Managing accounts payable can be a headache for businesses, but it's an essential part of accounting that must be managed properly. Poor AP processes can lead to delayed payments, strained vendor relationships, and compromised cash flow. And this not only impacts your bottom line, but can also damage your business's reputation and potential for growth.
In this article, we'll provide five proven AP automation best practices every business should follow to reduce costs, boost efficiency, and transform their AP department into a strategic asset.
Using comprehensive AP software is fundamental to improving accounts payable processes. When choosing accounts payable automation software, look for solutions that seamlessly integrate with existing financial systems like Xero, ensuring uninterrupted data flow across your organisation's existing systems. Effective AP automation solutions should also offer features such as:
● Electronic payment processing: AP software payment options streamline transactions and minimise delayed payments, while providing enhanced security and tracking capabilities.
● Automated AP workflows: Automated expense approval workflows ensure AP invoices follow predetermined approval routes, eliminating bottlenecks, reducing time-consuming manual tasks, and ensuring accuracy.
● Optical Character Recognition (OCR): OCR technology automatically extracts and validates invoice data, dramatically reducing manual entry and associated errors. ExpenseOnDemand's receipt scanner app is powered by AI and OCR, allowing users to extract data from receipts simply by taking a picture of them.
● Access from mobile devices: Mobile accessibility allows your accounts payable team to review and authorise payments when out of the office, preventing delays in the payment cycle.
Implementing accounting software with these capabilities results in an accurate and efficient AP system, and provides business owners with real-time visibility into their accounts payable workflows.
Since 2022, there has been a 28% increase in cyberattacks on small businesses, making the protection of sensitive payment data a priority for AP departments. Security breaches can result in significant financial losses, damaged vendor relationships, and compliance issues.
To protect sensitive data, businesses must implement robust AP automation solutions that incorporate multi-layered security measures to protect sensitive payment information. This includes encryption of data, secure user authentication, and role-based access controls. This ensures that sensitive vendor information and payment details are protected but remain easily accessible to authorised personnel.
Businesses must also implement AP automation systems with built-in validation checks and standardised data capture processes. AP systems should automatically flag discrepancies and unusual patterns, helping prevent fraud and manual data entry errors before they occur.
Comprehensive audit trails can also ensure both compliance and operational efficiency. Every transaction, modification, and approval should be automatically logged, creating a clear record of all AP activities and data. This documentation is invaluable for internal controls, external audits, and process optimisation.
Implementing proper verification protocols, including multi-factor authentication and automated three-way matching between purchase orders, receipts, and invoices, adds an additional layer of security and accuracy to AP processes.
Strong vendor relationships are fundamental to efficient AP operations. There are several ways businesses can improve vendor management:
● Self-service vendor portals: Vendor portals enable suppliers to submit invoices, track payment status, and update their information independently, reducing the burden on your AP team and providing vendors with real-time visibility into their transactions.
● Standardising payment terms: By establishing clear payment terms and AP processes, you create predictable payment cycles that improve cash flow management and vendor relationships.
● Vendor discounts: Businesses can improve vendor relationships through early payment discounts. Modern AP automation systems can automatically identify early payment discount opportunities and offer them to eligible vendors, while simultaneously considering cash flow requirements.
● Clear communication: Clear communication channels are essential for maintaining healthy vendor relationships. Automated systems can provide vendors with timely updates on payment status, issue resolution, and policy changes, fostering trust and transparency within your supplier network.
Optimising vendor management not only streamlines your payment processes, but also strengthens your supply chain relationships and improves cash flow management.
Establishing and monitoring key performance indicators (KPIs) is essential for measuring the success of your AP automation initiatives. Without clear metrics, it becomes impossible to quantify the return on investment of AP automation tools and to improve AP processes effectively. Some key AP metrics that organisations should track include:
● Invoice processing time
● Cost per invoice
● Percentage of invoices processed straight-through
● Early payment discount capture rate
These metrics provide valuable insights into operational efficiency and financial performance. Days Payable Outstanding (DPO) should also be monitored to optimise cash flow while maintaining vendor satisfaction.
Modern AP automation solutions provide real-time analytics and reporting capabilities, enabling organisations to monitor these key metrics continuously and easily make adjustments when necessary. By establishing and measuring clear KPI metrics, businesses can identify AP workflow bottlenecks, exception rates, and approval cycle times.
The success of AP automation also depends on effective change management and training programs. Even the most sophisticated automation solution will fall short without organisational buy-in and successful user adoption.
Businesses must clearly communicate the benefits of AP automation and demonstrate how new systems will address current pain points, improve efficiency, and contribute to the organisation's strategic goals. Involving key stakeholders early in the implementation process is key to addressing concerns and incorporating valuable feedback.
Comprehensive team training, including onboarding and continuous support, ensures your accounts payable department and vendors can effectively use the new system. Role-specific training materials that address different user needs, from basic invoice processing to advanced reporting functions, can teach users how to use the software effectively.
While comprehensive onboarding is crucial, businesses must also focus on continuous improvement, which includes gathering user feedback, monitoring system performance, and staying up to date with emerging AP trends and technologies.
ExpenseOnDemand's innovative software revolutionises accounts payable processes. Featuring AI-powered receipt scanning, customisable approval workflows, and real-time visibility of expenses, it addresses key AP challenges and reduces manual processes. The user-friendly AP software seamlessly integrates with accounting systems for uninterrupted dataflow across your financial ecosystem.
By following these AP automation best practices and implementing ExpenseOnDemand's digital solutions, you can optimise your AP processes and stay ahead in today's competitive business landscape.
Book a demo with ExpenseOnDemand to improve your AP processes.
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