Accounts Payable Automation

Accounts Payable Automation Definition

Accounts payable automation or AP automation is an overarching concept used to describe a system or series of systems used to alleviate manual processes from an organization’s accounts payable operation. This may include supplier data management, invoice processing and routing, tax and compliance procedures, payment execution, early payments and supply chain finance, and reconciliation and reporting.

Accounts payable automation also enables organizations to employ best practices to reduce risk exposure, streamline and improve supplier payment processes, and move towards more immediate views into accounting.

The risks in not employing accounts payable automation as an organization grows or matures is that processes will need to continue to be sourced manually. Late or erroneous payments to suppliers can also lead to issues with maintaining an efficient business operation.

Best Practices

A comprehensive approach to AP automation completes the cycle of bill-to-pay-to-reconciliation. AP automation should look to solidify interaction with both banks and suppliers to provide end-to-end control and streamline the entire AP operation. This may include:

  • Integrating directly with the organization’s ERP or accounting system for immediate reconciliation to general ledger.
  • Reducing payment errors with supplier data management and onboarding strategies.
  • Employing technologies related to invoice processing and routing, including machine learning to reduce manual intervention.
  • Managing and securing payments controls including ACHs, wire transfers, paper checks, and local bank transfers overseas (international ACH) in one dashboard.
  • Enacting automated security and controls to monitor operations and streamline audits.

Datapoints

The State of ePayables 2017, Ardent Partners

Source: “The State of ePayables 2017”, Ardent Partners

80% of companies that remit over 500 payments a month stated a payment error rate of 1% or higher. 44% had an error rate of over 3%. (Techvalidate)

90% of organizations see late payment as having wider issues – limiting the flow of funds between buyers and sellers, employers and workers, company investors and limiting the growth of the economy.

Source: “Creating Payment Energy: Unlocking the value of B2B payment networks,” MasterCard.

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