Making on-time bill payments to your suppliers and vendors is one of the most critical processes for any organization. However, managing accounts payable (AP) can be time-consuming, labor-intensive, and prone to errors. If not managed properly, you could decrease your cash flow and damage vendor relationships—which nobody wants.
Fortunately, technology has come a long way in automating the AP process, allowing businesses to streamline their accounts payable with accounting automation. By automating parts of the process, you can free up your team’s time to focus on other crucial tasks.
What is accounting automation?
Accounting automation is defined as using technology to automate accounting tasks to reduce the manual work required to perform functions like bill approvals, reconciliation, payroll, and many others. With automation, businesses can process invoices faster, reduce the risk of errors, and have more time to focus on other core business tasks.
Ideally, you should establish an accounts payable system that reimburses bills on a weekly or monthly schedule, which can be handled by accounting software.
Benefits of automated accounting
- Reduce manual data entry, in turn reducing risk of human error
- Makes bookkeeping easier and keeps records up to date
- Ensures accuracy and keeps you compliant with regulatory requirements
- Allows your accountant to review business finances in real time
Automating your accounts payable
Automating your accounts payable processes can make your business much more efficient. By streamlining manual processes, reducing errors, and increasing transparency, automation can help optimize accounts payable processes in several ways.
Invoice processing
Automation can help streamline invoice processing by automating the capture and extraction of invoice data. This can be accomplished with optical character recognition (OCR) technology, which reads and extracts information from invoices, then enters it into your accounting system.
Purchase orders
Automating the creation and approval of purchase orders can help reduce errors and ensure that orders are placed quickly and accurately. This can be done using a workflow system that automatically sends purchase orders to the appropriate departments for approval, then creates the purchase order in the accounting system.
Payment processing
Implementing automation in your payment processing can help ensure that payments are made on time and in the correct amount. You can use an electronic payment system that automatically generates payment requests and sends them to the appropriate parties for approval.
Vendor management
Vendor management automation can help streamline the process of onboarding new vendors, maintaining vendor records, and managing vendor relationships. This can be done using a vendor management system that automates the vendor registration process and tracks vendor performance metrics.
Reporting
By automating your reporting, you can give stakeholders more visibility into your accounts payable processes so they can track key metrics and identify areas for improvement. Automated reporting dashboards can aggregate data from various sources and provide real-time insights into accounts payable performance––plus, you’ll be able to set parameters that can help flag unusual activity.
Tips for automating your bill payments
Here are some tips for how to optimize your accounts payable process once you’ve implemented automated accounting.
1. Check recurring payments regularly
Just because you’re automating a process doesn’t mean you can totally ignore it. It’s important to check in on your recurring payments on a regular basis to catch any errors or scheduling mishaps. Technology can help you become more efficient, but it’s not always perfect.
2. Keep your accounts connected
Make your life easier by maintaining active connections between your business checking account and accounting software. This way, you can sync all your important data like payees, bills, categories, and more––and track all your bill payments from one place.
3. Use sub-accounts to separate money for different expenses
If your checking account lets you create sub-accounts, you’ll be able to separate money for different expenses, such as payroll, inventory, taxes, and more. This can help you budget more effectively, as well as control which accounts vendors can bill if your sub-accounts each feature dedicated account numbers.
4. Optimize due dates to improve cash flow
If your vendors are flexible, you may be able to negotiate payment terms to adjust them in your favor. This can include switching due dates around to help optimize your cash flow every month.
Overall, automating accounts payable processes can help optimize your financial operations, reduce costs, and improve the accuracy and timeliness of financial reporting. By leveraging technology to streamline manual processes, your business can focus on strategic initiatives that drive growth.
