Accounts Payable Software
Accounts Payable Software automates and simplifies the process of managing and tracking an organization’s outstanding payments to vendors and suppliers. It enables businesses to efficiently track invoices, manage approvals, and schedule payments, leading to improved accuracy, reduced manual errors, and enhanced financial visibility.
Key features of accounts payable software include invoice scanning and data extraction, automated invoice routing and approval workflows, integration with accounting systems, and reporting capabilities for better insights into cash flow and payment trends.
By leveraging accounts payable software, businesses can streamline their financial operations, reduce processing times, eliminate paper-based inefficiencies, and ensure compliance with regulatory requirements. Whether you’re a small business or a large enterprise, investing in accounts payable software can result in significant cost savings and increased productivity.
What is an Accounts Payable Software?
The Accounts Payable (AP) process is one of the most document and data-intensive processes for any company. Yet many finance teams still rely on manual, paper-based workflows to handle invoices, approvals, GL coding, payments, and reporting. This leads to slow, inefficient, and error-prone processes that make it hard to gain insights into spending.
Accounts Payable Software aims to digitally transform and automate the invoicing and payment process. It enables employees to capture, manage, code, route, approve and pay all invoices from purchase order through payment. AP automation delivers increased efficiency, lower processing costs, fewer errors, early payment discounts, 360° visibility across AP and stronger compliance.
This guide will explore the key benefits of Accounts Payable automation in 2024 and beyond. We will provide an overview of leading solutions and vendors in the space. Buyer considerations like scalability, integration, analytics and more will also be examined. By the end, you will have a comprehensive understanding of how modern AP software can optimize working capital, strengthen vendor relationships, and enable data-driven decisions.
Key Benefits of Accounts Payable Automation
1. Lower Invoice Processing Costs
One of the biggest benefits of Accounts Payable Software is significantly lowering the cost to process each invoice. Manual invoice processing can cost $5-$10 per document due to labor, printing/postage, and error resolution. AP automation reduces this to just $0.50-$2 per invoice by eliminating paperwork, speeding approvals, and preventing duplicate payments. This generates major cost savings, especially for companies with high invoice volumes.
2. Faster Approval Workflow
Routing invoices for approvals is sped up from days to just hours with AP automation. Rules-based workflows automatically send invoices to appropriate reviewers, while notifications and dashboards prevent bottlenecks. This increases turnover of invoices and helps capture early payment discounts from vendors.
3. Improved Visibility & Control
Modern Accounts Payable Software centralizes invoice and payment data in one cloud-based system. This provides real-time visibility and control over AP processes. Dashboards deliver insights into invoice aging, duplicate payments, vendor behavior, fraud patterns and more. Automation makes AP transactions transparent and trackable.
4. Reduced Fraud & Errors
Automating the invoicing process minimizes human errors and stops duplicate or fraudulent payments. Solutions with OCR can match invoices to POs and product receipts to avoid mismatches. Some even leverage artificial intelligence to detect fraud and outliers before payment. This mitigates financial losses and compliance risks.
5. Lower Risk & Better Compliance
Accounts Payable Software enforces approval workflows, payment terms and spending policies organization wide. This improves internal controls and policy adherence. A detailed audit trail also reduces risks and supports compliance with accounting standards and regulations like SOX.
6. Early Payment Discounts
Accelerating the approval cycle allows companies to capture more early payment discounts from vendors for on-time invoice settlement. Vendors often incentivize faster payment through discounts of 1-2% off the invoiced amounts. AP automation enables firms to capitalize on significant sums through these discounts.
7. Optimized Working Capital
With real-time AP visibility and forecasting, Accounts Payable Software enables better cashflow management. Companies can optimize working capital by paying invoices on time – not early or late. Forecasting ensures sufficient liquidity, while tight integration with accounts receivable improves overall cashflow.
8. Enhanced Supplier Relationships
Suppliers desire quick, on-time payment. AP automation facilitates this through faster turnaround on invoices. Automating supplier communications also improves relationships. This strengthens the supply chain, drives negotiated discounts and boosts continuity of supply.
9. Greater Efficiency & Productivity
By eliminating manual tasks, AP software enables employees to focus on more strategic initiatives. AP staff gain efficiency through intuitive workflows and process management instead of paperwork. Together with real-time access to data, this drives smarter financial decisions.
