Accounts Payable Automation Best Practices in 2024

The financial world constantly evolves, demanding continuous learning for businesses to thrive. Companies unlock doors to growth, efficiency, and success by embracing new strategies and adapting to market changes.

What is Accounts Payable Automation?

Accounts Payable (AP) automation leverages technology to streamline invoice handling, approvals, and payments for vendors. It replaces manual tasks like data entry, invoice matching, and workflow approvals with automation.

Why is Efficient AP Management Important?

Efficient AP management is crucial for smooth cash flow, maintaining positive vendor relationships, and ensuring timely payments to avoid late fees. It's an ongoing process requiring updates based on market trends and emerging technologies. Businesses constantly seek better AP practices for accuracy, efficiency, and compliance in financial transactions.

The Solution: Accounts Payable Automation in 2024

The answer lies in implementing best practices for accounts payable automation. This blog explores the latest trends, technologies, and tactics impacting the AP landscape and the best practices for automation in 2024. This blog lets you understand how automation can transform your company's financial operations.

1.Automating the Account Payable

Businesses struggle with tedious manual processes in their accounts payable processes regarding financing. Issues like pending invoices, human errors, and processing delays are inevitable. Last year, many businesses adopted automated AP solutions to streamline invoice processes, minimize errors, and speed up payment cycles. AP automation provides enhanced accuracy and compliance in financial management, saving time.

"The market for supplier electronic invoicing software and account payable automation is estimated to expand to around $1.75 billion by 2026."

In 2024, AP automation will continue to gain popularity among finance professionals. The increased popularity of remote working settings makes automation a necessity. Automation allows employees to operate from anywhere, ensuring continuity and flexibility in business operations. Businesses will automate their accounts, implement machine learning algorithms, harness predictive analytics to predict cash flow and optimize payment schedules.

2.Prompt processing of Invoices via Automation

Manual invoice processing involves AP clerks physically entering data into systems, which results in delayed processing, extended payment cycles, and a higher risk of human errors. On the contrary, AP automation lowers the risk of errors, which is too common in manual data entry and processing.

• Seamless invoice scanning is the first step in the effective account payable automation process. OCR technology has advanced significantly in accurately scanning paper in digital format. Adhering to pre-established guidelines, automated systems accurately match purchase orders and invoices and facilitate timely payments without human intervention.
• Automation offers instantaneous visibility into the AP process, providing users with immediate access to invoice status and payments, essential for precise financial forecasting and cash flow management.
• Maintaining an auditable record of every transaction also improves compliance and control over all processes, reducing the risk of fraud.

In 2023, the average cost of a single supplier payment, including all components, was approximately $8.  Around 75% of medium-sized businesses receive their invoices via email or paper. The average medium-sized business dedicates 0.7 FTES toward supporting the AP process. Automating AP provides a 24*7 solution with no downtime / pause in invoice processing.

3.ERP integration

Organizations that managed account payments struggled with manual processes, fragmented data, and isolated systems. Businesses thus implemented ERP integration as a novel approach to this problem. ERP integration provides a single platform for managing financial data, automating routine tasks, and facilitating real-time collaboration. Organizations are experiencing enhanced accuracy, swift approval processes, and improved decision-making capabilities. Integration of current systems is important for the success of AP automation. This comprises seamless ERP and accounting software integration, optimizing communication among departments and stakeholders, and automating the data entry and resolution process.

"More than 66% of firms handling approximately 2,500 monthly payables see ERPs as vital for increasing payable volumes."

Moving forward by 2024, the ERP integration is intended to provide increased functionality and features to businesses. Deeper integration capabilities, A-I-powered predictive analytics, and good mobile accessibility for remote operations are some anticipated developments. Along with payable management, ERP integration will be used to gain actionable insights into strategic financial planning and forecasting by businesses.

4.Cybersecurity and fraud prevention

With advancements in technology, fraudulent practices also rise. Handling money in any amount can put a business at great risk of fraud. To mitigate this risk, create policies and procedures. One must stay aware of current and emerging fraud detection methods. It's not merely the best account payable practice but a crucial precaution for your organization's long-term survival and protection from fraud.

Advanced fraud detection strategies combine anomaly detection, pattern recognition, and verification checks against recognized fraud flags. Implementing such tools enables AP teams to proactively monitor transactions for suspicious activity, highlighting anomalies for further investigation and lowering the risk of financial loss. These systems may learn and adapt over time, adjusting to new fraud strategies and keeping up with the constantly changing digital world.

