As businesses grow, owners frequently take a proactive role in overseeing daily accounting operations. This scenario encompasses tasks like authorizing outgoing payments and diligently tracking customer invoices to maintain precision.
However, challenges arise when customers delay payments, or suppliers make invoicing errors. With growth, manual methods impede accounting processes. Even a dedicated accounting team can become overwhelmed with piles of invoices and receipts.
This scenario is why modern businesses rely on automated accounts payable and accounts receivable systems. Automation simplifies tasks from procurement to payment, freeing up accounting personnel to focus on business priorities. It enhances the customer experience and diminishes faults associated with manual data entry.
How Automation Streamlines Accounts Payable (AP) and Account Receivable (AR)?
Accounts payable and accounts receivable automation streamline traditional AP and AR functions. It results in simplified cash flow management, reduced mistakes and inefficiencies, and improved customer/supplier relationships.
By implementing automation, companies can establish a digital workflow for routine tasks such as crafting, sending, receiving, coding & routing payment, invoices, and reconciliation.
Significant Benefits of Accounts Payable (AP) Automation
Accounts Payable (AP) automation transforms the payment process for vendor invoices within a business. With AP automation, all staff members have immediate visibility into paid and upcoming bills and any potential overdue payments.
- Transparency, Accessibility & Security Measures
By maintaining transparency and accessibility in outgoing payments, effective oversight is achieved. Timely payments to vendors foster long-term relationships that can yield significant business advantages, such as early payment discounts and sales perks for future endeavors.
A streamlined approach with AP automation minimizes the risk of fraud and enhances accuracy by cross-referencing invoice details with purchase orders and delivery receipts.
- Reads Invoices and Bills Automatedly
AP automation enables the automatic extraction of pertinent information from digital and paper bills using OCR technology. This scenario eliminates the need for manual data entry and reduces errors.
The extracted data can be easily uploaded to the AP system, ensuring accessible and up-to-date cash flow reports. Additionally, digitization eliminates paper clutter and allows for easy sharing of documents among relevant parties.
- Sets and Automates Recurring Payments
Automated recurring payments help streamline bill management for utilities, loans, and regular supplies. By automating these predictable bills, staff time is saved, and payments are made consistently without the need for official approval.
The integration of machine learning (ML) in automated AP software allows for the detection of outlier bills, such as unusually high AC bills during a heat wave or overcharges from vendors. This automation alleviates staff from the monotonous task of manually handling regular bills.
- Matches Purchase Orders (POs) to Invoices
The Accounts Payable (AP) process involves matching Purchase Orders (POs) with Invoices and verifying the receipt of goods or services. A PO specifies the details and cost of the purchase. When an invoice is received, the AP software matches it with the corresponding PO and, sometimes, with proof of delivery.
If the information is verified, the payment is queued for approval, released, or scheduled for future payment. Manual matching can be prone to errors, such as missing items or incorrect charges. Automation ensures accurate generation, payment, and receipt of charges.
- Create Payment Reminders
Utilizing automation to send payment reminders can mitigate missed payments. With an Accounts Payable (AP) system, businesses can prioritize payments based on due dates, preventing bills from being forgotten or misplaced.
Efficient cash flow management can be achieved through structured payment schedules and reminders, surpassing the need for scattered sticky notes on an accountant’s computer.
By redirecting funds to other areas, a payment reminder guarantees that bills are settled before their deadlines, which is particularly beneficial during peak seasons when accounting departments are overwhelmed with tasks.
- Automation of Payment Approvals
Automated payment approvals provide customizable solutions for businesses. By automating routine vendor invoices, companies can prevent bottlenecks, expedite payments, and set specific payment limits.
Artificial intelligence-driven software can identify and flag unusual or potentially fraudulent payments, seeking explicit approval before releasing funds.
Significant Benefits of Accounts Receivable (AR) Automation
AR Automation is crucial for efficient payment management. Generating invoices is the initial step, but it is important to acknowledge that not all customers pay on time.
By automating AR, you can easily send invoices, manage reminders, streamline payment processes, and minimize losses from non-paying customers.
- Creates, Sets, and Sends Invoices
Automated AR can swiftly initiate the invoicing process by creating and sending invoices. This scenario ensures prompt receipt and payment from customers. Any potential errors are promptly addressed and rectified, guaranteeing accuracy from the onset of the AR process.
- Matches Invoices to Deposits or Payments
The matching capability of AR ensures accurate and up-to-date records. When a payment or deposit is received, the corresponding invoice is marked as paid, and the customer record is updated. This scenario reduces time spent pursuing payment for invoices that have already been paid but need invoice matching.
Additionally, having an accurate picture of outstanding amounts owed contributes to making informed decisions, preventing incorrect assumptions caused by overestimated or underestimated AR.
- Creates Reminders for Customer Payments
Automating reminders and notifications can improve invoice management, saving time and reducing collection efforts, resulting in lower DSO and cost savings.
- Accepts Digital Payments
Digital payments provide numerous benefits for both you and your customers. It increases the likelihood of on-time or early payments while also saving time for your bookkeeper.
Integrated with automated AR software, digital payments ensure proper crediting of accounts and provide customers with an easy-to-use platform to view their accounts.
Key Takeaways
Automated AP and AR systems manage routine workflows, freeing staff from the burdensome task of invoice generation to payment receipt.
With the assistance of AI and ML, these systems cross-reference invoices, purchase orders, and delivery receipts for transaction accuracy. So, automating AR and AP enhances invoice transparency, improves efficiencies, and ensures smooth cash flow management.