Tech Tidbits: What is Accounts Payable Automation?

Manual invoice processing can cost businesses up to $16.5 per document—a significant drain on financial resources that smart automation eliminates. The solution? Automating accounts payable functions to eliminate manual labour and processes.

Contents

• What is AP automation?
• Why is AP automation important?
• When is AP automation needed?
• Who uses AP automation?
• How does AP automation work?
• How can TRG help you?

What is AP automation?

Traditional paper-based financial processes create costly bottlenecks that modern businesses cannot afford. AP automation addresses these challenges through intelligent technology that streamlines vendor payments and related workflows.

Accounts payable automation, or AP automation, involves the digital transformation of all or a portion of labour-intensive and time-consuming AP processes, such as data entry and invoice matching.

The market for AP automation is predicted to reach USD 7.5 billion by 2030 with a CAGR of 12.5% between 2022 and 2030. The growth is primarily driven by the need for digital transformation as well as growing concerns about payment delays, fraud, and inefficiency.

Read more: 4 Deadly Sins of Financial Consolidation

Back to the top

Why is AP automation important?

AP teams are often required to maintain peak performance amidst increasing business and market complexities. Manual AP and invoice processing are not only waste valuable time and resources but also incredibly costly.

AP automation helps accelerate processes and delivers significant advantages:

• Allow businesses to monitor cash flow in real-time and make more data-driven decisions

• Fast-track payment processing, thus eliminating costly late payment fees or delays

• Ensure organisations stay secure with multi-layered protection includes:
  Advanced encryption protocols
  Dual authentication systems
  Active monitoring capabilities 

Moreover, smart automation creates opportunities beyond cost reduction. 

Modern solutions are equipped with strong governance frameworks to protect business interests, establish clear approval hierarchies with complete audit trails, and provide a robust defence for invoice processes. 

Read more: Solving 5 Common Accounts Payable Issues with Automation

Cloud-based AP automation solutions also grow with the business, flexibly scale and adapt seamlessly to increasing transaction volumes and supplier networks. This flexibility eliminates the traditional correlation between growth and increased headcount.

Furthermore, AP automation supports ESG initiatives through enhanced vendor tracking capabilities, positioning organisations favourably in sustainability-focused markets.

Quick, transparent payment cycles due to automation build trust and reliability, which can translate to helping businesses strengthen and nurture relationships with their vast network of partners and suppliers.

Financial teams gain strategic advantages through improved capital management. Real-time analysis reveals trends, flags irregularities, and identifies opportunities, enabling confident, data-driven decisions about resource allocation.

Back to the top

When is AP automation needed? 

Businesses, regardless of their industry, can greatly benefit from automation. However, some very obvious warning signs indicate you are in desperate need of automation. 

• You are constantly drowning in paperwork and buried deep under piles upon piles of paper invoices.

• It takes weeks to process an invoice from receipt to payment.

• You spend an ungodly amount of hours entering invoice data into the accounting system.

• You easily spot data entry errors (not just a couple but a lot of them, all the time!)

• You frequently encounter problems finding invoices or are oblivious to the invoice’s status.

• You can’t get access to relevant data to make decisions on time.

• You miss out on early payment discounts due to long manual processes.

• You have to pay a hefty amount to process invoices, which include costs like labour, storage, paper, printers, ink, stationery, etc.

• You frequently encounter disputes with vendors and suppliers due to payment delays, which strain the business relationships.

• The current AP process can’t keep up with the growth and demand of your business.

• You can’t provide auditors with the necessary documents and evidence for auditing.

• You are afraid of facing fraud and non-compliance risks as the current processes do not have any protection.

If you recognise any of these warning signs in your organisation, it is time to consider implementing AP automation.

Read more: Can Your Bank Reconciliation Process Be More Efficient?

Back to the top

Who uses AP automation? 

Key user groups who can benefit from AP automation solutions:

Accounting teams:

• Financial data consolidation

• System integration management

• Transaction accuracy assurance

Procurement specialists:

• Purchase order reconciliation

• Vendor relationship optimisation

• Discount capture maximisation

Industries that typically handle large volumes of transactions and complex regulatory requirements are particularly well-suited for AP automation:

• Hotel: To centralise invoices from a wide range of vendors, including F&B suppliers, housekeeping services, maintenance agents, etc. as well as from properties spread across multiple locations.

• Food & Beverage: To efficiently keep fluctuating food prices under control while optimising inventory management by keeping track of changes and adjusting purchasing strategies accordingly.

• Healthcare: To manage large volumes of invoices from various suppliers while ensuring compliance with regulations like HIPAA.

• Manufacturing: To handle complex purchase orders and invoices related to raw materials, components, and finished goods.

• Retail: To efficiently manage inventory and process high volumes of invoices from numerous vendors. 

• Construction: To handle invoices related to subcontractors, materials, and equipment rentals.

Read more: 7 Worst Financial Fiascos Caused by Excel Errors

Back to the top

How does AP automation work?

The primary focus of automating the accounts payable function is to fast-track and eliminate redundant, time-consuming manual processes, thus increasing accuracy, visibility, and efficiency.

It starts with extracting data from the invoice using two primary methods:

• Electronic invoicing via B2B/EDI connections or supplier portals

• Paper invoice digitisation using OCR technology combined with AI

Once all information is captured, it then automatically moves through a series of predefined validation systems to match it with the right purchase orders and goods receipts. This ensures that only verified transactions are able to proceed to the next step.

Below is a brief breakdown of the technology that automates each key stage of the AP process.

Various smart AP solutions today utilise advanced technologies like machine learning and artificial intelligence to recognise patterns, learn the processes, and improve over time, thus further enhancing accuracy.

Smart workflows, which run on predefined rules, are also one of the core components of automation. They automatically route documents to the next step and to the appropriate personnel to approve, reject, schedule payment, etc., ensuring the right invoice gets paid at the right time and with the right amount.

Read more: The Future of Invoice Processing: Smarter Data Extraction with OCR

The automatisation also brings the latest information, allowing users to make timely and more informed decisions. The solution can also be integrated with existing ERP systems to create a more streamlined data flow across the organisation.

What happens when all payments are made? Invoice details are then safely archived in a cloud database for future retrieval or audits if needed, providing complete transparency throughout the invoice processing workflow.

Fundamentally, AP automation, just like its name, is the automatic routing of documents digitally based on predetermined criteria. The approach not only streamlines operations but also boosts efficiency and saves resources.

Back to the top

How can TRG help you?

TRG International is proud to partner with Yooz, a leading provider of cloud-based purchase-to-pay (P2P) automation solutions to help our clients transform not just AP processes but also their entire finance function.

Yooz is an all-in-one solution for every P2P need, providing:

• AI, deep learning, and RPA to automate 80% of invoices

• OCR technology to instantly and accurately capture invoice data

• Smart workflows for PR/PO, approval, and more

• A consolidated and unified platform for archiving all kinds of documents

• Integration with over 250 ERP systems

• Mobile capabilities to slash approval time

Back to the top

Wonder how our Yooz solution can benefit your organisation? Watch our on-demand webinar to get a taste of what Yooz is!