AP automation, or account payable automation, is a term that is regularly used to describe the effort made by companies to streamline their account payable departments more effectively. The main responsibility of this department is to review and process transactions between the company itself, and the suppliers of that company.

In simple terms, the AP department of a business is responsible for ensuring that any outstanding invoices from suppliers are processed, approved and paid. Processing an invoice includes recording important data from that invoice, and placing it within the financial or book-keeping system of the company.

Although the process of an Accounts payable department can be relatively straight forward, it can quickly become troublesome if the company itself has a large number of invoices to deal with on a regular basis. This problem becomes even more significant if the invoices in question are on paper, as this can lead to human error, invoice duplicates, and lost paperwork. These and a number of other problems result in a higher cost per invoice metric.

Why use AP Automation?

So now that we have established what the AP department does, it’s worth discussing what makes AP automation so valuable. Around 80% of AP function can be connected to processing invoices. However, although most invoices are prepared electronically, many are processed manually through manually entering information into an automated system. By optimizing an AP automation system you can improve the efficiency, speed, control, and visibility of your operations.

Improving Productivity

A lot of AP departments get bogged down with piles of paper, meaning that time is wasted on retrieving, filing, copying, faxing, mailing and searching for papers that have been accidentally misplaced. Add this time spent to the job of entering information from paper invoices into the financial system, and the result can be a productivity disaster.

Another issue with traditional AP solutions is that they are regularly too complex. They come with not enough standardization, too many internal manual controls, and far too many different financial systems. Mix that with interruptions resulting from rushed requests, and inquiries and it’s no wonder that AP productivity begins to suffer. Fortunately, AP automation takes some of the stress, complications and time-wasting processes out of the AP department, meaning that more work can be done faster.

Improving Quality

Another thing that is worth considering when you are thinking of switching to AP automation systems is that errors in your AP department can be incredibly costly in regards to lost revenue, departmental productivity, and of course, your corporate reputation. The challenge is to figuring out why and where these errors occur. The general solution that is most regularly used for reducing the number of AP errors that take place in an organization is automation of entry and receipt. By automating the system, you reduce the number of time-consuming steps in the process, which means your chances of making a mistake are also reduced.

By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to [email protected].