AP Automation 101: Streamlining your Accounts Payable process

AP Automation can transform your accounts payable process. It discards outdated, manual methods and streamlines all your tasks, from vendor onboarding to payments to compliance.

As a result, you can get a clearer view of payments, manage cash flow better, and strengthen vendor relationships. Automating compliance tasks simplifies your workload, giving you ease of mind. Plus, your team is freed up to focus on strategic tasks.

In this post, we’ll explain AP Automation 101 and show how it changes the game. Say goodbye to late payments—it’s a win-win. Beyond efficiency and cost savings, there are layers of benefits; they’re just waiting for you to explore.

What is AP Automation?

AP Automation, also known as accounts payable automation, refers to the use of technology and software solutions to streamline and automate the accounts payable process within an organization. It involves digitizing and automating various tasks, such as invoice processing, payment approvals, vendor management, and reconciliation.

This change can transform your payment processes, making them more efficient and accurate. AP Automation simplifies invoice processing, eliminating the need for paper-based systems and time-consuming data entry. The automation benefits are manifold; it frees up time, reduces errors, and speeds up the accounts payable process.

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A real example of AP Automation in action

Before embracing AP Automation, Ethos faced the daunting task of manually coding over 800 bills every month. The manual process was fraught with challenges, including prolonged reconciliation periods and misaligned bill payments, hampering visibility across the company’s large AP team. 

As a tech-savvy life insurance provider, Ethos was determined to find a solution to improve its accounts payable process, enhance visibility on agent commissions, and seamlessly integrate with its existing accounting software, Oracle NetSuite.

To support its projected growth, Ethos aimed to triple its AP processes within 12 months. They decided to leverage technology to manage CSV bulk uploads, creating thousands of bills and payments in mere minutes and significantly cutting down the manual labor required.

The transformation

AP Automation marked the beginning of a new era for Ethos. Their new automated AP system facilitated a smooth transition of agents to the new platform and sped up the vendor onboarding process. This automation extended to bill creation, approval routing, and payment processing, ultimately fostering a 10x growth in Ethos’s operations. Ethos created a white-labeled solution that enhanced internal communication, reduced inquiries about payment statuses, and synchronized data with NetSuite in real-time.

The results

Ethos’s drive for efficiency through AP Automation bore fruit:

• Scalability: Ethos went from painfully handling 800 bills a month to effortlessly managing over 8,000, proving the scalability of AP Automation.

• Time Savings: The company saved approximately 20 hours monthly in approval routing and 60 hours in processing payments.

• Efficiency: Not only did payment times to agents improve by 25%, but the two-way sync and reconciliation with NetSuite significantly reduced manual labor.

Ethos’s journey from grappling with manual processes to achieving better operational efficiency is a testament to the strategic impact of AP Automation. It’s a vivid illustration that embracing technology like AP Automation can significantly enhance your operational capacity, financial accuracy, and team productivity, no matter the scale of your business.

The Evolution of AP processes

Let’s examine how accounts payable processes have evolved. This evolution has been marked by a steady shift from manual tasks to automation tools. Previously, managing financial operations was labor-intensive and error-prone, compromising financial health and operational efficiency.

However, the advent of automation software has revolutionized these procedures. It has reduced the workload, improved accuracy, and provided real-time visibility into the company’s financial controls. This shift has significantly improved firms’ financial health, enhancing operational efficiency.

Here’s a table that illustrates the evolution of AP tasks before and after implementing AP Automation:

