What Are the Steps in the AP Process?
One of the best things you can do for your business’ efficiency, productivity, and overall financial health is automate, depending on the size of your business.
While it’s a back-office function, AP is critical to your business.
When your AP department is well-managed, you’ll be better able to maintain good relationships with your vendors and suppliers, and you’ll have uninterrupted delivery of goods and services. A well-run AP department can help you save money on overdue payments, and you’re better able to manage your cash flow. You can also reduce the risk of fraud and ensure that you aren’t missing or duplicating payments.
Some of the challenges your AP department might face include too much paperwork, an approval process that takes too long, and a lack of visibility. Accounts payable software can simultaneously solve all of these problems.
Invoice Capture
Invoice capture can be the first step in the AP process, which involves entering invoice data into a record system. This is the time when you start to see a significant risk of human error and inaccuracies.
In order to reduce inaccuracies, most of full scale businesses use Excel invoice templates that are recommended for growing businesses. During the invoice capture stage of the process, you’ll enter vendor details, line items, and amounts, as well as any relevant coding.
Invoice Approval
The next general stage of the AP process is invoice approval. This means that supplier and vendor invoices need to be reviewed and ultimately approved for payment.
In a clunky, outdated system, someone from your AP team might actually take a paper invoice and carry it around the office to get the approvals needed.
There’s a term here called a three-way match to be aware of.
There are three documents you would need—the vendor’s invoice, a purchase order, and receiving documentation.
A three-way match in AP helps match up the invoices with purchase orders and whatever the received quantity of a good or service is before the processing and payment of the invoice.
A three-way match is a way to automatically verify the documents to make sure that an invoice needs to be paid. When you automate three-way matching, you can avoid paying for things you haven’t received or making duplicate payments. This type of matching also goes a long way toward helping prevent fraudulent purchases, theft, and embezzlement.
Authorization of Payment
After an invoice is ready to be paid, you then need authorization for said payment. The authorization will usually include the date you’re going to submit the payment, how much it’s for, and the method you’re going to use.
Execution of Payment
The fourth general step of the AP process is the execution of the payment. After payment is authorized, the invoice can be paid, and the vendor may receive what are called remittance details.
When you’re choosing an AP automation solution, you should look for an option that will send all of your invoices electronically, no matter how they were initially received.
Clean data can be put into an ERP system using OCR capabilities.
Then artificial intelligence can automate your invoice matching and then process payments in a touchless system.
All of your controls, workflows, and guidelines for approvals are electronically managed, with documents archived and stored based on your guidelines for retention.
If you were to face something like an audit, everything you need to deal with it would be on your AP automation platform.
You can find invoices in a matter of seconds, rather than searching paper records. You can also provide access for auditors, so they can get what they need from anywhere.
Finally, you’ll have an inherent audit trail since your documents go through a fully electronic process, and you can see who opened what documents.
Conclusion
In conclusion, automating the accounts payable process can significantly improve the effectiveness, accuracy, and financial stability of a business. Making informed decisions when selecting an AP automation solution requires an understanding of the key accounting procedures, from invoice capture to payment execution.
Organizations can minimize human error, cut down on paperwork, speed up approval cycles, improve financial transparency, and protect against fraud by streamlining these processes. A touchless system for managing invoices and payments is ensured by the integration of technology, such as OCR and artificial intelligence, while maintaining thorough audit trails.
In general, adopting accounts payable automation enables financial teams to concentrate on strategic tasks, forge stronger vendor relationships, and improve cash flow management, ultimately enhancing the success of the company as a whole.
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