5.Employing Cloud-based solutions

According to studies, utilizing cloud computing for accounting can result in up to 50% cost savings for companies. Database storage in hardware stacks or manual paper-based documents is always at risk. Cloud computing is more effective, efficient, and cheap for companies looking for AP management.

Businesses migrate to cloud-based AP solutions in search of a transformative solution. Businesses streamlined their accounts payable procedures by moving to the cloud. They could collaborate in real-time, save time, and have improved accuracy and accessibility for any location. Research shows that 78% of small businesses will switch their accounting operations to cloud software.

• Cloud computing systems are scalable, allowing businesses to adjust their resources according to their requirements without any major upfront investments in hardware. This is handy when handling varying payments and invoices due to unforeseen market situations or seasonal trends.
• Cloud computing also offers enhanced security features, including regular updates and patch management, which are important for protecting sensitive financial data.
• Cloud services are centralized, facilitating better compliance management with regulations such as GDPR, as data handling and privacy controls can be standardized and monitored more effectively.

The trend is anticipated to advance with more advanced features by 2024. Companies will foresee more automation, integration of machine learning, and stringent security protocols. Furthermore, customization options and integrations with other systems are expected to amplify.

6.Keeping records up to date

Inaccurate invoices or compliance or administrative problems, such as receiving the invoice too late to process payment by established credit conditions, account for 61% of late payments. Prompt entry of every invoice and data as soon as it's received ensures fast and accurate processing of account payments. This practice avoids late payments or lost invoices, which can cost your firm its reputation, relationships, time, and money. And here's where automation comes in handy.

As per the reports, there are $3 trillion in outstanding accounts receivable from businesses in the United States, and the average American company has 24% of its monthly revenue withheld for trade credit. Only 29% of chief accounting officers use robotic process automation (RPA) for financial reporting.  

Automation allows the team to identify problems or opportunities for development by giving them a deeper and faster view of their accounts' payment procedures. You can rely on real-time statistics to better understand the company's financial status.

7.Utilize a supplier portal to organize vendor data.

Fostering good vendor relations is key to avoiding communication gaps and improving conversation. Create a supplier portal to establish positive relationships and better vendor engagement. It facilitates better communication between the two sides, gives the suppliers more authority, and organizes your data.

All the documents can be kept in one place, including invoices, tax returns, and payment information. Merchants can update their data anytime, and the system will make the necessary changes automatically. Another perk of self-service supplier portals is error minimization. Supplier information management is made easier by real-time confirmation of Tax Identification Numbers (TINs), payment information, and address data. Happy suppliers are the product of fewer errors.

8.Review and optimize regularly.

AP automation is not a one-time fix. Analyze system performance regularly and ask users for input. Keep up with the most recent developments in AP technology to continuously improve and streamline your operations. Automating AP gives you detailed analytics on metrics like suppliers with high volume invoices, suppliers with high invoice numbers, suppliers sending the greatest number of duplicates, and many more. While 29.7% of firms reported no significant improvements in reporting ease, 65.8% of businesses reported reduced reporting load since implementing AP automation technology. That's why it's essential to analyze AP automation systems frequently.

9.Check for duplicates

Always check for duplicate invoices, regardless of whether your AP process is manual or automated by software.

10. Mobile Accessibility and Approval

Mobile accessibility is necessary now, as your teams can be set up anywhere. Teams that work on-site and, on the need, mobile accessibility. Nowadays, many accounts payable automation solutions come with a mobile app, allowing professionals to optimize processes on the go, from reviewing invoices to approving payments.

Security measures for mobile usage are a major concern when leveraging mobile accessibility. It's important to implement powerful security measures. Two-factor authentication, encrypted connections, and secure mobile applications ensure sensitive financial data security, even when accessed from mobile devices.

In summary, businesses have countless options to improve efficiency, develop strategic value, and streamline their financial processes within accounts payable automation. Businesses may optimize their Accounts Payable processes and maintain competitiveness in the ever-evolving digital landscape by implementing best practices, such as utilizing cutting-edge technologies, integrating with ERP systems, and abiding by compliance regulations.

About Hermes AP

Hermes is an AP automation software developed based on combined concept of AI and ML which is the key-factor to producing high accuracy and less processing time. We are partnered with Oracle, Workday, Microsoft, Sage, SAP, Infor, and Epicor. Hermes can efficiently handle and process high-volume invoices 24/7. We help to save 90% of costs with 10% human intervention. Hermes can seamlessly integrate with your ERP and boost employee productivity by 65%. We reduce AP processing time by ten days, reduce operation risk & data breaches, improve vendor relationships, and enhance transparency to help you focus on high-ticket activities.