10. Insights for Innovation
Rich analytics and reporting provide insights that can drive innovation, such as spending patterns by time period, department, or vendor. Data mining helps identify opportunities for process improvements, supply chain enhancements and strategic cost optimization.
What Key Features to Look for in Accounts Payable Software
With so many options on the market, identifying the must-have features is essential for buyers. Here are some of the key capabilities modern Accounts Payable systems should provide:
- Intuitive interface: The solution should have an intuitive, user-friendly interface that facilitates employee adoption across finance, procurement, and the wider company.
- Mobility: Mobile access enables approvers to manage invoices from anywhere. This accelerates approvals and provides flexibility.
- Invoice capture: Advanced OCR and file ingestion allow automated capture and extraction of invoice data into digital workflows.
- 2/3-way matching: Matching purchase orders, receipts and invoices is crucial for verification and preventing duplicate payments.
- GL coding: Software should auto-code invoices based on rules and machine learning to maximize straight-through processing.
- Approval workflow: multi-tiered approval workflows route invoices to reviewers based on customizable rules improving control.
- Accounting integration: A tight integration with major accounting systems like QuickBooks, NetSuite, and Microsoft Dynamics syncs AP data.
- Supplier management: Systems with supplier portals, self-service and e-invoicing optimize supplier document submission and communications.
- Spend analysis: Built-in reporting and analytics provide insights into invoices, payments, vendor activity and other spending data.
- Payment capabilities: Support for multiple payment types like ACH, virtual cards, cross-border wire transfers facilitate payments.
- Configurable rules: User-defined rules for coding, approvals, workflows and more enable a customized AP process.
- Compliance: Features like audit logs, access controls and policy enforcement help maintain regulatory compliance.
- Data security: Robust data encryption, perimeter security and access controls are must-haves to secure financial data in the cloud.
- Scalability: Solutions should easily scale invoice volume growth and support easy onboarding of new departments, suppliers, and locations.
Buying Considerations for Accounts Payable Software
Selecting the right AP automation system is critical for maximizing ROI and advantages for your business. Keep the following buying considerations in mind:
- Integration: Evaluate how easily the software integrates with your ERP system, bank, and accounting platform to enable seamless data and workflow connectivity.
- Flexibility: The solution should readily configure your unique workflows and rules with easy changes as your needs evolve.
- Scalability: Ensure the system can scale up smoothly as transaction volumes grow without degradation in performance.
- Implementation: Look for vendors with resources to guide your implementation and provide ongoing training and support.
- Supplier adoption: For electronic invoicing, review options to incentivize suppliers to adopt the solution through buyer-led programs.
- Analytics: Robust reporting and API access to data are vital for extracting insights to improve decisions and processes.
- Total cost: Factor in subscription fees, setup costs, training expenses and IT resource needs for accurate TCO and ROI modeling.
- Security: Verify the vendor has up-to-date cybersecurity, SSAE compliance and data encryption for financial data protection.
- Payment flexibility: More payment method support like virtual cards and international transfers provides helpful options for settling supplier invoices.
- Vendor stability: Choose established vendors with a track record of success and low risk of the solution being discontinued.
Best Practices for Implementing Accounts Payable Software
Once an AP automation system is selected, focusing on the implementation plan is key for adoption success.
Here are best practices to follow:
- Phased rollout: Gradually roll out the software to groups of users and suppliers to smooth the transition from manual processes.
- Training: Provide comprehensive training resources and sessions to users and suppliers to develop proficiency on the new solution.
- Change management: Actively communicate changes, train staff on process impacts, and get buy-in from key stakeholders’ pre-implementation.
- Process documentation: Document legacy workflows and processes before shifting them into the new automated system.
- Conversion assistance: Work with the vendor to convert supplier data and invoices from legacy systems into the new platform.
- Integration testing: Thoroughly test integration points with accounting systems and banks before going live to avoid issues.
- Ongoing support: Ensure you have vendor resources to assist with questions, optimization, and enhancements post-implementation for sustained success.
Emerging Technology Trends for Accounts Payable
Key technology innovations are shaping the future of AP software and bringing new benefits to users:
- Artificial intelligence: AI and machine learning allow more intelligent OCR extraction, coding validation and anomaly detection in AP processes.
