Accounts Payable (AP) Automation: Strategies, Benefits, & Solutions

Accounts payable (AP) teams face the constant challenge of managing invoices, approvals, and payments efficiently while ensuring accuracy, security, and cost-effectiveness.

The solution? AP automation. This guide takes a deep dive into AP automation, exploring strategies, benefits, and solutions that can transform how businesses manage their accounts payables.

Key takeaways

• AP automation streamlines the end-to-end process, saving time, reducing errors, and increasing productivity so teams can focus on other important tasks.
• By eliminating manual processes and reducing processing costs, AP automation helps businesses capitalize on discounts, improve cash flow, and achieve significant cost savings.
• Automation provides more control over the invoice approval process, minimizes the risk of fraud, and provides real-time visibility into the AP process, improving scalability and ROI.

Why is AP automation important?

AP automation is important for businesses looking to streamline operations and easily address inefficiencies associated with the accounts payable process. Automating your accounts payable process eliminates time-consuming manual processes and reduces human error and, increases productivity by allowing companies to save time.

What are the benefits of AP automation?

AP automation solutions offer the following benefits:

Save time and increase efficiency

AP automation allows organizations to save time and increase efficiency by completely streamlining each step in the AP process. Instead of having to manually input invoice data, write paper checks, and chase down team members for signatures and approvals, everything is done digitally. With this extra time, your team can focus on higher-value projects that drive revenue and process more work volume with the same size team, eliminating the need to hire additional employees  — which is becoming tougher to find and more expensive by the day.

Reduce costs and capitalize on discounts

AP automation reduces costs by negating the need to spend on resources that are typical of a manual AP process. On average, it costs $12-15 to manually process an invoice and an additional $5 to pay with a paper check. With an automated solution like MineralTree, you can reduce processing costs by 80%.

Additionally, AP automation allows organizations to better take advantage of early payment discounts by having greater control over when you pay invoices. Many vendors offer a discount for paying invoices early, which can be smart to do if you are trying to improve your vendor-supplier relationships or your company’s cash flow.

Increase control and visibility

With automation, users have greater control and visibility surrounding the invoice approval process. Internal controls like segregation of duties and two-factor authorization are built into each step of the process along with the ability to assign employees to a given role and prevent authorization for others. Additionally, if you have questions surrounding where an invoice payment stands, authorized users can easily look up the invoice number, see where it is in the process in real-time, who is needed to sign off, and more. Accounts payable teams can unlock their AP data and automate the reporting and analysis of AP KPIs across invoices, payments, and vendors.

Increased visibility also helps businesses understand their true AP balance. When the process is manual and paper, there may be 50 invoices on the AP clerk’s desk that the controller doesn’t have visibility into. By digitizing the accounts payable process, businesses have a much clearer picture of all invoices outstanding and the overall AP balance.

Decrease risk of fraud

Fraud continues to be a concern for B2B companies with 78% of businesses impacted by payment fraud in 2020. AP automation greatly decreases this risk by creating a centralized space for all AP activity, having built-in payment controls in the AP process, including segregation of duties, dual-factor authentication, and Positive Pay Files, all of which are automated fraud prevention tools. AP automation also eliminates the need for paper checks – the number one target for those who commit fraud – by utilizing electronic payment methods.

Improve vendor relationships

Utilizing automated accounts payable software can greatly improve your vendor relationships by making it easier to facilitate secure payments on time and by giving suppliers visibility via their self-service vendor portal. Self-service vendor portals eliminate the back and forth communication from vendors to businesses regarding their payment status and provide vendors with detailed downloadable remittance data for reconciliation in their systems. Each step in the AP process is streamlined and made easier through digitization, cutting out time that is required of a manual process, and largely eliminating the possibility of errors. Additionally, with AP automation, you have the opportunity to take advantage of early payment discounts if that’s in the interest of your company’s cash flow, which can help to strengthen your relationships with vendors.

