Managing your cash flow and paying off your short-term debts is critical for your business’s success. Automating your accounts payable (AP) process is the key to ensuring you make payments by the due date, avoid incurring late fees or penalties, and even take advantage of early payment discounts. AP automation also enables your company to streamline its financial processes, all while taking the mental load off your own plate.
Whether you’re a brand-new business or simply reviewing where your company can save time and money, AP automation can be a big help. Here’s an overview of the accounts payable automation process.
What is AP automation?
AP automation automates and streamlines the accounts payable process. Accounts payable is a log of your short-term debts which have not been paid. This is the opposite of accounts receivable, which logs money owed to the business. Tracking your accounts payable process enables you to accurately track your cash flow and avoid late payments. In turn, this gives you a big-picture view of where you’re spending money and whether your credit usage is increasing or decreasing.
Unfortunately, managing accounts payable can require a big investment of time if you do it manually. You’re also more prone to making errors. AP automation is a great way to save time and reduce errors, while taking advantage of the benefits accounts payable management provides.
AP automation simply means that you automate the process of entering and reconciling purchase orders and invoices. The accounting software you choose can be connected to your online bank, which makes payments and cash flow management even easier.
There are three broad tasks AP automation provides. Once you receive invoices, the software either receives and adds them automatically, or converts from paper to digital copies. The extracted data is then stored in the cloud.
Next, your invoices are matched to their purchase orders and receipts. This automates the reconciliation process, in which you match purchase orders to invoices and make sure the amounts add up. Some AP automation software can be programmed to route certain types of invoices to specific team members. Once the invoices are approved by the appropriate party, the automated system pays the bills according to their due date.
Finally, invoices and purchase orders are archived and stored alongside a log of all the actions taken for each invoice. If you need to audit your records or are searching for old invoices, the archive makes it easy to get the job done.
Why automate your AP process?
AP automation offers significant benefits, including:
- Time and money savings: When you automate your AP process, it significantly cuts down on the time and money you’d have to spend managing your financial accounts. If you’re a sole proprietor, that frees you up to focus on other aspects of the business. It also cuts down on the cost of labor and office supplies used to manually manage the process. By adding specific rules to your workflow, invoices are automatically sent to the right person and are scheduled for on-time or even early payment.
- Lower likelihood of errors: Accounts payable lends itself to fewer errors. From missing a payment deadline to manually entering the wrong amounts, even small typos can have unpleasant consequences. Automating the process ensures that there’s a lower chance of human error. Plus, if you do find an error, the process log enables easy auditing.
- Security and fraud prevention: When you use AP automation, you can create better security measures to avoid payment fraud. Your company can apply rules to authorize only specific users to approve invoices and release payments. This gives you more control over who has access to your financial records. The detailed process log also tracks who performed which actions, which can cut down on internal fraud.
- Better data preservation and transparency: The IRS recommends saving up to seven years of financial records. Storing physical records is costly and an inefficient use of space—but using AP automation software enables owners to securely store their data in the cloud at a fraction of the cost. Similarly, dashboards and process logs make it clear who is responsible for which actions, and where delays or errors could have been made.
Ultimately, automating your accounts payable process is the fastest and easiest way to cut down on errors, protect your company, and gain some peace of mind.
How to automate your AP process
When you’re ready to make the switch to AP automation, there are a few key steps you’ll need to take. First, switch to digital invoicing, if you haven’t already. When you receive electronic invoices, it’s much easier for your accounting software to capture the data and send the invoice to the right person. If your vendors and suppliers are behind the times, however, many automation tools can capture data from scans or photographs of the invoice.
Next, find the right accounts payable software. There are plenty of accounting tools out there which allow you to build workflows and automate AP processes. Look for software that integrates with the management tools you already use, and can be linked to your online bank.
Once you find the right software for your company, invest time into making rules for the accounts payable workflow. You might spend extra time at the outset, but it will pay off. When your system is set up, you’ll be able to take advantage of a faster, streamlined, and automated AP process.
Pay vendors effortlessly with NorthOne Invoice Payments
With NorthOne Invoice Payments, you can make effortless invoice submissions by uploading or forwarding unpaid invoices to NorthOne via email and we’ll take care of the rest.
You’ll save hours a week and hundreds of dollars in bookkeeping fees with precise payments paid on the invoice’s due date. Plus, you can see all of your upcoming and completed invoice payments in one place, making it easy to stay organized and on top of your finances.
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