- Blockchain: Blockchain has potential to enhance transaction visibility, compliance, and interoperability between AP/AR systems.
- Predictive analytics: Solutions are leveraging big data and ML to provide predictions of future cashflow, payments and market fluctuations.
- Mobile: Mobile optimization makes approvals, reporting and other capabilities available to finance staff on smartphones and tablets.
- Supplier portals: Supplier-facing portals with self-service, e-invoicing submission and status tracking improve supplier experience.
- B2B payments: Integrated B2B payment capabilities through ACH, virtual cards and global wire transfers simplify settlements.
- ERP integration: Tighter integration between AP software and leading ERP systems powers end-to-end automation.
- Supply chain finance: Solutions enabling early payments to suppliers through discount programs and dynamic discounting.
The Future of Accounts Payable
The global Accounts Payable automation software market was valued at nearly $1.9 billion in 2019. But it is forecast to grow at 13% CAGR, exceeding $4 billion by 2024. Several key factors are driving this growth:
- Digital transformation: The push to digitalize manual financial processes is propelling adoption of end-to-end AP automation across industries.
- Cloud adoption: Accounts Payable are increasingly transitioning to affordable, scalable cloud systems from on-premises legacy solutions.
- Big data: Organizations want greater visibility and insights from large volumes of AP data, fueling analytics adoption.
- Working capital: The increased focus on optimizing working capital is accelerating usage of technologies like virtual cards and dynamic discounting.
- Regulations: Stricter regulatory requirements for financial controls and visibility mandate improvements in compliance and auditability.
As AP automation becomes more mainstream, buyers will shift from basic invoice imaging solutions to platforms with integrated workflows, supplier collaboration, predictive analytics, and other advanced capabilities. Adoption will increase across enterprises of all sizes and sectors.
Within 5 years, manual invoice processing could become nearly obsolete. The future of Accounts Payable will be defined by intelligent, integrated automation that transforms the payment process. This delivers new levels of efficiency, control, and strategic insights for finance teams. Organizations that automate sooner stand to gain a competitive advantage.
Final Thoughts
Accounts Payable automation is becoming a digital transformation imperative for finance teams looking to reduce costs, risks, and inefficiencies. Modern AP software centrally digitizes invoices and payments with approvals workflow to optimize the process. This delivers significant ROI through discounts captured, lower processing costs, improved cycle times and other benefits.
Leading solutions make AP integration intuitive across the procure-to-pay process. They apply technologies like AI and blockchain to unlock more value from AP data. By 2024, AP automation adoption will accelerate across industries. Now is the ideal time for organizations to evaluate systems that can unlock the full strategic potential of accounts payable.
Frequently Asked Questions About Accounts Payable Software
Here are answers to some common questions regarding modern Accounts Payable automation solutions:
Is AP software worth it for small businesses?
Yes, small firms can benefit tremendously from AP automation. Solutions tailored for SMEs make invoice processing faster, eliminate late payments, provide visibility, and help control expenses – delivering an attractive ROI.
What features help optimize working capital?
Dynamic discounting, supply chain finance integration, virtual card payments and forecasting help optimize working capital by accelerating invoice settlement, earning discounts, and tightening cashflow management.
How long does AP software implementation take?
Implementation spans 2-6 months depending on scope and complexity. Phased rollouts by department and office location are recommended for easier adoption across larger organizations.
What options exist for suppliers that still use paper invoices?
Solutions with advanced OCR can digitize paper and PDF invoices. Many also offer supplier portals for online invoice submission or provide scan/fax services to ingest supplier documents.
How can compliance with regulations like SOX be improved?
Automated controls, digital workflow with comprehensive audit trails, and data access controls improve compliance and accountability required by financial regulations.
How can AP automation reduce late payment penalties?
By speeding approval workflows, AP software enables faster settlement of invoices before terms to avoid late fees. Configurable business rules also enforce policies.
What cybersecurity measures should AP software have?
Robust measures like data encryption, role-based access, SOC2 compliance, cybersecurity insurance and hardened data centers help secure financial information in the cloud.
How can AP software help analyze spend?
Embedded analytics provide real-time visibility and reporting on AP spending by vendor, department, time period, invoice type and other variables to reveal opportunities.