{"id":17311,"date":"2024-04-19T09:44:39","date_gmt":"2024-04-19T09:44:39","guid":{"rendered":"https:\/\/envoice.eu\/?p=17311"},"modified":"2024-04-19T18:47:48","modified_gmt":"2024-04-19T18:47:48","slug":"10-ap-automation-best-practices-for-2023","status":"publish","type":"post","link":"https:\/\/envoice.eu\/en\/blog\/10-ap-automation-best-practices-for-2023\/","title":{"rendered":"10 AP Automation Best Practices for 2024"},"content":{"rendered":"

Managing accounts payable in a business isn\u2019t child\u2019s play.<\/span><\/p>\n

It is one of the highest-stakes tasks there is for any modern business. After all, every thriving business needs to pay what it owes and manage its cash flow, and you can\u2019t afford to get this process wrong.<\/span><\/p>\n

Managing invoices accurately and promptly is the key to maintaining good supplier relationships. If you don\u2019t have a good accounts payable system to manage payments, you\u2019re asking for trouble.<\/span><\/p>\n

It could lead to efficiency bottlenecks, misallocated resources, and a risk of losing the budget to maverick spending (purchasing goods\/services outside the defined spending policy).<\/span><\/p>\n

Fortunately, there are accounts payable automation best practices to improve compliance, boost productivity, and increase the efficiency of your AP department. <\/span><\/i>But for better appreciation, let\u2019s first learn about the AP automation process in a typical business.<\/span><\/p>\n

What is AP Automation?<\/span><\/h2>\n

Accounts Payable (AP) Automation is a set of processes and tools automating your finance team’s daily tasks. Instead of entering the data manually, AP automation is done digitally \u2013 from invoices to purchase orders.<\/span><\/p>\n

Yet, some 55% of businesses still handle financial data manually.<\/strong><\/span>[1] <\/span>That manual process requires costly personnel, introduces room for errors, and takes time.\u00a0<\/span><\/p>\n

Automating the accounts payable process in your business frees your team to focus on more important tasks in the back office and adds value to the company. <\/span><\/i>Here are some of the best practices for AP automation:<\/span><\/p>\n

10 AP Automation Best Practices<\/span><\/h2>\n

1. Plan for complexity<\/span><\/h3>\n

Growth is a traditional marker of business success. Yet, with growth comes complexity. You must cope with increasing product and service categories, different markets, numerous customer segments and channels, and compliance challenges.<\/span><\/p>\n

Even processes in an accounts payable department are almost always complicated. They can be long and confusing \u2013 from creating requisition to manager\u2019s approval and VP approval to finance review, then issuance of invoice.<\/span><\/p>\n

That\u2019s why one of the best AP automation best practices is to plan for complexity. You may use a workflow diagram to document the process you plan to automate. This will help you see the importance or insignificance of a particular step or decision point.<\/span><\/i><\/p>\n

Once you have your rules in place, it\u2019s easier to, later on, customize your AP automation software to enforce workflow best practices.<\/span><\/p>\n

2. Align AP automation with overall business objectives<\/span><\/h3>\n

Your AP objectives need to align with your overall business objectives. This will help ensure that your business needs won\u2019t be deprioritized and will secure the future success of your business. And <\/span>when your accounts payable process succeeds, so does your organization<\/span><\/i>.<\/span><\/p>\n

3. Have your team on board<\/span><\/h3>\n
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Source: Unsplash<\/figcaption><\/figure>\n

Ultimately, you\u2019ll need people in your accounts payable team to use your AP automation solution. So, it\u2019s important to discuss any improvements with your team.<\/span><\/p>\n

Having them on board s will also help you know that you\u2019re addressing the root of the issue with their expertise. As much as possible, consult them early in the decision-making process to know you\u2019re investing in the right tool or building the AP system they need.<\/span><\/p>\n

Ask your team what they like about your existing accounts payable processes, what challenges them, what concerns they have about the possible changes, and what solutions they believe will have the biggest impact.<\/span><\/p>\n

4. Enter new invoices immediately<\/span><\/h3>\n

The average small-to-medium size company takes about nine days to process a single invoice using a manual AP process. This leads to lengthy approval times.\u00a0<\/span><\/p>\n

In fact, the biggest hurdle for AP in 2023 is that invoice and payment approvals take too long. <\/span>[2]<\/span><\/p>\n

This is why the next AP automation best practice you should consider is to enter new invoices promptly. Make it a habit for your team to enter new invoices into the system the day they receive them.<\/span><\/p>\n

Doing so allows you to track transactions more effectively and get the maximum benefits of outstanding days payable (DPO). It is a financial ratio that indicates the average time it takes to pay invoices for goods and services to trade creditors, including financiers, vendors, and suppliers.<\/span><\/p>\n

Do you want to automate invoice processing for your business? Anyone can do it with Envoice\u2019s smart and adaptive platform. <\/i><\/b>Try it free for 14 days<\/i><\/b><\/a>. No credit card required.<\/i><\/b><\/p>\n

5. Maintain supplier and vendor communication<\/span><\/h3>\n

Communicating with your suppliers and vendors is just as important as having your AP team fully on board. Your success will also depend on their willingness to adapt to new AP procedures.<\/span><\/p>\n

Ensure that your automated AP software and the one used by your suppliers and vendors can share information and are compatible. The software should also not expose either party to data they shouldn\u2019t have access to.<\/span><\/p>\n

If they are unwilling to adapt or their software is incompatible, maintain good communication. This way, suppliers stay updated on your policies and protocols and will eventually be familiar with how your system handles payments and invoices.<\/span><\/p>\n

This frees up your accounts payable department from many customer service calls.<\/span><\/p>\n

6. Store digital records<\/span><\/h3>\n

Another best AP automation practice is to store digital records. Paper records take up large storage space. Moreover, it\u2019s often time-consuming and difficult to find information in paper files.<\/span><\/p>\n

A water leak or fire can also quickly destroy a year\u2019s data. That\u2019s why you\u2019re going to prefer digital records of your business invoices as well as the processing history. Digital records are easy to search and secure and won\u2019t get damaged or lost as easily as paper records.<\/span><\/p>\n

7. Mind the metrics<\/span><\/h3>\n

To maximize the efficiency and bottlenecks of the accounts payable department, businesses should define their key performance indicators (KPIs).<\/span><\/i> It\u2019ll help the AP team measure their performance against main business objects and set a target for improvement.<\/span><\/p>\n

Invoice validation is one of the most important KPIs for accounts payable. The purchase order and invoice must match to ensure a smooth transaction. Your AP process will be less expensive and more accurate the more invoices are linked to purchase orders.\u00a0<\/span><\/p>\n

Other AP performance metrics to track are:<\/span><\/p>\n