Accounts payable represents the amount owed by a company to its creditors and suppliers. It is deemed a liability when a company orders commodities or services without paying in cash upfront, implying that the goods purchased were on credit.
A company's net accounts payable (AP) balance shows up on its balance sheet and can be found under the current liabilities section.
To boil it down to simpler terms, here is an example:-
A manufacturing company requires raw materials, machinery, and fuel for production. These desired commodities are consumed in considerable amounts and thus cannot be purchased in cash. Therefore, the company makes such a purchase on credit with a credit period of typically 30 days.
Until the company pays off the amount owed on the supply of raw materials, power, and fuel to the vendors in question, it will appear as Accounts payable in its accounting books.
AP Workflow is an invoice tracking and validation process which includes invoice data capture, entering the right account and cost center, matching against purchase orders, seeking approvals, and posting for payments.
AP workflow can be achieved manually as well as via automation; however, there are certain downsides to the manual approach.
The manual approach, when it comes to AP processing, is a tedious and time-consuming task performed by delegated individuals in a business work-frame.
Therefore, the manual operation has a considerable tendency for errors that impact the production flow.
Manually matching invoices to other appropriate accounts documents is the traditional approach, being the most widely performed practice of the fundamental AP process in a business - despite being exceedingly slow-paced and error-prone.
According to the Ardent Partners’ Accounts Payable Metrics that Matter, in 2020, there exist several deterrents that shackle the streamlining of the AP workflow for any company -
AP automation boosts the efficiency of AP operations and provides enhanced information accuracy, deeper visibility into the performance of the AP department, and promotes consistency within a business.
AP workflow automation alleviates the time spent on manual processes such as invoice data entry, gap analysis, and approval workflow. AP Automation accelerates invoice processing and ensures the accuracy of payments.
Here are some key points on AP workflow essentials and why the AP department must implement automation in all steps of processing -
Invoice entries from various vendors can get exceedingly complex because suppliers forward them in varying formats and channels.
In such scenarios, AP workflow automation can truncate the steps involved in the process, notably with augmented invoice processes handed over in complicated formats and channels.
Before an invoice gets paid for, it goes through a step-by-step procedure for relevant approvals for subsequent deviation handling and authentication.
Considering that several individuals are involved in the AP invoice approval workflow, it is cost-efficient to delegate the invoice to the appropriate department of the claimed request.
The AP automation system tool can aid in the immediate and effective operation of the routing and approval process.
Manual data entry is time-consuming, expensive, and prone to errors and mistakes. The automated accounting systems and validation solution yield a streamlined and cost-effective process.
Automation boosts the efficient throughput of work, and since the task requires repetition, potential recurring clerical errors get identified and marked or segregated and quickly resolved.
To authenticate the invoices received, they must get matched along with the other invoices and appropriate documents.
The AP workflow automation tools help validate the legitimacy of the invoices before processing payments by juxtaposing them with other documents and swiftly spotting errors or inconsistencies.
Here are some pain points with regards to the AP workflow being shackled due to manual invoice processing, incompatible systems, and limited resources:-
Data errors are unavoidable when paying invoices or generating purchase orders that demand manual data entry, scanning paper invoices, printing, or signing paper checks.
A Proactis survey revealed that 62% of European SMEs face inaccurate data challenges in AP and enterprise resource planning (ERP) systems.
Identifying errors and rectifying them is time-consuming, and if a business depends on manual quality control, some inaccuracies can slip through the cracks.
AP is a sizable target for fraudsters due to widespread disorganization and inaccuracies in invoice reports generated by manual operations. The Association of Certified Fraud Examiners deduced that billing fraud impacted 18% of large organizations and 29% of SMEs.
Third parties or even employees forge invoices and extract capital from the company due to the absence of a centralized solution.
Manual invoice processing is slow and draining for employees, especially in giant enterprises that deal with thousands of invoices each month. This scenario leads to delayed payments to vendors.
