The Definitive Guide to Accounts Payable Automation

Data Entry Errors

It is nearly impossible in modern business to avoid bringing accounts payable data into a digital format. So at some point, the information on a form or receipt will have to be keyed into a computer. Data entry is one of the most common places for an error to creep in, simply due to the volume of information and the human factor. Mistakes are inevitable with this method. A study conducted on the use of spreadsheets found that 88% of the documents examined suffered from some type of data entry error. During a particularly busy period or one in which there is insufficient staff to deal with the volume, the need to rush exacerbates the chances of including errors.

Slow or Inconsistent Processing

Manually entering data, even with a touch-typist that can handle 100 words per minute, is slow. Moreover, for companies that don’t have a person with that level of clerical skill, it is slower still. That is due to simple human limitations of how much can be typed in a given period, with only one pair of eyes and one mind to process everything. On top of this, people often develop their own methodologies or “shortcuts” to get work done faster. It’s not unusual for these methods to yield inconsistent results as different people handle accounts payable data in different ways to get through a pile of work. In other cases, different clients using their own invoicing systems, rather than a standardized one, can also slow things down.

Storage & Retrieval

Another major challenge with manual AP processing, especially much older, more established systems, is that it takes up a lot of physical space. Numerous documents, if still required, must be preserved somewhere, which means valuable physical workspace is used purely for archival purposes. On top of space issues, even a dedicated, meticulous filing and storage system doesn't guarantee easy retrieval of data when required. In the same way that books can be easily misplaced in a library, despite the established Dewey Decimal System, errors occur in accounts payable filing and documentation. One incorrectly filed document can take a long time to retrieve later.

Fraud

Finally, the most serious issue with manual AP processing is that fraud is easier to commit within this system. Accounts payable is a vulnerable point in company finances because it is where funds can enter or leave a business. Therefore, an unscrupulous employee with the right knowledge can hide or redirect funds at this critical juncture, costing a company both time and money. Anti-fraud measures are much harder to implement in a manual system where there are more "blind spots" to exploit.

Better Record Keeping

One of the most dreaded notices a company may receive is an audit. A government-ordered audit requires many documents to be sifted through, organized, and supplied to the auditor. Most companies are caught off guard by an audit and end up hoping that everything is accounted for. To avoid being surprised or reprimanded, an accounts payable automation system can take a big chunk of the logistical nightmare away from this demanding, organization-intensive activity. With proper AP automation that correctly organizes and files data and then notifies all relevant parties of transactions in need of review, approval, and filing, things no longer “slip between the cracks.” Your company’s years of carefully processed and archived data can be easily retrieved, whether for internal review or to comply with audit requests.

Lower Costs without Outsourcing

One of the most straightforward reasons to outsource work is to lower costs. Work that is handed off to less-developed nations is often done at lower pricing, and thus businesses recoup their losses by paying for the same amount of work with fewer dollars. However, outsourcing lowers costs by lowering the prices paid. It does not necessarily improve, or even maintain, the quality of the work or increase efficiency. AP automation solutions are a way to lower costs by increasing efficiency. By spending less time processing, approving, retrieving, and managing data, the company will spend less money overall. Why pay less for inefficiency, when an AP automation solution enables you to spend less and receive a better output?

Increase Efficiency System-Wide

The American Productivity & Quality Center noted that “36% of organizations say their financial processes are misaligned,” and this resulted in lower performance that had a widespread impact on the entire business. The study also noted that poor access to internal financial data led to a 3.3% error rate in sales forecasting for these companies, versus a 1.5% error rate for business with better-managed finances. In some cases, there were even reports of a 1% loss in sales due to poorly managed financial systems, such as the accounts payable department. Accounts payable automation can be a crucial part of an enterprise’s resource planning and help to reign in systemic inefficiencies. Key features such as centralized, accessible data in the cloud or automatic notifications of receipt, processing, and approval can make a big difference in how quickly transactions are completed and reported, making for faster, better financial data.

Increased Employee Productivity

AP automation means that the average, run-of-the-mill invoices that never cause a business any issues, but merely take time to receive, process, and store, can be safely done by the software and not a valuable employee.

Powerful human resource efforts can instead be directed to something that requires expertise and judgment such as a problem invoice or some kind of improvement. There’s no point in devoting employee efforts to a routine task that can be easily handled by invoice processing automation when knowledgeable expertise may be required for crisis management or generating more business.

Security & Oversight

The transparent, easily accessible nature of accounts payable automation provides much more security for both a business and its customers. Fraud is more difficult to enact with AP software tracking all moves and changes. Manipulation is much easier to detect when the software is constantly there to flag anomalies and deliberate attempts to skew data.

The AP software has superior tracking abilities. When alterations are made within the system’s organized data, whether expected or an attempt at fraud, the system notes who has logged in and made such changes. Good work will always be recognized, and deliberate attempts at fraud or sabotage are also cataloged. Digital forgery or fraud is much more difficult to execute anonymously than it is when using paper documents.

Easier Access

AP automation ensures that even when staff are not in the office, they can access and make changes to data as needed.

Cloud storage with proper security allows deletions, additions, or new transactions to be conducted in the centralized system. Once a change is completed, everyone who has access to the file is automatically notified. Any processing or approval can then be made, and upon completion of the action, a notification can automatically be sent to relevant parties.

In the same way, any business data that might be required can be called up on a smartphone if the staff member is authorized and has access to the right software. So even if a meeting abroad suddenly requires an extra bit of financial information, the data is there.