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4 mins read

Accounts Payable Automation

What is Accounts Payable Automation?

by Yooz on 09.18.2020


Intelligent automation finance, digital technology, and more specifically Accounts Payable Automation softwares, facilitate the Accounts Payable workflow and provide additional services to businesses. Accounts Payable Automation tools are simpler than ever and are available from a variety of cloud-based SaaS providers on a pay-per-usage basis, making them accessible to all sizes of businesses. How does it really work ? What do we refer to when we talk about AP Automation?


AP Automation : the definition


Business process automation refers to the replacement of all or part of a given process, originally based on exchanging paper invoices, digitally. These digital documents, which are the foundation for digital processes, generally arrive from various sources.


In some cases, the data to process already exists in electronic format, either in a structured file format such as EDI, XML, or CSV, or as unstructured ones such as PDF files.


In other cases, the data must first be transformed into digital format by scanning the contents of paper folders using scanners in conjunction with automatic document reading (ADR) and optical character recognition (OCR) technologies. Numerous processes may be automated. For example, it is possible to process invoices and contracts, calls-for-tender, and even tax information.


In its reference guide to invoice capture and automation practices, the consulting firm Markess International distinguishes three ways of supervising the invoices:


Automatic processing of simple invoices, which consists of exchanging invoices using digital transmission systems, such as EDI, or sending electronic files such as PDF. In this case, no mechanism is implemented to ensure the fiscal value of invoices.


Automation of tax-based invoices consists of exchanging these same folders, but with the added value of signing them digitally and complying with various conditions required by tax laws, including archiving, ensuring message integrity, creating summary lists, and more. Only this kind of electronic capture and automation enables companies to completely eliminate paper invoices.


Automating invoices, which consists of implementing scanning technologies to automate invoices delivered in paper format.


AP Automation: where do we stand?


Among the processes most frequently automated are the management of incoming and outgoing invoices. These processes involve numerous archives, including order forms, delivery slips, invoices, and credits. In addition, invoice processing involves many data processing (i.e. entry, reconciliation) and approval steps, more frequently prone to error when performed manually. Numerous organizations are concerned by invoice processing, from companies and local governments to Accounts Payable Automation.


Several studies have highlighted the challenges faced by accounting departments that have not implemented accounts payable automation software. This includes high running costs, lack of visibility, lost invoices, payment errors, insufficient traceability, absence of a reliable audit trail, and more.


The cost of manually running a paper invoice was shown to range from £9.40 to £20.8, with a per-document storage estimated at £3.25! The figures for lost or incorrectly classified archives are equally astounding: £110 to search for an archive and £200 to recreate it.


Beyond the direct costs associated with manual processing invoice, you must also consider indirect ones, which may be harder to quantify but are just as important and equally detrimental to accounts payable operations:


  • Managing supplier calls and late payments: respectively, these two cases represent 41% and 31% of an accountant’s time.
  • Lost invoices: 7.5% of the invoices managed by any given business are lost. Some employees may not be overly motivated to focus on purely administrative tasks that could be automated easily.


Using a Cloud-based software


Without requiring any compromise on performance, features or security, the Cloud-based SaaS Model represents considerable savings with respect to on-premise software. SaaS does not involve any installation or license fees. With per-use payment, invoicing matches the company’s activity. Not only that, but users benefit automatically – and at no charge – from product improvements and upgrades, such as changes made for regulatory reasons. Lastly, a modern software in phase with today’s usage patterns is also fast and easy to learn, bringing accounts payable staff employees improved productivity starting the very first day.


Who is Accounts Payable for?


Accounts Payable Automation has truly expanded over the past several years. Many factors have contributed to this generalisation, including solution availability as Internet services, Cloud offerings, SaaS mode and use-based pricing models, which help bring digitalisation to within reach of all types of organisations, regardless of their size or the volume of documents to handle.


Where should you start ?


Beyond critical basic criteria, such as solution performance, infrastructure security, resulting automation level, scalability, and others, choosing a digitalisation solution starts with optimal understanding of the organisation’s current situation as well as the problems to be solved. The steps are as follows:


Understanding functional needs: at the very outset, it is essential to involve all project participants, including the CFO, accountants, buyers, approvers, and other stakeholders to highlight pain points and regularly encountered challenges, while also quantifying costs as much as possible. Performing an audit of your current process also represents an important starting point: you must be familiar with the types of documents to process and their volume, as well as invoice workflows and the various people involved.


Defining your qualitative and quantitative objectives: measuring quantitative objectives is relatively easy once you have set up relevant indicators, such as invoice processing cost and time; average processing time of an invoice from reception to archive; the number of invoices handled by each accountant; and the number of supplier disputes and related processing time.

Qualitative objectives generally depend on the identified pain points, for example:


Planning your project: it is critical to start by defining an optimal schedule that takes various issues into account, such as: When is the best period for the accounting team to undertake an organisational change? Does the project need to be coordinated with another change or new accounting package?


Project implementation times vary with the chosen type of solution, its complexity and the required level of customisation.


Discover the key steps that are crucial in selecting the right AP automation solution, explore AP automation best practices exhibited by top performers, and revamp your AP before your competition does.


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