Process	Before AP Automation	After AP Automation
Vendor onboarding	Time-consuming manual entry with lots of back-and-forth communications.	Automated data capture and onboarding processes, enhancing accuracy and efficiency.
Invoice capture and bill coding	Manual data entry, high risk of error, lengthy processing time.	Automated data capture, bill coding, and categorization via OCR vastly reducing errors and processing time.
PO matching	Time-consuming manual comparison of purchase orders, invoices, and receipts.	Instant and automatic matching of purchase orders, invoices, and receipts, reducing processing time significantly.
Bill and payment approvals	Manual routing of invoices for approval, potentially causing delays and misplaced documents.	Automated workflows route invoices for approval based on pre-set rules, increasing speed and transparency.
Making payments	Payments made via checks, requiring manual preparation and mailing.	Electronic payments are processed automatically, enhancing security and speed.
Reconciliation	Manual matching of invoices to payments, a time-consuming and error-prone process.	Automated reconciliation tools match payments to invoices, highlighting discrepancies for review.
Compliance	Manually ensuring compliance, with a high chance of oversight and errors.	Automated systems maintain compliance, manage regulatory reporting, and create audit trails effortlessly.
International payments	Complex, involving manual calculation of exchange rates and fees, slow payments, and compliance with international regulations.	Automation simplifies currency conversion, handles fees, and ensures compliance with international payment regulations.
Mass payouts	Labor-intensive, requires substantial manual effort and time to process each payment, posing a risk of errors and fraud.	Automated to handle large volume payments efficiently and securely, with significantly reduced manual effort.

Vendor onboarding and management

Ever wonder how vendor onboarding can improve your accounts payable process? Implementing a centralized vendor management system makes a significant difference. Automation helps standardize vendor onboarding, ensuring efficient processes and reducing errors.

To achieve this, you should focus on a few key steps in your vendor setup:

• Consolidate all vendor information in a central system

• Custom-branded vendor onboarding portal that looks like your business

• Collect and file vendor tax forms automatically

• Conduct vendor compliance checks

• Build strong vendor relationships through clear communication

Centralizing vendor management creates a single source of truth for all vendor information. This reduces the chances of data discrepancies and inconsistencies, which can lead to costly errors.

Another vital step is standardizing vendor onboarding. A uniform process saves time, reduces the likelihood of errors, and ensures that all vendors are onboarded consistently.

Automated invoice capture

With automation, you can streamline the invoice data capture, bill creation, coding, and processing steps. This not only enhances accuracy but also saves significant time.

Imagine:

• Automatically capturing data from invoices with high accuracy, reducing manual entry errors.

• Creating and coding bills in under 90 seconds

• Streamlining invoice processing, enhancing efficiency, and time savings

• Improved invoice management, leading to significant cost reduction

• Syncing invoices in real-time with your accounting software

The beauty of invoice automation isn’t only in the automation benefits but also in the opportunity it provides for strategic resource allocation. With automated invoice data capture, you’re improving the process and enabling your AP team to focus on more value-adding tasks.

PO matching

Purchase Order (PO) matching is another critical aspect of AP Automation. For companies leveraging POs, it helps ensure that invoices are matched against the corresponding purchase orders, verifying that products or services were received as expected before payment is made.

By automating this process, you can eliminate the need for manual review and comparison of invoices and purchase orders. This significantly reduces the chances of errors, delays, and discrepancies. The system can automatically match the invoice details with the corresponding PO, quantities, and pricing, flagging any discrepancies for review.

Automated PO matching provides several benefits, including:

1. Improved accuracy: Automation greatly reduces the chances of human error in matching invoices with purchase orders. This helps prevent overpayment, duplicate payments, or payment for goods or services that were not received.

2. Cost and time savings: Manual PO matching can be time-consuming and labor-intensive. By automating this process, you are freeing up resources to focus on more strategic tasks. Additionally, automated matching reduces the chances of errors and discrepancies, which can lead to costly mistakes and rework.

3. Pre-approvals on future invoices: One of the benefits of using POs in general is getting pre-approval on future invoices. When the invoice comes in, it can be a quick match, and payment is sent out (compared to routing for approvals and then paying). So the speed to payment is better, and there is reduced friction for your approvers

Bill and payment approvals

Managing bill and payment approvals is a breeze with automated workflows, distinct roles and permissions in approval hierarchies, and increased speed and transparency. As you start on this digital transformation, you’ll collaborate with automation specialists to tailor approval workflows, which are essential to payables processes.

Automated approval workflows enable a systematic approach, ensuring every vendor payment passes through predetermined checkpoints. This intelligent automation eliminates the possibility of overlooked or unauthorized payments, enhancing control and mitigating risks.

Defining roles and permissions in approval hierarchies is vital. And getting granular (especially for larger organizations) is key. Including multiple approvers or triggering approvals based on specific bill amounts ensures the right approvers are always involved.

