When you own a business, paying your suppliers and vendors on time is critical to good cash flow management. If you don’t have an accurate and easy-to-implement accounts payable system, it’s easy to incur late fees or make other financial mistakes. Left unchecked, you could jeopardize your relationships with suppliers and vendors. The benefits of accounts payable automation include streamlining your processes and saving time and money.

Taking the opportunity to automate your accounts payable process ultimately pays dividends. Here’s an overview of why automation is worth pursuing.

What is accounts payable?

Accounts payable are your short-term debts that have not yet been paid—the opposite of accounts receivable, which is the money owed to the business. When you track your accounts payable properly, you can accurately track your cash flow. It also ensures that you don’t incur any late fees or put your relationships with vendors and suppliers at risk.

Monitoring accounts payable helps keep track of your company’s financial health, too. If you notice that your accounts payable is decreasing, it means that you’re paying off your short-term debts faster than you’re purchasing new goods and services on credit. If you notice that your accounts payable is increasing, it means you’re relying on credit more. This allows you to make strategic cash flow decisions, like increasing your cash reserves to make up for seasonal lulls.

Managing accounts payable requires a significant time investment if you plan to do it manually. You’re also far more likely to make errors, especially if you’re a sole proprietor managing every aspect of the business yourself. The answer: automating the accounts payable process.

What is accounts payable automation?

Accounts payable automation refers to automating the process of entering and reconciling purchase orders and invoices, among other tasks. This is done with accounting software, which can be connected to your online banking. When you automate your processes, you minimize how much time you’ll spend managing your finances—and the potential for human error goes down, too.

Generally, accounts payable automation includes three main components:

  • Invoice receipt: Once you receive invoices, your software can receive them automatically or convert them from paper to digital copies. The data is extracted and stored, usually in the cloud.
  • Matching and processing: Next, the invoices are matched to purchase orders and receipts for reconciliation purposes. Some software allows you to route specific invoice types to appropriate parties. After the invoices are approved, they are sent to the accounting system to be paid.
  • Archiving: Finally, the invoices and purchase orders are archived, as well as a list of all actions taken on invoices. This makes it easier to review your processes if you need to audit your records or find old invoices.

Benefits of accounts payable automation

You already know the benefits of accounts payable automation include saving time and avoiding human error. Here’s an in-depth look at all the benefits that come along with automating your financial processes:

  1. Avoid errors: One of the biggest benefits of accounts payable automation is improved accuracy. Instead of having a human manually entering each data point, your software will automatically process invoices, gather the data, and enter it for you. Invoices are directed to the appropriate team member and automatically paid and reconciled. If errors do occur, it’s easy to check the process log and audit your records.
  2. Save money: Accounts payable automation also cuts down on the cost of labor. Even if you’re a sole proprietor, the time you spend managing financial accounts is time you could spend focusing on aspects of your operations that can’t be automated. It also cuts down on hard costs like office supplies and postage, which can add up fast. You’re less likely to incur late fees and penalties, and can protect yourself against line-item errors and duplicate payments thanks to automatic reconciliation processes.
  3. Save time: Manually updating accounts payable is an incredibly time-consuming task, even if you have other team members to help manage invoices. Instead of risking invoices languishing in your inbox, your software does the heavy lifting for you. After you apply specific rules to your invoicing and workflow, invoices are automatically directed to the right person. You can also create rules for reminders and take advantage of a dashboard view to monitor progress, further ensuring that nothing is overlooked. This can dramatically speed up your invoice and payment process.
  4. Integrations: Your automated software can be integrated with existing systems and software tools, which further streamlines processes.
  5. Fraud protection: Payment fraud can happen to any business—and automating your accounts payable can protect against it. You’ll be in control of who can approve invoices and release payments by building approval workflow rules. This creates more opportunities for you to find fraudulent invoices before you send the payment.
  6. Easier auditing: When it’s time to audit your records and processes, accounts payable automation makes it simple. The software links all the actions, processes, and documents together, so it’s easy to follow the paper trail. Your purchase orders and receipts are matched with invoices and payments in a searchable format.
  7. Preserve your data: As a business owner, you should save up to seven years of financial records—but finding space to store this volume of paperwork can add up quickly. Digitizing and automating your accounts payable allows you to save those records in an easily searchable format, without taking up physical space in your office or facility.
  8. Better insight: Automated accounts payable software utilizes dashboards, which makes it easy to see where you are in any given payment cycle thanks to real-time data tracking. It’s easy to address outstanding invoices or assess your cash flow—which in turn translates to fewer errors, delays, and late payments.
  9. Data transparency: If you have employees, the dashboard can also provide insight into employee productivity and manual processes. You’ll be able to keep an eye on who meets their deadlines and where errors are most likely to occur. This allows you to refine your processes and set employees up to succeed.
  10. Qualify for discounts: If your vendors offer an early payment discount, you can set up your systems to take advantage of them. Simply set those payments to process by the early payment deadline, and they’ll be automatically processed and sent. It’s a simple way to save even more cash.
  11. Peace of mind: Finally—and perhaps most importantly—automating accounts payable provides significant peace of mind. When you know you’re less prone to errors, and are saving time and money, you’ll be able to pour your effort and skills into the tasks only you can do.

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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