How Automation Reduces the Accounts Payable Cycle

The accounts payable cycle includes several essential steps for paying supplier invoices. The impact of ineffective invoice processing on the accounts payable cycle can be huge for large corporations with many suppliers, high invoice volumes, and multiple processing operations. Each step in the AP payment cycle has its own set of activities, including:

• Supplier onboarding
• Invoice receipt
• Invoice processing
• Invoice posting
• Supplier payment and reconciliation

 

Supplier onboarding

A proposed supplier needs approval, verification as a payable supplier (in other words, not on any watchlists), and set up in a buyer’s vendor master database. Typically, it falls on the shoulders of accounts payable staff to collect and maintain the contact information for the supplier as well as their banking account details and tax documents.

Invoice receipt

Invoices can arrive via many delivery channels, including paper mail, e-mail, File Transfer Protocol (FTP) upload, a supplier portal, fax, or electronic data interchange (EDI). Accounts payable staff collects all these invoices and prepares them for processing. Then, AP staff opens the mail, downloads invoices from an FTP site, retrieves them from an e-mail box or supplier portal, and collects the faxes.

Invoice processing

Once received, header and line-item data on each invoice must be captured and verified for accuracy. Then, AP staff matches invoices against purchase orders (POs) or proof-of-delivery receipts. Data on each invoice also must be recorded in the general ledger. Any invoices that do not match a PO or shipping document must be routed for approval, typically to the purchaser but possibly to additional people. Any exceptions must also be reviewed, and information collected for resolution.

Invoice posting

When an invoice is approved, it must be recorded in the buyer’s enterprise resource planning (ERP) or accounting system and scheduled for payment. An ERP is the financial nerve center of a business, managing all its financial information and terms.

Supplier payment and reconciliation

The ERP manages the scheduling of supplier payments, typically using pre-set payment terms established between the buyer and the supplier. While paper checks have traditionally been the most popular form of supplier payment, more buyers pay suppliers via Automated Clearing House (ACH) or card. Accounts payable records the payment method and any payment discounts.

 

Issues and inefficiencies in any step of the accounts payable cycle can result in: 

• Higher AP costs – from time wasted keying data and chasing down information
• Erroneous payments to suppliers – from miskeyed invoice information
• Delayed payments  – when invoices are lost or become “stuck” in the approval process
• Upset suppliers – due to late payments on invoices or when the invoice status is unclear
• Poor AP visibility – when data on paper traps payables information   

 

The shift to Work from Home exposes and exacerbates the shortcomings of manual invoice processing. So that, partially, semi-automated and on-premises approaches to invoice processing result in challenges from the abovementioned issues for more AP departments.

 

Accelerating the AP cycle with automation

Automation significantly reduces the accounts payable cycle, no matter where AP staff work!

Accounts payable automation solutions include capabilities for:

• Invoice receipt
• Invoice data capture
• Workflow approval
• Exceptions resolution
• Invoice posting to any ERP
• Supplier payments and reconciliation
• Invoice analytics

 

These capabilities digitize and simplify invoice processing for a faster accounts payable cycle.

Accounts payable robots (or “bots”) log into an e-mail box, FTP site, or online supplier portal to retrieve invoices for processing. Suppliers also can use an online portal built into an invoice processing platform to submit invoices electronically or to “flip” POs into electronic invoices. The result is that all accounts payables processes are centralized onto a single standardized platform.

AP automation software uses optical character recognition (OCR), e-mail invoice extraction, robotic process automation (RPA), machine learning (ML), and proprietary technology to extract and verify data from each invoice according to pre-defined business rules. Invoice data is guaranteed 99.95 percent accurate and then matched against a PO. Matched seamlessly upload to any ERP application, including SAP, Oracle, PeopleSoft, NetSuite, Sage Intacct, Infor, Advantage, and more.

Unmatched invoices, or those without a PO, are digitally routed for approval based on configurable business rules. If any data required for approval is missing from an invoice (such as a PO number), an AP automation solution sends an e-mail to the supplier’s billing department. The supplier then clicks a link, inputs the required information, and re-submits the invoice. The data input by the supplier is validated in real-time, eliminating the possibility of back-and-forth e-mails.

Automating the accounts payable cycle enables AP departments to lower costs, reduce human error, maximize efficiency, and achieve continual process improvement for best-in-class results.

 

Streamline accounts payable

The accounts payable cycle does not have to be complex, time-consuming, or costly when staff work remotely. With the right solution, payables departments can efficiently manage invoice processing.

 

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Edenred Pay, an Edenred Company, is the global leader in invoice-to-pay automation. Our integrated platform connects businesses with suppliers, ERPs, banks, FinTechs, and payment rails to automate, optimize, and monetize the entire B2B payments lifecycle – from invoice receipt through payment reconciliation. Edenred Pay’s efficient, integrated solutions create a frictionless process and help deliver value to the enterprise by enhancing visibility and monetizing AP.

Visit www.edenredpay.com or contact us to learn more.