It designates responsibility and ensures that only authorized personnel can approve payments, maintaining accountability and reducing the likelihood of fraud.

Speed and transparency in approvals are also significant benefits of AP Automation. The time taken to approve invoices is significantly reduced, leading to prompt vendor payments and improved relations. Transparency is enhanced as you can track the approval progress in real time, providing insights into bottlenecks and enabling process optimization.

AP Automation transforms bill and payment approvals, making them efficient and transparent. It’s a big step towards optimizing your payables processes.

Making payments

With AP Automation, you make payments faster, leverage flexible payment methods, easily schedule and track payments, and benefit from robust security features. AP Automation streamlines payable processes, making them more efficient and less taxing on your resources.

The automation process offers a plethora of benefits to your accounts payable management. Importantly:

• Flexible payment solutions like ACH that make transactions quicker and reduce paperwork and human error.

• Payment scheduling and tracking payments become seamless, offering you better cash flow visibility.

• Robust security features protect your financial data from fraud and breaches, ensuring your transactions’ integrity.

Payment automation is a critical component of efficient accounts payable management. It eliminates manual tasks, reduces the chances of errors, and speeds up transactions. More importantly, it provides real-time data, allowing you to make informed financial decisions.

As you explore AP Automation, you’ll discover its immense potential to transform your accounts payable process. By leveraging these advanced tools, you’ll optimize your payment procedures and enhance your overall business performance.

Reconciliation

Moving from making payments to reconciliation, automated tools can greatly reduce manual reconciliation efforts, ensuring financial accuracy in your accounts payable process. With the influx of paper and electronic invoices, manual errors are commonplace in traditional accounting systems. However, by employing automation tools, you can increase the accuracy in reconciling transactions and save valuable time.

Automation experts recommend these tools for their ability to verify payment details against financial statements, catching discrepancies before they become costly errors. It’s a step that improves your accounts payable process, reducing manual reconciliation of paper invoices and enhancing internal controls.

Compliance

AP Automation can be your strongest ally in meeting compliance requirements. It simplifies your workload and guarantees your adhesion to industry standards and regulations.

It also helps maintain financial integrity by creating automated audit trails. You can track and verify all transactions, enhancing transparency and accountability in your financial processes.

AP Automation is a game-changer in terms of risk management. It proactively identifies potential issues, allowing you to address them before they escalate.

AP Automation can help you with:

• Regulatory compliance: The right AP platform guarantees you’re consistently meeting industry regulations.

• Vendor compliance checks: Reduce the chances of fraud and ensure your vendors are safe to send payments to.

• Tax compliance: Simplify the tax process, ensuring accurate, timely compliance and reducing the risk of penalties associated with tax errors.”

• Automated audit trails: All transactions are recorded and easily traceable, ensuring accountability.

• Risk management: You can preemptively identify and manage potential issues like misleading payment records or vendor compliance issues.

International payments

Mastering the complexities of international payments, from handling currency exchange and fees to guaranteeing compliance with international regulations, can be a breeze with AP Automation. This technology simplifies the process of cross-border transactions, making your global business operations more efficient.

When dealing with international payments, you’re faced with the challenge of managing foreign exchange rates. AP Automation ensures this by providing real-time exchange rates and ensuring precise payment amounts. This eliminates the risk of overpayment or underpayment due to fluctuating foreign exchange fees.

Compliance with international regulations is another significant concern. This not only saves time but also reduces the risk of non-compliance penalties. With AP Automation, you can process international payments quickly and accurately. The system easily manages and tracks multiple transactions, providing a clear overview of your global transactions.

Mass payments

Payments have changed in the past few years. Legacy systems can’t handle the large volume of payments required for marketplaces, gig workers, ecommerce, and other industries where a massive volume of payments is happening daily.

AP Automation offers scalability that’s crucial for businesses experiencing growth. It allows you to easily handle increasing payment volumes, providing robust payout solutions that adapt to your needs.

Consider the following points to visualize how AP Automation simplifies mass payouts:

• Simplifying: It eliminates manual tasks like invoice coding, approvals, and more to reduce errors and free up your team’s time for more strategic efforts.

