The process of electronic Accounts Payable (AP) approval has streamlined the invoicing process for many companies. By automating this task, businesses can reduce errors, save time, and improve efficiency. However, there is much more that can be achieved in the purchase-to-pay process through digital transformation and straight through processing.
Companies can leverage technology to completely overhaul their financial systems, implementing end-to-end digital processes that eliminate manual intervention and enable real-time decision-making.
In this article we'll talk about the value of electronic invoicing and AP approval processes plus how embracing digital transformation can help to achieve greater agility, competitiveness, and profitability in the long term.
The invoice approval process is a set of steps and procedures that an organization follows to review, verify, and authorize the payment of invoice for goods or services received. This process ensures that the company only pays for legitimate and accurate expenses, and that all financial transactions are properly recorded.
The process can be a time-consuming and complex task, especially when the AP department is handling large volumes of invoices and using manual processes. How does it work? Here is a typical outline of the invoice approval process:
These steps are then followed by periodic Accounts Payable reconciliation and reporting in addition to any internal and external audits that may occur.
Implementing an effective invoice approval process helps companies to maintain financial accuracy, prevent fraud, and ensure timely payments to vendors, ultimately contributing to the overall financial health and reputation of the organisation.
According to global research by The Institute of Financial Operations and Leadership (IOFL), the switch to automated process has been slower than expected with the majority of global AP teams (54%) still only partially automated. The effect of this becomes even more apparent as the same report states that top processing challenges for AP teams include delays due to invoice exceptions (22%) and too much manual data entry (21%).
But why is a manual process so problematic? Why does it pose numerous problems for finance teams beyond being time-consuming and lengthy?
Relying on a manual process can result in various added complexities, such as duplicate payments, inaccurate amounts, and missed deadlines. These issues can culminate in unnecessary expenditures, strained vendor relationships, and a decrease in trustworthiness with both clients and suppliers.
The manual invoicing process is also slow, leading to processing delays. The delivery of paper invoices to different departments or locations for approval can add days or even weeks to the overall processing time.
This lack of speed and efficiency can hinder a company's ability to track finances and make informed choices, which in turn make it more challenging to identify any financial issues.
Furthermore, relying on manual procedures increased the likelihood of errors, fraud, and non-compliance. Approvals may not conform to corporate policies and practices since they are not always documented correctly. And, without the documentation, it may be hard to track and identify any issues.
Finally, manual invoice processing can also be expensive, draining resources in the form of paper, printing, and mailing, as well as the time and effort required for human data entry and approvals.
As a company expands or adds multiple geographic locations - all of which involve a growing volume of bills - manual invoice validation processes can become unmanageable, causing further inefficiencies and affecting the company's overall productivity.
By embracing digital solutions like AP automation systems, businesses can address these challenges effectively. Having an electronic AP approval process ensures precise financial records, saves valuable time and resources, enhances vendor relationships, and supports well-informed decisions for driving growth and success.
Let's delve deeper into enhancing the Accounts Payable invoice approval workflow by implementing an Accounts Payable automation software solution.
Accounts Payable automation software digitises the payable invoice approval process, automates date entry, and provides real-time visibility into the status of invoices. By using automation software, business can reduce the risk of errors, speed up processing, and improve the overall efficiency of the invoice approval process.
Electronic systems can also help to ensure that invoices are routed to the appropriate approver according to the company's policies and procedures.
Implementing an electronic Accounts Payable approval process means multiple AP automation benefits, including the ability to reduce processing times, eliminate manual errors, and improve financial transparency. Automation further aids by reducing the need for manual input and transmission of invoice data, thereby minimising the potential for errors and delays.
Real-time visibility into the status of any single invoice can be quickly accessed, allowing businesses to monitor invoice progress throughout every stage of the approval process. And, by enforcing approval workflows, automation helps to ensure compliance with company policies and procedures.
This provides an audit trail of all invoice approvals which in turn helps business not just in the Accounts Payable process, but also in achieving overall greater financial control and accuracy.
Automating the payment process also strengthens connections with suppliers. This can increase a company's bargaining strength, allowing them to negotiate better deals and potentially even early payment discounts.
This means that not only does the automation solution save money, but it can actually make money as well!