Increase cash flow, ROI, and improve business scalability

AP automation also helps companies who are looking to increase cash flow, ROI, and improve their business scalability. With a paper-based system, it’s incredibly hard to keep track of what your cash flow looks like, but with a digitized system, users can gain new insights by monitoring all payments, comparing cash-in versus cash-out, taking advantage of cash-back rebates, and troubleshooting any cash flow problems as they arise. In addition, by switching to an automated AP process, and phasing out check payments, your business can significantly cut down on labor and infrastructure costs, which lowers your cost per invoice and improves overall ROI.

How do you automate the AP process?

While there are a few ways to automate the AP process — via e-voicing, automated data entry, automated invoice match, etc. – the best way to automate this process is to leverage an AP automation solution like MineralTree. MineralTree integrates directly with corporate bank accounts and accounting systems in as little as 12 days. The solution keeps overhead to a minimum by paying for itself as quickly as 60 days after the simple implementation and is proven to streamline the entire accounts payable process — from invoice capture to invoice approval, payment authorization, and payment execution.

How does AP automation software work?

While many AP automation solutions address a single pain point in the accounts payable workflow, the right software takes into account the unique challenges stakeholders face at each step of the process with a complete end-to-end solution. At MineralTree, AP automation improves the AP process by addressing the following:

Automated data capture & coding

Both header and line-level information is automatically extracted from invoices and are coded at near-perfect accuracy. There are several ways to initiate the capture process. Processes include the use of a dedicated email inbox for electronic invoices or a PO box service for mailed invoices, manually uploading invoices to MineralTree, and uploading and syncing directly into your ERP. Any invoice captured by MineralTree will automatically sync back to your ERP system, maintaining it as your system of record. With MineralTree, duplicate invoices are automatically detected and flagged for review, saving time and preventing duplicate payments that require reconciliation.

On-the-go approvals

With an AP automation solution, you have the flexibility to define approval rules to automatically route invoices to specific approvers in real-time. Invoice approvers can then make approvals from anywhere, even on mobile. Organizations can also utilize important payment controls such as segregation of duties, two-factor authentication, and dual approvals to add more security and further protect against payment fraud.

Automated Purchase Order (PO) matching

Purchase Orders allow organizations to bypass the tedious approval process which sometimes involves people across departments, including hard-to-reach department heads. Rather than collecting everyone’s “stamp of approval” for every invoice that is received, automated PO matching links invoices with their corresponding POs, allowing the invoice to bypass approvals and go directly to payment scheduling and execution. Mismatched invoices that fall outside of pre-defined thresholds are routed through an exception handling workflow for resolution.

Automatic payment scheduling and routing for approval

Automating payments is a great time saver for AP departments. Many organizations start out by automating their payments as a gradual gateway towards end-to-end efficiency. For many automation solutions, execution can be automated in a single workflow across payment types. You can also select your preferred payment dates to have control over cash flow and take advantage of early payment discounts. By utilizing automatic approval routing and simple payment scheduling, you can dramatically increase efficiency and decrease the time it takes to get a payment out the door. It’s also likely that vendor relationships will be strengthened when payments arrive accurately, securely, and on time.

Payment method flexibility

Typically, AP automation solutions will execute payments on your behalf to streamline the process. Some solutions will help you optimize your payment methods, which can lead to quicker payment completion, the ability to earn cash-back rebates, enhanced security, and more. With MineralTree, organizations gain seamless support over multiple payment types, including check, ACH, virtual card, and international/FX payments in one workflow. After a payment is complete, electronic remittance details are sent to vendors. A great automation solution will sync this data back into your accounting system so that there are no discrepancies between the platforms.

Simplified audits

All approval and payment details are automatically stored in one central repository that can be accessed by authorized users at their convenience. This kind of logging helps teams easily conduct internal audits or supply outside auditors with necessary information upon request.

What industries are using AP automation?

