Back to Blog AP Automation

How to automate Accounts Payable

Automating accounts payable (AP) has become a cornerstone strategy for businesses seeking to enhance efficiency, improve accuracy, and secure financial operations. The benefits of AP automation extend beyond simple cost savings, fostering better vendor relationships, and enabling more strategic financial decision-making. This guide will take you through a detailed journey of transitioning from a manual to an automated AP system, highlighting best practices and tools at each step.

Assess your current accounts payable process

Thorough assessment and documentation

Begin with a detailed mapping of your existing AP process. This involves understanding every step from invoice receipt to payment approval and final processing.

Identify the roles and responsibilities of each team member in the AP process to understand workflow dependencies and approval hierarchies.

Key points to document:

  • Decision points: Where are decisions made, and who are the decision-makers?
  • Approval pathways: How does an invoice travel through your system from receipt to payment?
  • Time analysis: Measure the time taken at each step to identify delays.

Simplify approval processes

Strategic reduction of approval steps

Simplifying the approval process is crucial for reducing the cycle time of invoice processing. Evaluate the necessity of each step and consider consolidating approval points to minimize delays.

Effective strategies

  • Centralized approvals: Implementing a centralized approach where possible can significantly speed up decision-making.
  • Threshold rules: Set up rules that allow automatic approval for amounts below a certain threshold, which can help speed up processing for routine, low-value invoices.

Implement digital invoicing

Transition to digital

Switching to digital invoicing is a transformative step for any business. It allows for faster dispatch and receipt of invoices, facilitates better tracking, and integrates seamlessly with AP automation software.

Advantages of digital invoicing

  • Reduced physical storage: Eliminate the need for physical storage of paper invoices.
  • Enhanced accessibility: Digital files can be accessed from anywhere, making remote approval and auditing processes much more straightforward.
  • Improved vendor relationships: Faster processing of invoices leads to timely payments, which can help strengthen vendor relationships.

Automate vendor payments and data management

Automation of financial interactions

Automating vendor payments ensures that payments are made promptly and accurately, which not only enhances relationships with suppliers but also helps in availing discounts for early payments.

Key automation functions

  • Vendor database management: Regular updates to vendor information can be automated to ensure all details are current.
  • Invoice matching: Implement systems that automatically match purchase orders to invoices, flagging discrepancies for manual review.

This step is crucial for maintaining high standards of accuracy and compliance in financial transactions.

Eliminate manual data entry

Incorporating advanced technologies

The use of Optical Character Recognition (OCR) and Robotic Process Automation (RPA) can significantly reduce the need for manual data entry, thereby decreasing the likelihood of errors and increasing processing speed.

Implementation tips

  • Choose robust software: Select software that integrates well with OCR and RPA technologies.
  • Continuous improvement: Regularly update software capabilities to adapt to new technological advancements.

Automating data entry processes is essential for reducing labor costs and reallocating resources to more strategic activities.

Establish compliance guidelines

Ensuring regulatory compliance

The establishment of robust compliance guidelines is essential to ensure that your AP processes adhere to industry standards and regulations.

Compliance measures

  • Regular audits: Implement regular audits to ensure compliance with both internal standards and external regulations.
  • Documentation: Keep thorough records of all AP transactions as part of your compliance efforts.

Setting up these guidelines helps in minimizing legal risks and enhancing the organization's reputation.

Choose the right AP Automation software

Software selection

Selecting the right AP automation software is pivotal. It should not only fit the current needs but also be adaptable to future requirements of your business.

Considerations for software selection

  • Scalability: Can the software grow with your business?
  • Integration: How well does it integrate with your existing financial systems?
  • Support: Does the vendor provide adequate support and training?
red text on paper accounts payabel

Choosing the correct software is critical for ensuring the smooth implementation and long-term success of your AP automation efforts.

Integrate and test your AP Automation system

System integration and testing

Proper integration of the AP automation system with your existing financial systems is crucial for ensuring seamless data flow and functionality.

Steps for effective integration

  • Data mapping: Ensure all data points match between the old and new systems.
  • System communication: Test how different systems communicate with each other to prevent data silos.
  • Pilot testing: Start with a pilot test involving a small part of your operations before going company-wide.

Partner with Medius

Automating accounts payable is a strategic move that can transform the financial dynamics of any business. By following these detailed steps, your organization can not only enhance operational efficiencies but also gain strategic insights into financial management, ultimately leading to improved bottom lines. As you embark on this journey, remember that choosing the right partners and tools is essential for achieving the desired outcomes. 

Ready to take the leap into AP automation?

Contact us to discover how our solutions can be tailored to
meet your specific needs.

The Financial Professional Census

Explore hurdles facing finance professionals today and learn how to overcome them in our research-backed Financial Professional Census report. 

Download the report

More finance, AP, and procurement resources

Our library of case studies, guides, and reports are available to help you become a better finance professional.

View all resources

The ultimate AP resource

If you're looking to streamline AP processes, automate invoice or payment processing, or curious about how accounts payable automation works, this is the guide for you.

explore AP Automation guide

Ready to transform your AP? 

Book a Demo Contact Us