Are you thinking about automating your AP department? Perhaps you just want to learn more about the AP automation process in general? This blog will cover everything you need to know about AP automation and guide you in terms of how to proceed if you want to automate your own department.

Although the core of AP Automation revolves around smart processes for digital invoices, capturing the invoice and managing the digital file are all a part of the package.

Capture

If you are dealing with paper invoices, the first part of the process is converting those to digital copies. Invoices need to be prepped (staples and paper clips are removed, dog ears are unfolded, etc.) and scanned. Once the pages are all scanned, they go through an application to extract all of the necessary data such as vendor name, invoice amount, invoice date, invoice number, purchase order number, etc. 

Different businesses will have different data that they are looking to have extracted, but a good piece of software should be able to extract anything without a problem, including multiple line item details.

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Already Digital?

If you are already dealing with electronic invoices, then you can skip the scanning part and extract data from your digital files. Every invoice will show up as an image with all of the information off that invoice indexed along the side for the viewer to see. 

Manage

This is where your business rules come into play. Once invoices are scanned and the data is extracted, they are put into a workflow. This workflow is customized to adhere to your specific business needs. 

If you have invoices that consistently follow the same GL coding rules, then those invoices can be automatically coded and routed to the approver. In situations where invoices cannot be coded automatically, they are sent to a coder and then routed to an approver.

No matter what your setup looks like, the workflow can accommodate it. Electronic signatures can be burned into the image to show that the invoice has been approved and that it can go into the accounting system.

A good AP automation system offers 2-way and 3-way matching. This means that when an invoice is received, the system will automatically look for the Purchase Order for a 2-way match and for the Bill of Lading (or receiving report) in the case of a 3-way match. 

https://polarimaging.ca/manage/

Automate

Once the invoice is coded and approved, it is automatically uploaded into your ERP or accounting system. As invoices are processed and approved, they become available in your accounting application which means your data is updated constantly giving you more accurate reporting. 

* If you have invoices that can be completely validated against a purchase order, then there is no need for human intervention and the whole process is completely automated. In this case the process is referred to as “touchless processing”.

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What can be automated?

Any process that is logical and consistent can be automated. 

Do you have portions of your process that aren’t logical and consistent? No problem, when a specific task requires human intervention to make a decision, the invoices are simply routed to an individual to make a decision and then the invoice can continue back in the workflow for additional automated tasks to be performed.

Automation at work

Oftentimes department managers are hesitant to automate their AP departments because they don’t want to put any of their current employees out of a job. In reality, AP can help increase the productivity and job satisfaction of employees. 

When AP automation is introduced into a department, it takes care of the repetitive and tedious work. This means that employees can focus their time and attention on more important and more stimulating tasks. With AP Automation, advanced technology such as A.I (artificial intelligence) can be leveraged to take care of tedious and repetitive tasks such as extracting data from invoices.

During the course of a regular work day, the accounting department can get more work done and be more efficient without hiring additional employees. In addition current employees will feel more accomplished as they complete more complex tasks instead of tedious ones.

Benefits

Save money

A major benefit people think about when switching to AP Automation is the cost savings and the ROI. These cost savings happen for 2 different reasons. The first is the amount of money saved on processing an invoice. It costs on average $11.76 USD to process an invoice manually. When the process is automated that cost can be reduced by 60-70%. 

AP automation will also help you save money by making it much easier to take advantage of vendor discounts. On average, when manually processing invoices, less than 10% of vendor discounts are actually taken advantage of. Even 1%-2% discounts can add up significantly over the course of a year adding to your cost savings.

Save time

Another advantage of automating your AP is that it makes your department more efficient. Since artificial intelligence would be used to do the tedious work, it would make the process quicker and it would eliminate error. If error is eliminated from the process, this means that no task has to be redone which increases productivity. 

Need to keep your invoice for 7 years? No problem. This requirement can be automated as well with a records retention feature.  Using a records retention feature, you can set how long your retention period is for each type of document and then the system will alert you whenever a document has reached its retention and will give you the option to purge it. Having this features means that you don’t keep unnecessary documents and you don’t have to waste your time periodically going through your files to see what has met its retention

Protect your files

When you manage your digital invoices in a centralized system, you add another level of security to your office. Having centralized digital files helps protect your information from both natural elements such as fires, floods, tornadoes, etc, and human harm such as theft, undesired deletion and misfiling. 

You also help prevent against files and invoices getting lost. When papers start piling up or moving from person to person, they can very easily get lost. A good AP Automation solution will offer backup and recovery which means you will never lose your digital files no matter what.

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Automating your AP department benefits the environment

When you automate your AP you essentially start eliminating the production of paper in that department. While some of your suppliers may still provide you paper invoices, once those invoices are scanned they do not need to be printed again. Everything is done electronically and everyone who needs to see the invoice can see it digitally. By no longer having to print they invoices every time a copy is needed, it helps saves a lot of paper which ends up saving trees!

Many companies who switch to AP automation try to get all their suppliers to switch to electronic invoices. Now although not every supplier might be okay with providing an electronic invoice, even if a certain percentage of them stop printing invoices, it adds up to a significant amount of paper saved over time.

In our current environment more and more companies are taking environmentally friendly approaches to their business practices. It is becoming a trend that consumers also look for when considering working with a company. Eliminating paper in the AP department is a great start towards a paperless office. It is an easy step to take that can have a huge positive green impact. 

You’re not Alone

If you’re still managing your invoices in paper format you’re far from being alone. Why do you still manage invoices in paper format when we live in a digital age? If you’re like most companies, you receive many invoices already electronic so why are you still printing invoices today? Based on our experience, it’s because you simply do not have a centralized system that adequate enough to manage your unique AP process.

Sure, you can scan or save all those documents after the invoices are processed into a company share drive. Why not just let your invoices flow through the same AP process as they do today but in an electronic workflow? Once the invoices have gone through your unique workflow process, they can remain in an electronic system for reference until the invoices are no longer required to be kept under your control, ensuring compliance. 

Tip: Define your process first and then look at technology to automate it.

Every different company and AP manager will want something different in their solution. While AP is capable of suiting everyone’s needs, there might not be examples out there that show off the capabilities that you are specifically looking for. Online examples have to show the general features that could apply to everyone. The best way to see if the solution can work for you is to talk to a representative and go over your business needs. A quick discovery call doesn’t cost anything and could help you save a lot of time and money in the future.