Managing cash flow is a vital part of running a business. It can also be one of the most challenging aspects. Accurate data on how much money a business is bringing in (accounts receivable) and how much it is obligated to spend (accounts payable) is essential for maintaining business operations. A company could find itself without enough working capital to pursue its goals or cash on hand to keep the lights on. Accounts payable automation (APA) offers businesses a way to keep accurate and efficient records of current liabilities, make timely payments and minimize the risks of fraud or regulatory noncompliance. Read on to learn more about APA and how it could benefit your business.
Read more about 8 Small Business Accounting Errors You Could be making and how to avoid them.
What Is Accounts Payable Automation?
Countless businesses still have employees manually entering invoices into their accounting software. A sole proprietor working out of their home might be able to get by entering bills into a spreadsheet, but most businesses need something that can manage a larger workload with greater efficiency.
APA provides a system for managing accounts payable through digital technology. By automating accounts payable tasks, it helps businesses avoid many of the problems that come with doing everything by hand.
How Does Accounts Payable Automation Work?
With APA, businesses can systematize routine steps in the accounts payable process, such as:
The software generates POs in a standard digital format that can be sent to vendors in a common format like PDF. It converts invoices into the same standard format through optical character recognition (OCR) or e-invoicing. It can compare the data on the invoices to the PO data to confirm that they match.
This type of workflow allows APA software to manage most of the process. It only needs human input at certain stages, such as approving expenses and dealing with discrepancies between POs and invoices.
The software provides a dashboard that allows businesses to manage the process, review transactions and troubleshoot whatever issues may arise. Analytic tools can help with tasks like evaluating performance and diagnosing problems.
What Are the Benefits of Accounts Payable Automation?
An APA system can offer numerous benefits to businesses of any size, including the following:
1. Increased Accuracy
Manual data entry is highly error prone. APA software uses sophisticated OCR algorithms and other processes to maintain the accuracy of all the information it receives.
2. Reduction in Work Hours
Entering accounts payable data by hand is also quite time-consuming. Employees must first type in all necessary data, and then they must review their entries for errors. Entering data into an APA system only takes as long as is needed to scan documents or transfer files. This frees employees to work on other job duties.
3. Improved Revenue Management
APA allows businesses to manage their cash flow more efficiently and accurately. In addition to data entry mistakes, manual accounts payable management can lead to errors like double payments and missed due dates. APA software can maintain schedules and track payments quite effectively.
An additional benefit of using APA, is the efficiency of getting AP invoices into your accounting system in a timelier manner, to allow the business to take advantage of allowable discounts for early payment. This seemingly small amount can add up to large savings over the course of a year.
Business owners and managers are also in a better position to make decisions about how to allocate funds with the help of APA. They have access to cash flow data that helps them pinpoint the best times to make expenditures or investments.
4. Greater Access to Real-Time Financial Data
Businesses can visualize their cash flow in real time with the data that APA software provides. They can spot problems that could be delaying revenue or restricting growth opportunities. They can make informed decisions about which expenses might not be necessary and where they might need to spend more.
5. Streamlined Risk Management and Compliance Reviews
The data that APA systems provide can also be an invaluable tool for compliance and risk management. Auditors have access to a complete trail for every transaction. This can allow them to spot irregularities and determine causes, such as errors or fraud. Businesses can address problems before they become large and expensive.
6. Learn More About Accounts Payable Automation
Running a business means taking on a wide range of roles. Small business owners might feel like they must carry the entire burden themselves, but even managers in larger businesses can easily become overwhelmed. Accounts Payable Automation offers a way for business owners, executives, and managers to take some of those obligations off their shoulders so that they can focus on other — often more interesting — tasks. Learn more about APA today.
Curious what the biggest tax scams of 2023 are? Read the 12 most common tax scams everyone should know.
If you have any questions or would like additional information about anything mentioned, please comment below or email us at askus@lgt-cpa.com.