Finally, electronic payment methods such as bank-to-bank Automated Clearing House (ACH) and wire transfers can help to streamline the entire Accounts Payable department's invoice approval procedure from end-to-end.
Cloud-based AP automation providers offer distinct advantages over their counterparts. These include:
Now that you're aware of how automation can enhance the payable invoice approval process, what should a business prioritise when selecting an electronic AP approval system? There are specific features that businesses should seek to ensure that the system efficiently streamlines their Accounts Payable processes.
First, an ideal system should offer end-to-end invoice automation, from receiving and approving invoices to paying the vendor. This saves time and minimises the chance of manual errors.
Second, the system should include a reporting feature capable of tracking approvals and providing real-time status updates and notifications to stakeholders regarding invoice progress. The frequency and timing of these notifications should be customisable based on the company's specific business processes and rules, catering to their needs. This feature should allow you to monitor your bills' status in real-time, processing timelines, payment approval statuses, and identify any bottlenecks.
Third, it is crucial to ensure the system seamlessly integrates with other existing accounting systems used by your business. This will accelerate the implementation process and help enable a smooth flow of information.
Finally, a good automation system will provide a secure platform for storing and retrieving invoices and related documents online, reducing the reliance on physical document storage while enhancing accessibility. This, along with the ability to enforce approval workflows and compliance, ensures adherence to various legal requirements including both regulatory and compliance issues.
Attaining financial transparency and control is paramount for any organisation. This is especially crucial for multinational companies that adhere to diverse legal frameworks, such as the European Union's e-invoicing rules.
Here's how an automated AP approval workflow can enhance these aspects:
Implementing an AP automation system may pose challenges for some companies. Among the most common are:
Employees may be hesitant to embrace new technology or workflows, causing resistance to change and implementation delays.
Involve key stakeholders in the process. Set clear expectations, communicate the benefits of the new system, and address concerns or questions. Emphasise that the goal is to streamline work, not eliminate jobs.
Integrating the new system with existing accounting software or other systems can be complex, especially for any company with intricate IT infrastructures.
Overcome integration hurdles by carefully planning the integration process. Understand the ideal approach and specific needs before you start. Ensure compatibility with current accounting systems.
Technical issues such as system bugs or errors may arise during implementation, causing delays and frustration.
Employ a seasoned automation platform with a dedicated implementation team and support. Establish a partnership to swiftly address any issues. Conduct thorough testing before deployment and have a contingency plan in place.
Migrating data from existing systems to the new automated one can be demanding and time-consuming, particularly if the data is in diverse formats or stored in multiple locations.
Develop a clear data migration plan. Verify data compatibility before beginning implementation.
Ensuring that employees are well-versed and comfortable with the new system can be a significant challenge, especially if the system is complex or has a large user base, or if the workforce is not tech-savvy.
Confirm that the vendor offers comprehensive training, designs user-friendly interfaces, and commits to ongoing support. Communicate this information up front. Make sure that all this is communicated to the employees upfront to alleviate concerns
Implementing an AP automation system can be a substantial investment, especially if the chosen system requires any kind of significant customisation or integration with other systems.
Evaluate the cost-benefit ratio in advance. Explore different pricing options and assess the long-term Return on Investment (ROI) of the system.
Yooz is an all-in-one solution, focused exclusively on automatic document processing and covering the entire Purchase-to-Payment (P2P) cycle. With seamless integration into over 250 different financial management systems coupled with a dedicated support team, the company ensures that your business receives the attention that it deserves. Moreover, our commitment extends well beyond the implementation stage.
Yooz reinvests a substantial 25% of its revenue into in-house research and development, ensuring that the company delivers cutting-edge technology including advanced Optical Character Recognition (OCR) and three-way data matching for verification. In addition, Yooz offers continuous training through integrated documentation and webinars within the software itself.
Our customer-centric approach has yielded impressive results: the company consistently achieves over 40% annual growth on a global scale.
By automating the AP invoice approval process, you not only save time but also enhance strategic decision-making and cash flow management. This guide has hopefully equipped you with valuable insights into the benefits of Accounts Payable automation software in addition to the key features to seek in a provider.
However, remember that knowledge is just the starting point; taking action is crucial. To discover how Yooz can efficiently streamline your invoice management process using Accounts Payable process automation, contact us today to schedule a personal demo.