How Invoice Automation is Critical to Making End-to-End Accounts Payable Processes Work Better
A good corporate accounting professional knows there’s more to accounts payable than processing invoices. Of course, invoice processing has been a focus for process optimization for decades because it’s such a labor-intensive operation when it’s done manually. But in the last ten years, improvements in automation technology have put manual processing on the endangered species list. To choose the best automation solution or to make the most out of your existing AP automation software, it is important to keep a holistic view of end-to-end accounts payable.
In this post we will first look at each step in the end-to-end accounts payable process. Then we will look at how automating these steps can streamline accounts payable processes.
End-to-End Accounts Payable Process
There is more to Accounts Payable than invoices and signatures. In fact, some would argue that the accounts payable process starts with procurement. Here are the steps in the entire accounts payable process from procurement to payment.
1. Procurement
Whether it is a manufacturer ordering materials or a professional services organization paying a monthly utility fee, procurement is the first step in the accounts payable process. Procurement begins the moment a purchase order is created, or a service agreement is made.
2. Receipt
Receipt of goods and services is the next step in the process. Again, whether it is an order of materials being delivered to a manufacturer's warehouse or an energy bill for an office, receipt happens upon delivery. In the case of utilities and other services, this may be an ongoing step.
When it comes to goods and materials, receiving often includes verification of the delivery and condition of the goods is required. Damaged or missing goods, or service interruptions may require a follow-up for replacements or credit.
3. Invoice Processing & Payment
Like we said in the top of the blog, invoice processing is a fairly complex step in the process, which is why it receives a lot of attention. Invoices contain a lot of information from itemized lists of items, pricing and total amounts-due, to branch locations, vendor information and dates. All of this information has to be verified, matched against purchase orders and entered into an accounting system, whether paper based or fully digitized. If there are no exceptions or reconciliations needed, invoices then get routed and approved, and payments have to be made to the vendor. When done manually this is a time-consuming process and prone to costly errors. That’s why AP automation is such a great place to invest tech spending–streamlining invoice processing can save some serious cash.
Related: Understanding Invoice Processing Automation
4. Reporting & Analytics
Reporting and analytics are key to improving accounting efficiency. Good data can help pinpoint bottlenecks and improve processes. Common performance indicators to measure in your end-to-end accounts payable process include:
- Average Time Per Invoice
- Cost Per Invoice
- Number of Invoices Processed by Each Employee
- Exceptions per Month
- Number of Steps in Your AP Process
Learn More about: How to Optimize Accounts Payable Performance
Making the End-to-End Accounts Payable Process Work Better
Visibility into your end-to-end accounts payable process is key. With a lack of visibility into the status of every invoice can be frustrating and sometimes requires pinging multiple people. Being able to just find it in the digital record is such a relief if you have ever dealt with the frustration. It’s also important to be able to track duplications and other costly mistakes. Lastly, visibility is also key to preventing fraud.
The right accounts payable automation software will give you the visibility you need to reduce these kinds of headaches. As we have been saying throughout this post, automation is critical in improving your end-to-end accounts payable process. Some of the other benefits include:
- Improve invoice cycle time and costs
- Avoid late fees and capture early pay discounts
- Reduce or eliminate lost & misplaced invoices
- Improve planning and cash flow management
- Improve vendor relations
