People understand that they need to pay their bills within the stipulated time so that they stay in good standing and their credit score is on the higher side. Companies also enjoy credibility based on how soon they honor their commitments. If a construction company promises to deliver the possession of a building by a certain date and they backtrack, it will leave a mark in invisible ink and they have to do a lot of right things to set their rating right. Likewise, a company has to pay its suppliers for all the raw materials and office supplies they order that are required for their normal work.
Most organizations have a lot of payments to handle within a given period. Verification of the data and ensuring that there are errors to avoid duplication takes considerable time. One of the major challenges of the accounting team is manual entry for their accounts payable functions which also translates into delays and inefficiencies. A shift to AP automation software will not just change the gears but also the lanes from a risk-averse to a compliance-oriented process.
Good cash flow management will ensure that the system gets its dues from customers before their commitments have to be met. The way bills are set up after our payday and it will not be possible to pay before the salary hits our bank accounts without taking a loan, a business that does not get its dues in time will have difficulty honoring the payments. Delays in vendor payments disturb the hornet’s nest in more ways than meets the eye. Repetitive patterns will either require the business to approach the bank for an increase in their overdraft or credit line or penalize late payments with a surcharge.
Some business owners fail to grasp the impact of delayed payments and hold onto cash instead of clearing vendor invoices promptly. This is not an ideal practice and people who are doing it must understand the value of goodwill and reputation of a brand. It takes years to earn the respect and just a few mishaps to ruin it. Here are 6 ways of automating the accounts payable function:
- Intelligent Data Capture & Extraction
Manual data entry is replaced in automated AP with optical character recognition software or OCR tools. For more complex translations for international transactions, ICR or intelligent character recognition tools can be used to explain the invoice in a simpler format. When there is no need to enter the data manually, the errors that arise due to human fatigue or oversight are avoided.
ICR helps decipher low-quality prints and invoices hand-written in illegible writing. After data is deciphered and extracted it is validated against the order placed by the company to the supplier, the delivery challan, and inventory ledgers. The verification aids in keeping the process abreast of audit trails and compliance requirements.
- Seamless Workflows
Accounts payable have multiple functions and nothing works in silos. The cycle requires the process to move like a relay race where the baton is passed to the next runner. The predetermined algorithm of the workflow automation sets this relay going without waiting for staff to show up for work the next morning.
The continuation sets its pace and keeps moving in the background and the concerned team members are updated about the status of the work while everyone gets a reminder about their inputs. If there is a need to escalate the invoice for approval, the automation sends it to the concerned manager notice.
- Matching Data
A three-way matching with purchase order, receipt of goods, and supplier’s invoice will ensure that the payment is processed as per the invoice without contesting it for any discrepancies. In case one of the values is not matching, an alert is raised and this leads to an automatic audit to check the discrepancies and ensure there is a reconciliation of the values.
Sometimes we place a purchase order and reject a few items based on the quality check. If the goods received reports show such return of goods, then the value of these products is duly detected from the supplier’s invoice if they haven’t already submitted a fresh invoice with the changes.
- Vendor Portal
When a company has multiple vendors, then it becomes difficult to answer their common queries about the status of their invoices and payments. Automation allows the syncing of information with the vendor that will give real-time notifications to vendors who can access this information in a portal with login credentials that are specific to them. It cuts the need to hire staff to answer vendor inquiries about payment status and keeps them informed as and when the status is updated. It engages them in a positive way as the vendors are happy to know the exact status of their payments from their clients.
- Multiple Payment Options
Depending on the payment option chosen by the vendors, automated accounts payable enable payment into multiple channels like bank accounts, online wallets, wire transfers, or credit card payments.
Vendors can hail from any geographical location and sticking to only one option will limit their services and outreach. For instance, a company that sells bakery and confectionery sources their vanilla pods from Madagascar, an island country in Africa. If they restrict the payment mode to only bank transfers, they may face supply issues and the quality of their produce will be impacted as this vanilla is the best in the world and irreplaceable.
Conclusion:
Automation is the end of the day smart machines. And it works as well as we build it. If one needs them to last a while then care has to be taken to build one that is flexible and expandable to meet future scale and size of the workflow. Compromising on the quality of the automation will lead to substandard results and the accounting team will not be open to trying another software again in the future. So it is recommended to conduct due diligence before implementation.