There are various industries that are utilizing the benefits of an AP automation solution. Primarily, businesses that deal with a significant volume of invoices and payments take advantage of an AP automation solution to streamline the entire AP process. Those industries include:

• Healthcare, pharma, and biotech
• Food and beverage
• Retail/E-commerce
• Professional services
• Education
• Hospitality and travel
• Manufacturing and distribution

How to select an AP automation software checklist

There are a wide variety of AP automation solutions available on the market. However, when deciding which solution is right for you, it’s important to understand that taking a holistic approach to automating accounts payable will set your organization up for success. Investing in a solution that streamlines the end-to-end process will deliver greater efficiency, improve control over cash flow, and enhance protections against fraud. But how do you know which solution is best? You can ask yourself these questions when evaluating an AP automation solution, or use the checklist below to help you select the best AP automation solution for your business.

• Define your requirements and objectives
• Evaluate features and functionality
• Consider UX and ease of adoption
• Review vendor reputation and reliability
• Compare cost and pricing structure
• Determine integration capabilities
• Understand customization and scalability
• Assess security and compliance measures
• Inquire about support and training

MineralTree is leading the AP automation solution, providing the most comprehensive approach to automating your accounts payable process. With market-leading features, a simple implementation process, and praise-worthy customer support, MineralTree continues to redefine what is possible in the realm of AP efficiency.

MineralTree case studies

AP automation solutions can work across several different industries, including retail, hospitality, healthcare, and software. Below are some case studies from MineralTree in a variety of industries.

BrightView health supports business rrowth through AP automation

BrightView Health provides outpatient medication-assisted treatment in Ohio and Kentucky. They expanded from four treatment centers to 30 in about two years. When Controller Matt Santell joined BrightView, most of the AP process was manual and 65%-80% of invoices were being processed via mail. However, this process was no longer sustainable due to the company’s explosive growth. Their AP team had been able to manage the 3,000 invoices a year this way, but now that number was over 10,000.

BrightView Health decided to partner with MineralTree, in part due to Santell’s experience with the platform. They use the platform to automate invoice approvals and management. Erik Arwood, BrightView’s Accounts Payable Accountant, has been impressed with MineralTree’s OCR technology and the human review process. “It has been astonishing to see just how accurate MineralTree is at capturing the right data,” he said.

In addition, the AP process has been reduced to mere minutes, according to Santell. Their team also used MineralTree to prepare for an upcoming audit, which took their team 20-30 minutes.

AP automation misconceptions

Many businesses searching to cut costs company-wide are evaluating AP automation solutions for several reasons — to increase efficiency, reduce time spent on menial, paper-based activities, etc. And finance teams are quickly realizing there is an imminent need for AP automation to bring their processes into the 21st century. As demand continues to grow, let’s set the record straight and bust some common misconceptions surrounding AP automation.

Misconception #1: Traditional AP processes are extremely efficient.

If your current Accounts Payable AP process is still manual, then you are not as efficient as you could be. Research shows that finance leaders spend 49% of their time on transaction processing within the AP department. If you think about it this way, your team is spending close to ten days each month to process and pay vendors.

Misconception #2: CFO’s enjoy signing checks.

In all honesty, no one likes signing checks–and neither do suppliers enjoy processing them. With an automated accounts payable solution, your CFO will have greater visibility into cash flow and operations. Unlike a paper check that can be overlooked or easily lost in the shuffle, automated AP solutions have true segregation of duties and can strengthen fraud protection.

Misconception #3: OCR technology isn’t reliable.

Optical Character Recognition, or OCR technology, enables you to convert scanned documents into editable and searchable data. Software alone cannot always do the job. And while some AP solutions rely solely on OCR technology, others take advantage of both OCR technology and human review. In this scenario, the provider relies on OCR technology to handle the initial data capture. Then, before being submitted for the customer to review, there is an actual person who reviews the document to make sure all the information is correct.

Misconception #4: Mismatched data occurs from adding another system into the accounting platform.

People often think that two different systems can create discrepancies and leave their AP department with mismatched data — and this very well could be the case if the solution chosen does not integrate seamlessly with your accounting system. With seamless integration, businesses can continue to use the accounting system they are familiar with and the workflows they previously created. With an integrated automated AP solution, transaction, approval, and payment information are automatically, and bi-directionally, synched with not only your accounting system but also your bank.