Blog / AP Automation
7 Ways Accounts Payable Automation Benefits the AP Team
In this blog series show how Palette Accounts Payable Automation makes a difference, role by role, to the people in an automotive manufacturing firm. It highlights how the technology can impact all of the people purchasing and invoice processing touches, empowering roles in the organization with transparency and accountability.
Accounts payable is the hub of all transactions. If an organization still has a commitment to paper processes, the job of the AP clerk tends to revolve around maintaining multiple files (and multiple stacks) of paper.
Indirect material invoices, purchase orders (POs) and goods receipts each have their own set of file folders. You manually go through these 3 files in alphabetical order to locate POs and shipping receipts for the invoices you have. You review “stranded” POs and goods receipts to find out why they haven’t been invoiced, or if they were paid without the PO and shipping receipt.
In most organizations, matching usually takes about 15 minutes of file shuffling and amount-checking for each and every invoice.
Once you have finished matching, you go into your email program and start following up on emails you have sent to employees and vendors.
You scan in new invoice activity that has to be investigated. Once you follow up on the emails that you have already initiated above, you now start new email threads about exception invoices.
To do this, you scan the invoice in order to attach it to an email and start another conversation you will follow up on. The follow-up could be reminding the email recipient that they need to respond, or it could be looking up a past response to print in order to attach that response to the invoice packet for audit purposes.
You manually key in invoice information to the ERP when you have a 3 way match, or an email that you have printed that provided the authorization to post the invoice into the ERP.
You then turn to another set of paper files – called Posted Not Paid. This is where you place the invoices that have been keyed into the ERP and are now waiting for payment to be made. Once the payment is made, you file them in their final location as a payment batch, or attach them to the check.
Now you shift your focus to the direct materials side. You have a different invoice file for all of your direct material invoices. They will not be matched to a hard copy PO or goods receipt because they have all been received into inventory. You have to match these manually.
You use a Received Not Invoiced (RNI) report, crossing off lines as you match them. These invoices must be matched in the ERP at the line level, matching on both their tiered pricing and delivered quantities.
The best method is to make the first pass and match as many invoices as possible, enter them into the ERP, and rerun the RNI report. The RNI report will be updated with only the remaining unmatched receipt lines.
You do this until all that is left are mismatched invoices. You scan the mismatched invoices and email them to either employees within the company or to vendors to help determine what the issue is.
Once you have entered these now resolved and matched invoices into the ERP, they are filed with the Posted Not Paid indirect material invoices. Each day you start the process over again. Some days are entirely dedicated to invoice investigation and others are more focused on manual data entry.
Coworkers will do things like use a blacklisted company. There is no procedure in place to stop users from purchasing from vendors that were not on the approved vendor’s list.
This means that the first place the transaction for the blacklisted vendor becomes visible is in AP during the approval process – where it is too late. The vendor has either sent the goods or provided the service, and the invoice has been sent to AP. It’s too late to correct the situation and use an approved vendor.
“There is no data entry – or paper cuts – because both paper and emailed invoices have been digitized by the system.”
Palette intuitively recognizes who the invoice is from and knows which data fields are required. Invoices are transformed into data and ready for the Palette automated workflow as well as payment in the ERP.
1-Bottlenecks are visible
The status of any invoice is visible is in a shared central dashboard. One large source of frustration is resolved, because if someone is not moving on an exception, you can have the system automatically move the invoice to a manager, or you can use a drag and drop workflow to send it to someone on their behalf.
2-Compliance rules are built in
You don’t have to keep a binder full of compliance rules. Approved vendors are the only vendors that users can use to purchase goods and services. Blacklisted vendors are simply not available.
3-Fewer calls from vendors
Vendors can check on their payments themselves so they are not calling you to ask where their checks are, or what the status of their payment is. You have the opportunity to communicate directly through the Palette supplier portal to let vendors know if you have a problem with their invoice. The vendor can respond to your comments directly, and can also submit invoices and credit memos directly to your system for routing and approval.
4-Time-consuming PO matching is automated
Palette takes care of matching the invoice, PO and goods receipt. This process happens as soon as the invoice enters the system. Palette sends the matched data to the ERP for payment.
5-Exceptions are flagged for you to investigate
You can either automate the workflow for the types of exceptions or use a “drag and drop” workflow to send the exception to the proper approver(s). Palette tracks all of the communications about the invoice, including messages between the vendors and staff.
“When I send the approver the exception packet to examine, it contains the invoice, purchase order, goods receipt, and any communication with vendors.”
6-Audits are less stressful
Palette replaces all the file cabinets you relied on during vendor inquiries and audits, providing a searchable archive and record of every transaction.
A step-by-step documented history of invoice transactions, including communications between internal staff and suppliers with time and date stamps, provides the basis of objectivity for inquiries and investigations.
You don’t have to go digging for entries in the GL, go to the ERP to see payment information, or deal with spreadsheets. All of the AP staff are empowered because we have the opportunity to identify other areas that can be streamlined.