What is Accounts Payable Automation?

It is rare these days to find someone who is not at least a little familiar with the term, "AP Automation" or has some preconceived notion of what "AP Automation" is and how it works or should work. 

It's important to understand that AP Automation can touch many processes and internal systems. So, from that regard there may be a few moving parts to an AP Automation engagement. But not to worry as AP Automation, by today's standards has matured. 

If we look at the definition of "Accounts Payable", Wikipedia defines it as "money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created.

SO WHAT IS ACCOUNTS PAYABLE AUTOMATION?

Accounts payable automation or AP automation is a term used to describe the ongoing effort of many companies to streamline the business process of their accounts payable departments. The accounts payable department's main responsibility is to process and review transactions between the company and its suppliers. In other words, it is the accounts payable department's job to make sure all outstanding invoices from their suppliers are approved, processed, and paid. Processing an invoice includes recording important data from the invoice and inputting it into the company’s financial, or bookkeeping, system. After this is accomplished, the invoices must go through the company’s respective business process in order to be paid.

This process is straightforward but can become very cumbersome, especially if the company has a very large number of invoices. This problem is compounded when invoices that require processing are on paper. This can lead to lost invoices, human error during data entry, and invoice duplicates. These and other problems lead to a high cost per invoice metric. The goal of automating the accounts payable department is to streamline this invoicing process, eliminate potential human error, and lower the cost per invoice.

Some of the most common AP automation solutions include E-invoicing, scanning and workflow, online tracking, reporting capabilities, electronic invoice user interfaces, supplier networks, payment services and spend analytics for all invoices.

With the increasing availability of AP Automation solutions, businesses are driving process improvement in AP even further. By applying end-to-end AP Automation to their accounts payable department, organizations can accelerate invoice processing speed and accuracy while improving operational costs. Some organizations report that by implementing AP Automation they have managed to almost completely eliminate human intervention from the AP process, thus saving 60% to 80% of the time that was previously spent on manual processing.

In Summary

By centralizing AP, revising processes, introducing automation and reducing the cycle time from weeks to a few days, AP departments can give the CFO the increased productivity and information vital to meet his or her goals. Discount capture, spend analysis, and cost reduction are benefits that directly impact the margin needed by companies in this day and age, at the same time giving the C-suite the visibility and audit capabilities they need to confidently sign off on the effectiveness of financial controls and management certification of results.