Blog / AP Automation
What is AP Automation?
AP Automation is enterprise software that streamlines supplier invoice processing, eliminates the potential for human error due to paper processes, and provides both visibility and control over essential business processes.
The most common AP automation solutions include functionality such as invoice data capture (also known as OCR or digital invoice scanning), invoice processing, approval workflow, PO matching, a system for auditing and archiving, detailed reporting, and cost analysis.
AP automation software has to seamlessly integrate with an organization’s ERP. Data is passed back and forth between the two systems, and invoices are sent to the ERP for payment once they have been approved.
AP Automation provides several key functions for organizations that receive supplier invoices:
- Invoice Data Capture – Invoices received by mail or email are scanned by the software and sent to the ERP and AP Automation function. Paper invoices are scanned with 95% accuracy rates, and email invoices that are in electronic format such as PDF, EDI, XML, CSV, Word and Excel are scanned with 100% accuracy.
Benefit: Approximately 75% of organizations in North America manually enter invoice data into their ERP. Not only is it a poor use of staff resources, any errors introduced into the system may not be noticed until month-end.
- Invoice Processing – Supplier invoices are visible in a central dashboard showing invoice status in real time. Predefined business rules dictate where invoices are sent for employee/manager approval.
Benefit: Bottlenecks are immediately visible and accounts payables status is available in real time.
- PO Matching – Intelligent AP automation platforms address PO and Non-PO matching, where the software automatically matches an invoice to the PO and/or goods receipt. Matched invoices are sent to the ERP for recording after being matched by the software.
Benefit: PO matching can take anywhere from 15 minutes to an hour depending on the size of the organization and number of approvers. For a large organization with thousands of invoices this can take up a considerable amount of resources. Manual PO matching is a resource-intensive manual task that impacts payment approval cycles.
- Exception Handling – Exceptions are flagged and sent to the people in charge of the order. In place of phone calls, emails and spreadsheets, the exception is automatically sent to approvers by email and on mobile. Approvers get all of the information they need to review the invoice along with notes from team members.
Benefit: Approvals can be done with one-click by approvers in the field, 24/7.
- Auditing – An archive and audit function keeps a record of every transaction, including communications.
Benefit: Audits and enquiries are faster (and less stressful)
AP Automation has 3 key benefits for businesses and organizations:
> Reduces the cost of invoice processing, PO matching, and other outdated manual business processes.
A company’s relationship with suppliers is important. An essential aspect of managing that relationship is the timely payment of accounts. Factors such as human error during data entry, lost and duplicate invoices and the unavoidable slowdowns due to processing are avoidable with this technology in place.
> Reduces the risk of fraud by providing visibility into the status, approval, and transactions around supplier invoices.
For companies still committed to paper processes there are many moving parts with all of the paperwork and paper processes. This is very difficult to track and is prone to abuse.
> Reduces the time involved in approval cycles and payment times, reducing late payment penalties as well as taking advantage of early payment discounts.
Issuance of payments can be dragged out for weeks when it’s possible to have payments approved in one or two days. Automating the process increases operational efficiency.
Compliance and Security
Compliance and security are major considerations when making technology investments in finance operations. Organizations choose to consider AP automation software platforms that are accredited or compliant with HITRUST, HIPPA, SOC1, SOC2, GDPR, ISO 29001, ITAR, and PEPPOL.
For more information about Palette AP Automation, visit our solution page here.