How Accounts Payable Automation Helps High-Growth Companies

Automation can be a huge time and money saver for corporate finance departments — especially accounts payable (AP). Automating repetitive tasks allows for better accuracy and frees up time for more important accounting practices like strategic planning and forecasting.

For high-growth companies, saving time and money and operating as efficiently as possible is crucial to maintaining momentum.

Plenty of accounting duties can be improved through automation, but for now, we’re going to focus on accounts payable. Read on to find out how accounts payable automation can help high-growth companies.

What Are Accounts Payable?

Accounts payable is a portion of the general ledger that documents the amounts owed to suppliers or vendors for goods or services that have not yet been paid for.

The sum of all outstanding payments owed to vendors appears as the accounts payable balance on the company’s balance sheet under current liabilities. It would appear on the vendor’s ledger under account receivable.

For example, if Company A orders a shipment of paper from Company B, Company A would record the order under accounts payable, while Company B would record the same order under accounts receivable. 

Managing these payments is a crucial part of maintaining your company’s cash flow.

What Is the Accounts Payable Process?

A typical accounts payable process starts with receiving an invoice for payments that are due. The accounting department will then review and verify the invoice, ensuring that the charges match the order of goods or services requested. 

Managers will then approve the invoice, confirming the quantity ordered and the amount spent, and approving the purchase to be made. The invoice will then be recorded to the company’s books — this is usually manually entered into accounting software by an employee. Finally, the invoice will be paid to the vendor via check or an electronic payment. 

To recap, the traditional accounts payable process looks like this:

1. Receive invoice
2. Review and verify invoice
3. Approve invoice
4. Record invoice
5. Make payment

The AP department is responsible for ensuring that the payments are made on time to avoid additional charges and damaging the relationship with the vendor or supplier.

Ways to Automate Accounts Payable

There are plenty of ways to automate accounts payable. And despite some fears, automation is not a means of replacing human labor. In fact, it takes over menial tasks to free up time for employees whose skills go well beyond data entry and matching numbers.

Here are some of the accounts payable tasks that you should consider automating.

Electronic invoicing and OCR Technology

The invoice is the starting point for all AP tasks, so it’s crucial that it is received on time and the information is transferred correctly to your company’s ERP or accounting software. If you’re still sending or receiving paper invoices, it’s time to stop now. 

Making the switch to electronic invoicing allows invoices to be stored in a way that is easier to access, more organized, and more secure (with the right encryption). Especially with the rise in remote work, having a single copy of a physical document is no longer an efficient way to do accounting.

Furthermore, the development of OCR technology takes electronic invoicing one step further by eliminating the need to manually copy information from an invoice into your company’s accounting system. OCR stands for optimal character recognition, and the technology makes it easy to transfer written or typed words into machine-readable text.

Using OCR software to automate data entry saves loads of time and eliminates the risk of human errors like typos, duplicate entries, or missing information. 

Approval flows

The approval of invoices is necessary, but can often be the source of delays and communication breakdowns. The invoice should be reviewed and approved by the person who placed the order, the department manager, and then the accounting department and/or CFO (depending on your company’s structure). 

Coordinating all of these approvals can be a nightmare if sharing a document on paper or over an email chain, which also compromises security and increases wait times. It also doesn’t create an easy chain of proof to reference later.

By using software with automatic approval flows built-in, the right people will be notified in the right order. A digital “paper” chain is created and stored, ensuring that no steps are skipped. This not only saves time, but ensures better accuracy.

Verification and matching

Your accounting department is overqualified for sorting through invoices and matching them to the purchases made. OCR technology can be utilized here too, automatically reading figures from invoices and matching them with corresponding purchase orders, receiving paperwork, or other necessary documents.

The automation of verification also makes it easy to identify any discrepancies between orders sent, products and services received, and payments made.

Make payments with a virtual card

When it comes time to transfer payments to vendors and suppliers, using a virtual card makes things a breeze. In addition to being able to control the amount spent and the vendor paid, card owners can approve others to use it, as well — meaning business doesn’t have to stop because one person is out of the office.

Choose a virtual card that can lock specific accounts to particular vendors. This way, payments are easy to approve and can be automatically categorized as they are made. This also makes it easy to spot any unusual or duplicate charges. Mesh Payments is even able to alert you when a cheaper alternative to certain vendors is available.

Benefits of Automated AP for High-Growth Companies

Improve accuracy

According to the Institute of Finance and Management (IOFM) 3.6% of invoices contain errors, adding additional time and money to correct — if they’re even caught at all. If your company is processing hundreds or thousands of invoices, that number of mistakes adds up quickly. And all accounting departments know that it only takes one minor error to throw off the books.

Automating tasks like entering data from e-invoices and matching invoices to orders take the human error element out of the equation.

Save time

Automation gives you the peace of mind that comes with improved accuracy, so employees are not only saving time by not having to manually input data, but saving additional time by not needing to double or triple check every entry made by hand.

Save money

Automation can reduce company costs by 75% in some cases. Studies have found that it takes up to $15 USD to process a single invoice. Once again, if your company is processing hundreds or thousands of invoices, those numbers add up fast.

The good news is that the same studies have found that automation can lower the cost per invoice to as low as $5 USD.

Reallocate resources

When you are able to free up time, money, and team effort, those resources can be better put to use somewhere else. Instead of menial tasks like data entry and invoice matching, your finance team can spend time analyzing and forecasting — and planning for your company’s financial health in the future.

Final thoughts

Automation continues to be at the forefront of accounting’s digital transformation. By changing a few simple accounts payable processes, companies can reduce errors, save time, and spend less on accounting processes. Those saved resources can be better used to help plan and execute your company’s business strategy, so you can focus on growth — not matching receipts and data entry.

To see how Mesh Payments can help your team simplify and streamline the accounts payable process, schedule a demo.

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