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11 mins read

Accounts Payable Automation

Think Big: Accounts Payable Software for Small Business

by Yooz on 03.3.2022

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Since the introduction of Lotus 1-2-3 and Microsoft Excel in the 1980s, spreadsheets have become a staple of productivity applications. What made spreadsheets so attractive is also their greatest shortcoming: they are an all-purpose tool to enter, present and crunch data. Small businesses quickly warmed to those apps and used them in their accounting processes for managing invoices and payments. In fact, even today roughly one in five organizations still manage their Accounts Payable (AP) workflow with spreadsheets.

 

Learn more now about AP automation

 

However, using spreadsheets to record, review and approve an invoice for payment is just one of the ways that companies are coping with the incessant stream of invoices and other documents. One thing that they all have in common is that they are still to a large extent manual-based and on paper.

 

This reliance on old workhorses comes with a price, particularly in this era of digitalization. Fortunately, this is one payment that they can easily avoid. The way to leave this inefficient set-up behind is accounts payable automation powered by a specialized platform.

  

Why Accounts Payable Automation Software Is Not One-Size-Fits All

 

Over time, organizations began to implement Enterprise Resource Planning (ERP) or general financial software packages to help them get a better handle on their overall operations (including the financial and AP workflow). However, this approach only yielded mixed results because, as a universal tool, ERPs offered many functionalities but lacked the specialized features needed by accounts payable pros.

 

In fact, in many cases the actual heart of the problem lies with a continued overreliance on paper invoices despite having an ERP in place. This is a mistake because if the workforce and supply chain disruptions brought on by the pandemic have proven just one thing, it’s this: Maintaining paper-based processes when your employees are working remotely is not a good solution for any company, large or small. 

 

So what to do?

 

The best solution with the right mix of functionalities and flexibility is a combination of both: and ERP and a platform that purpose-built for AP Automation that reflects each company’s unique needs for dealing with invoices. Indeed, that’s how using this technology together can unlock sizable savings in terms of time and money while in addition offering ironclad security plus scalability to be ready for growth.

 

But What if I’m Just a Small Business?

 

If paper invoices, for instance, are arriving at your head office when no one is around to open the envelopes and handle them or only collecting invoices sporadically, it wreaks havoc with your approval process and in making payments on time. In fact, many finance leaders we polled post-lockdown admitted that this was the case; they had serious problems paying their invoices on time.

 

In addition, without any kind of digitization, small businesses risk losing sight of the status of an invoice in the process (let alone any specific details). The flow of communication between the AP team and other departments quickly suffers and adversely affects accounting accuracy, information security, and even department reputation.

 

Companies that were able to weather the recent disruptions and enhance their competitive position coming out of the pandemic have one thing in common. They know that paper and manual-based processes won’t suffice and instead are betting on technology. Thanks to cloud-based platforms, they are moving towards now affordable and scalable payable software solutions that lets them modernize their AP workflow and seamlessly integrates with their existing system (regardless of the software that they are already using).

 

The Four Advantages of Accounts Payable Software

 

There are several tangible benefits:

 

  • It drives down the processing costs per invoice. While manual handling of an invoice can cost anywhere from $9 to $20 per document, using an intelligent invoice payable software platform will cut the cost per invoice to $3.25 or less. 
  • It ensures visibility. Today, around 3.5% of all invoices result in erroneous or duplicate payments. This in turn generates unnecessary losses and administrative costs to correct errors and claw back payments.
  • It puts an end to late payments. Close to one in three invoices are paid late under normal circumstances, even if your office isn’t deserted and employees working remotely. The consequences are late fees and wasted early payment discounts, low-hanging and profitable fruit that would be easy to pick if your AP workflow were automated.
  • It takes out the complexity. While cycle times for an invoice in a traditional workflow can range between 22 to 35 days, an automated platform cuts processing time to days or even hours. The mad dash at the end of a week or a month to get those vendor invoices processed and paid becomes a thing of the past.