Delayed payments result in late fees and missed discounts on timely payments, leading to thousands or millions of dollars in missed savings. Late payments also lead to a breakdown in trust between a business and its vendors.
With manual AP processes, the staff must manually hand over paper invoices for approval. This scenario increases the chances of misplacing relevant documentation that gets buried under tons of paperwork, leading to delays.
When a business receives invoices from the supplier, the AP department must manually enter data into the system to initiate the invoice approval procedures, which can be time-consuming.
AP automation can inhibit several glitches and pitfalls of the traditional approaches to AP workflow -
While manual AP processes can easily get manipulated, AP automation creates a digital audit trail that enables automated validation. With automated calculations and enhanced validation of data, manipulation of invoices gets tougher.
Errors in a paper invoice require the resubmission of paperwork. Besides, busy approvers leave manual paperwork buried at the bottom of inboxes, withholding approval processes.
Under such scenarios, AP automation can speed up invoice coding and processing time by 73%. Automation performs repetitive tasks effortlessly.
Automatic routing and approval notifications lead to approvals getting signed quicker, while automatic validation eliminates errors, cutting out the time spent on corrective work.
Manual AP processes are stricken with data entry errors, duplicate invoices, missing paperwork, and double payments. Human errors are unavoidable and can often lead to substantial losses to the company.
Automation eliminates errors by automatically validating information before submission. 36% of organizations acknowledge that automation results in fewer exceptions and duplicate payments in the AP process.
Manual AP processes are expensive and can add substantially to your expenditures in terms of remedial costs if the reports get submitted with errors.
However, with automation, these costs are considerably lower, as AP automation leads to an 81% cutback in invoice processing costs.
By implementing an AP automation solution like Docsumo, your AP process speeds up and becomes more scalable, leading to you paying less staff to do the same work. Besides, there are fewer correctional costs as data gets automatically validated and eliminates mistakes.
As manual AP workflow is slow, error-sensitive, and susceptible to recurrent delays, they can jeopardize your supplier relationships as suppliers anticipate fast payments.
By implementing intelligent automation solutions for accounts workflows, you can initiate payments faster and ensure timely execution. Automation also provides a better audit trail for suppliers to promote transparency.
The AP department in a company oversees payments to all vendors and plays a pivotal role in strengthening relationships between the two parties.
However, due to erroneous data detection, AP frauds, slow turnaround time, and more, the AP department must adopt automation and facilitate a streamlined operation of processes.
AP automation tools deliver unparalleled precision, reduced turnaround times, and alleviate costs to provide you with a seamless experience and avert crisis scenarios like delayed payments, double payments, falling victim to frauds, and several others.
In today’s dynamic business world, filing and archiving official documents in the digital form makes it handy, and works wonders in the future or in unforeseen circumstances.
With an automated data extraction solution, loan documents can automatically be processed end-to-end without any human errors and delays. Automation in loan document processing prevents downtimes, eliminates data redundancy, and allows companies to respond faster to client queries. By combining machine learning with deep learning and OCR, companies can eliminate huge costs, derive actionable insights, and streamline loan processing and approvals through efficient data extraction and analysis.
Mortgage lenders receive multiple identity and income verification documents along with different forms from loan applicants in a variety of formats and styles. Traditional OCR solutions fail to extract data from these semi-structured documents and that’s why more and more lenders are adopting intelligent document processing solutions. IDP solutions not only extract data correctly, they are able to validate extracted data against predefined rules in order to improve accuracy.
Intelligent Document Processing is an automation technology that captures information from a myriad of documents and data sources, extract data, and organizes it for further processing. IDP solutions enable businesses to seamlessly integrate with core processes, eliminate manual labour, address challenges faced in reading different document layouts, and meeting legal & compliance requirements. Accurate data is the foundation of every organization, and IDP assists businesses in dealing with the complexity of processing huge volumes of documents, helping them automate manual data entry processes, and move away from traditional semi-automated OCR workflows.