• Efficiency and scalability: Automation accelerates the accounts payable process, enabling managing large volume payments without additional resources.

• Operational costs: With less time spent on manual tasks, your team can focus on strategic initiatives, reducing operational costs and improving your bottom line.

The benefits of AP Automation

Embracing AP Automation streamlines finance operations and yields many benefits, from significant cost savings to future-proofing your AP department. The power of automation is undeniable, enhancing efficiency and reducing the risk of errors in your payment cycle.

With automation, timely payments become a breeze. You no longer have to chase down invoices or worry about late fees. This leads to better supplier relationships, as their accounts receivable team appreciates the promptness. Payments facilitated by AP Automation guarantee no lag in the payment process.

Cost savings are an important aspect of AP Automation. These savings come from reduced manual labor, fewer errors, and eliminating late fees. As these savings accumulate, you’ll quickly see a return on your investment.

AP Automation also offers strategic advantages. You gain a clearer view of your future payments, which allows for improved budgeting and forecasting. 

Imagine what you could do with that saved time and resources. It’s time to streamline your accounts payable process and embrace the benefits of AP Automation.

Transform AP with Routable

Automated invoice processing and payments, seamless vendor onboarding, approval flows, and more. At 30% less expensive than the competition, Routable gives you all the best features at a fraction of the cost.

• Reclaim your time with AP Automation: With an easy-to-use interface, you can eliminate time spent on manual bill coding, complicated approvals, and reconciliation.

• Invoice capture with OCR: Routable eliminates manual data entry and reduces errors with AI-powered OCR for invoice data capture.

• Real-time, two-way sync: Ensure that all data remains up-to-date with your accounting software, removing the need for manual work and making payments a breeze. Integrate with Oracle NetSuite, Sage Intacct, QuickBooks Online, Xero, and more.

• Send faster payments: Send payments faster with tools like automated reminders, early payments, and flexible payment methods. Routable supports 4 ACH speeds, 8 check speeds, and real-time payments.

• Send thousands of payments in minutes: Make thousands of payments fast with our no-code CSV upload, or use the Routable API to craft the payout experience of your dreams.

• Fast, easy international payments: Send payments to 220+ countries in 36 currencies in as little as 1-3 business days. Make all your domestic and international payments in one system with complete fee transparency for you and your vendors. 

• Easy vendor management: Seamlessly onboard domestic and international vendors in a custom-branded onboarding flow with no vendor sign-up required.

• Committed to compliance: With robust disbursement controls, single-click access to vendor tax forms, and audit trails, Routable simplifies compliance, reduces risk, and enhances overall efficiency for finance teams. 

FAQs

What is AP automation vs AR automation?

AP Automation refers to automating accounts payable processes, such as invoice processing, sending payments to vendors, and payment management. On the other hand, AR automation refers to the automation of accounts receivable processes, such as invoice generation, collecting money from customers, and collections management.

How do you automate payables?

To automate payables, implement an AP Automation software that digitizes invoice processing, automates payment approvals, and facilitates electronic payments. This streamlines the entire accounts payable process, reducing manual labor and improving efficiency.

How does AP automation work?

AP Automation digitizes and automates accounts payable processes such as invoice processing, payment approvals, and electronic payments. It streamlines the AP workflow, reduces manual labor, and improves overall efficiency in managing payables.

What is the typical AP workflow?

The typical AP workflow includes invoice receipt, processing and approval, bill creation and coding, payment scheduling, execution, and transaction reconciliation. AP Automation software helps streamline these processes by digitizing and automating them, reducing manual labor, and improving efficiency.

What is the AP cycle process?

The AP cycle process refers to the steps involved in managing accounts payable, including invoice receipt, processing, bill creation and coding, approval, and payment execution. AP Automation software streamlines this process by digitizing and automating each step, reducing manual labor and improving efficiency.

What is the AP workflow process?

The AP workflow process refers to the steps involved in managing accounts payable, from invoice receipt to payment reconciliation. AP Automation software streamlines this process by digitizing and automating each step, reducing manual labor and improving efficiency.