How to Save Time and Money with Modern Software

 

Let’s take a closer look at how using an invoice payable process software solution saves time and money, boosts accuracy, and increases productivity.

 

A cloud-based system can capture invoices in any format in seconds. Once it’s set up, which in a cloud-based platform like Yooz typically takes less than an hour, a modern software platform will ingest documents the moment they come in. No matter if a vendor submits an invoice on paper, by fax, as an email attachment, or in a structured electronic format such as EDI, the system automatically handles them and prepares them for speedy processing. 

 

Yooz, for instance, processes invoices for more than 200,000 users every day. Over its lifetime, the platform has read more than 100 million invoices from thousands of vendors, so it’s capable of dealing with even the most unusual document formats without any human intervention. Even a ream of faxed invoices doesn’t pose a problem as the system will split them into individual documents.

 

But capture is only the first step in the invoice process. It is followed by automatic review, which includes GL coding and matching each invoice to a purchase order that’s stored in your ERP or financial system. The dual technologies that allow for this streamlined process are a combination of Robotic Process Automation (RPA) and machine-learning algorithms. The latter are smart enough to extract and understand all relevant information in an invoice, again without human intervention.

 

This means that important operational and financial data points such as items ordered, items delivered, amounts, vendor name, due dates as well as addresses, banking, and tax information - even exchange rates for international transactions - are all extracted and checked against other documents on file to avoid errors and any opportunity for fraud.

 

By using smart technology to replace manual entry, all the delays and potential mistakes are avoided and with them a broad range of problems that typically plague a small company. An AP team with scanners, keyboards and spreadsheets simply can’t compete with an AP team using digital technology.

 

Approve or Review From Anywhere Thanks to the Cloud

 

Next comes the approval phase. Companies can set up smart workflows and customize them for optimal results. Route invoices above a certain amount to a certain person, for instance, or give preference to invoices submitted by a key supplier. This means a faster invoice approval time or, in the case of an invoice being flagged as an exception, immediate notification for additional review.

 

Indeed, there are plenty of situations in day-to-day operations that need attention. With AP automation, they can be resolved quickly using relevant information that team members now have at their fingertips. Say a vendor didn’t deliver the right quantity of products ordered or shipped incorrect items. Or the bank account on the invoice doesn’t match what’s on file. The software will immediately detect these types of inconsistencies and ensure that the invoice ends up in the right hands to for further investigation without delay.

 

On the other side, if everything checks out the right members of the AP or finance team will automatically see the invoices show up in their browser or on their mobile device for approval. With a cloud-based platform this can be done from anywhere and anytime, further streamlining the AP workflow end-to-end, from purchase to payment.

 

How to Pull Off Purchase-to-Pay Automation as a Small Business

 

Up next: setting up payment (the best part of the invoice process for a vendor). With an automated platform, it’s easy to initiate payment based on a schedule that suits a small business and as well as fits with its cash management needs. Regardless of the payment format, the AP team can use the same intuitive interface for scheduling.

 

For example, after a vendor has been onboarded using just an email address and after they’ve selected their preferred way of getting paid (such as by virtual card, ACH, eCheck or even a traditional paper check), it’s a matter of three clicks to be done: picking the invoice to be paid, selecting the amount, and setting the payment schedule. The platform then handles the rest, sending out instant payment, recording that the invoice was paid and the vendor received the funds, and pushing the information back to the partner system in real-time. Yet another instance where a spreadsheet is no match for intelligent software.

 

And there are even more benefits that come with automating payments. First, money. Using a virtual card earns cashback on every invoice paid. No matter how small your organization, a few thousand invoices a year translate into a new revenue stream.

