizing your invoicing efficiency. According to the Institute of Finance Management, human error is a big problem in AP processes. Thankfully, accounts payable automation reduces human error and streamlines communication, all while ensuring your suppliers get paid on time.
With a robust automation system in place at your organization, you won’t have to worry much about lost documents or complications with unapproved vendors. Virtual cards are another way to improve efficiency and streamline payments. A virtual card is merely a 16-digit, digital, one-time use card. Its numbers are randomly generated, and it expires once used. Amounts are calculated to the exact totals necessary for making the payment. Some virtual cards offer rebates for use, while others make transactions faster. Payments work similarly to a traditional credit card payment and get entered into your accounts payable software automatically.
There’s little additional effort required, as virtual cards eliminate the need for an additional AP analyst to account for different types of payments, further streamlining the process. It’s ultimately up to the company’s discretion to take advantage of virtual cards as a payment method. Still, it may be a good decision that can make reconciling accounts a breeze when combined with a powerful AP automation/enterprise management solution.
Invoicing doesn’t have to be difficult, but sometimes it can be a mess. What do you do if your invoices disappear or get paid out before the product gets delivered? What if there are too many invoices to reasonably process on time? These and other issues can throw a wrench in your operation. AP automation doesn’t just reduce paperwork and streamline the process; it can automatically validate invoices from approved suppliers.
AP automation software allows your company to set invoice tolerance levels to determine which ones should be manually reviewed or not. Reviewers have the unique ability to approve or deny invoices from their own mobile devices or via email. Suppliers will benefit from it, too. They can send their invoices electronically at no additional cost to their organization. Enhanced invoicing serves to improve communication and business relationships while ensuring your company handles invoices correctly across the board.
Simplified Expense Management
The success of any business hinges on controlling costs, providing quality service, and professionally handling finances. Managing your company’s expenses shouldn’t be so complex that you can’t make heads or tails of what’s happening in the books. With powerful AP Automation software, you can simplify expense management and detect fraud along the way. The software tracks key metrics and spending risk across the entire organization.
A combination of machine learning and artificial intelligence examines expenses, requisitions, invoices, and purchase orders to get a sense of what you’re spending, how you’re spending, and suggestions for reigning it in and remaining frugal. Auditing tools, electronic transaction capture, and compliance initiatives help you stay solvent and compliant in all your business affairs.
Smooth, unrestricted workflow matters to the people working in accounts payable. Focusing too long on a single project or dealing with an unwieldy stack of papers isn’t generally on most employee’s to-do lists. Implementing automation into the process results in less paperwork and frees up team members to focus on others projects. Fewer team members are needed to get the processing done, freeing them up for other tasks across the organization.
With a faster workflow and multi-level validation for all invoices, your company can reduce late payment fees while avoiding missed payments altogether. It also significantly reduces the stress on employees, ultimately resulting in fewer errors or major issues in the AP reconciliation and process.
While increased efficiency and a smoother workflow are both fantastic benefits of AP automation, they can have a profoundly positive effect on supplier relationships that may lead to discounts for your company. Early payment discounts are a tremendous benefit of paying invoices early. They offer a few distinct advantages for your company, including a lower cost of goods and better cash flow for your organization. It also helps forge a better bond with your suppliers, leading to improved relationships over time. There are several different discount terms, but the most common is 2/10 – net 30, where buyers can earn a 2% discount by paying in 10 days.
Some software lets you automate the system even further to ensure early payments go out to your most valued suppliers. Taking advantage of various discounts and options like these may also help increase your working capital (essentially your assets divided by your liabilities), with the side benefit of eventually improving the company’s cash flow. Leveraging all of these benefits together to your optimal advantage not only improves your cash flow but makes the entire AP process easy, efficient, and uniquely beneficial to all involved parties.
Thank you for reading!