 

Why Vendors Love Accounts Payable Automation Software, Too 

 

It’s not just the business that appreciates having real-time data immediately on hand; vendors will appreciate the new level of visibility as they always know the status of an invoice. They won’t need to jump on the phone anymore to hunt down a missing payment, nor will staff spend time hunting down documents so that they can provide answers. Instead, the invoice process is fast and efficient so that payments occur on time, vendors can rely on the money arriving, and professional relationships across the board are improved.

 

What’s more, the cloud-based firepower of AP automation means you collect valuable data to help with strategic decisions that affect the entire company. Experts call these free insights financial intelligence, and it’s a key competitive advantage when the next disruption yanks around your supply chain.

 

Then there’s the fifth and final step of a smart invoice payable software system: export.

 

How Modern AP Automation Integrates with ERP Systems  

 

We mentioned earlier that many companies are trying to move beyond the spreadsheet and instead want to rely on their ERP systems. While these undoubtedly have their place in modern organizational structure to track and manage all kinds of assets and processes, the ERP remains a generalist. They are not specifically designed for handling the twists and turns of the invoice and purchase order (PO) process.

 

But here’s the thing: An AP automation platform that prides itself on unmatched speed, savings, security, and scalability must play well with other existing systems. Whether a small business has been using QuickBooks, Oracle NetSuite, or another solution, it should be easy and painless to connect their existing software package to an AP automation platform to export all relevant data to the ERP system and reconcile the books.

 

A seamless connection ensures that information passes rapidly between the two systems and in both directions. Information is updated in real-time on both systems which, in the case of payment, means that both software systems receive the information that the payment was made and marks the corresponding PO as paid. There is no need for the AP team to manually involve themselves, reducing the risk of human error and delays as well as creating a digital audit trail in case of inquiry.

 

Unlock Your Competitive Firepower with Small Business Accounting Software 

 

Now that we know there is a software that can level the playing field between businesses of any size and is accessible to all, let's recap some of the specific advantages of accounts payable automation software for small businesses:

 

  • Easy to set up and quick to begin use. With an advanced platform like Yooz, a business can get started in under an hour without waiting on extended customization processes.
  • Gain instant visibility across the entire invoice payable system. If everything is stored in the cloud, a search is just a click away at any time, from any place. Everybody is always in the loop.
  • Store fully compliant and fraud-free documents in the cloud. Nothing gets lost, there are no archiving costs, and of course no retrieval headaches.
  • Pay for only what you use. There's no need to invest in a large system based on future projections since a cloud-based software system is easily scalable.

And when it comes to the numbers:

 

  • Reduce processing costs by 80 percent (thanks to straight-through processing without human intervention).
  • Cut cycle time to minutes and hours, exchanging penalties and fees for late payments for early pay discounts.
It's really that straightforward: automating each step of your AP workflow raises your small business to a new level of competitive strength.

 

 

Why the Best Accounts Payable Software Lets Everyone See What Matters 

 

And one more thing. There’s more to accounts payable automation than just speeding through the purchase-to-pay cycle in record time with fewer errors and at a lower cost per invoice. It's a true gamechanger when everyone on the finance team, as well as other departments, has a clearer understanding of who is owed what for which products and services. More visibility over operations translates into making better strategic decisions on how to manage cash and how to build stronger bonds with your suppliers. 

 

Implementing a smart invoice payable technology process also helps create a dynamic business network around your company. A network defined by partnerships that can withstand predictable or unpredictable external shocks, be they a new round of government mandates, staff shortages for any reason, ruptured supply chains that can impact production, weather disruptions, or energy price shocks on the horizon.

 

Be Ready for an Uncertain World 

 

In an uncertain world, it literally pays to reduce your paper pile, automate processes, and instead embark on a smart path to digital transformations. Accounts payable software is no longer just a strategic asset accessible only by large companies with big IT budgets. Thanks to the cloud, any small business can tap into cutting-edge platforms that yield more insights faster for more people. 

 

Consider it a real-time survival strategy, one invoice at a time.   

 

Learn about the future of ePayables