AP Automation: The Benefits of Going Paperless

Paper invoices and late payments are overwhelming, but paperless AP automation can enhance efficiency, reduce costs, improve vendor relationships, and more.

For growing businesses, there usually comes a time when the sheer number of paper invoices, receipts, and payment documents bring a state of overwhelm to an accounts payable (AP) department. These paper excesses not only cause tedious manual data entry work, but they also contribute to instances of missing documents, data entry errors, compliance issues, and late vendor payments.

A few realities:

• It takes approximately 10.1 days to process an invoice manually, but only 3.9 days to process an invoice using automation (PayStream Advisors).
• The average cost to process an invoice manually is $15, but only $2.36 electronically (Aberdeen Group).
• Over a third of vendors would stop doing business with a customer if they experienced late payments (Atradius).

Want to know more? Follow this CloudX blog to learn about transitioning to paperless invoice and payment processing, plus find out about its many benefits.

What Does Paperless AP Automation Actually Mean?

Paperless AP automation involves the use of digital tools and software to handle AP processes, without relying on physical paper. This modernization replaces manual, labor-intensive tasks with streamlined, automated workflows to enhance efficiency and accuracy.

To begin, digital invoices are received via email or a dedicated vendor portal. After receipt, a business can easily move, track, store, and manage invoices, significantly reducing administrative burden and the risk of lost or misfiled invoices.

Automated data entry is the next step involved in paperless AP automation and this workflow allows a business to capture invoice data quickly and accurately using Optical Character Recognition (OCR) technology. Once digital invoices are scanned, information is automatically extracted and relevant information added into the system.

After invoice data is gathered and matched with other receiving documents, electronic approvals are routed automatically to the appropriate approvers who can review and authorize payments in just a few clicks. This workflow replaces physical signatures therefore accelerating the approval process and ensuring a comprehensive audit trail.

The Role of Technology in AP Automation

The backbone of AP automation lies in advanced technologies such as OCR, Artificial Intelligence (AI), and machine learning. OCR enables precise data extraction from digital documents while AI and machine learning optimize AP workflows by predicting anomalies, prioritizing invoices, and automating payment schedules. Altogether, these technologies ensure efficient and accurate paperless AP processing.

Realizing the Benefits of Going Paperless in AP Automation

In a business landscape where efficiency and sustainability are keys to success, transitioning to paperless AP processes offers a multitude of advantages. From cost savings to improved vendor relationships, moving to a digital AP system can transform how a company handles its financial operations. Let’s take an in-depth look at the benefits of going paperless in accounts payable.

Cost Savings

One of the most immediate and tangible benefits of adopting a paperless AP system is the cost savings achieved, starting with the reduction in costs associated with paper, printing, and storage. Traditional AP processes require significant expenditures on paper and printing supplies, plus storing physical invoices and documents necessitates space and resources that could be better utilized elsewhere. By eliminating these requirements, businesses can drastically cut down operational expenses.

Paperless AP systems also reduce labor costs by minimizing manual processing. In a traditional setup, employees spend considerable time entering data, filing documents, and managing paper trails. Automation reduces these labor-intensive tasks, freeing up staff to focus on more strategic activities that can add greater value to the company.

Increased Efficiency

Automated systems streamline the entire invoice lifecycle, from receipt to approval, and digital invoicing allows invoices to be submitted electronically. Then, the automatic capture and approval routing made available by the automated system speeds up processing times and reduces the likelihood of bottlenecks caused by manual handling.

Thanks to this faster invoice processing and approval processes, businesses can ensure timely payments leading to more predictable cash flow. Automated systems also provide better visibility into outstanding invoices and due dates, effectively enabling more accurate financial planning and forecasting.

Enhanced Accuracy

Accuracy in financial operations is paramount to good accounting, and paperless AP systems significantly enhance this aspect through automated data capture technologies like OCR and AI. By accurately extracting information from digital invoices, they minimize the errors and omissions that often occur with manual processes.

Additionally, automated systems ensure better compliance and provide robust audit trails, making it simpler to comply with internal policies and external regulations. In the event of an audit, digitally stored records then allow for quick retrieval and thorough documentation.

Environmental Impact

Transitioning to paperless AP processes also offers substantial environmental benefits as opposed to manual AP processes. With reduced paper usage, businesses contribute to lower deforestation rates and the decreased carbon footprint associated with paper production and waste. This eco-friendly approach aligns with growing societal and consumer expectations for sustainable business practices and demonstrates a company’s commitment to environmental responsibility.

Improved Vendor Relationships

Because paperless AP processes streamline invoice processing, errors and delays are reduced. This efficiency allows for faster payments which improve vendor cash flow and fosters trust. The transparency provided by digital systems also enhances communication, enabling vendors to track payments and resolve issues quickly. These benefits collectively strengthen vendor relationships and lead to more favorable terms, better service, and long-term partnerships that are mutually beneficial.

How to Go Paperless in Accounts Payable

Transitioning to paperless accounts payable (AP) processes is a strategic move that can bring substantial benefits to a business. However, ensuring a smooth shift requires careful planning and execution. Here are steps you can take to prepare for a paperless accounts payable environment:

1. Assess Current AP Processes and Identify Inefficiencies: The first step in preparing for a paperless AP system is conducting a thorough assessment of your current AP processes. Begin by mapping out entire workflows, from invoice receipt to payment processing. Along the way, make sure to identify bottlenecks, redundant tasks, and areas prone to human error. For instance, manual data entry or slow approval processes can be significant inefficiencies. By pinpointing these issues, you can understand where automation will be most beneficial and then prioritize changes that will have the highest impact on efficiency and accuracy.
2. Choose the Right AP Automation Software Provider: Once you have a clear understanding of your current workflows, the next step is to choose an AP automation software provider. Look for one that offers comprehensive features such as digital invoicing, electronic approval workflows, and automated data entry. Evaluate different options based on ease of integration with your existing systems, user-friendliness, scalability, and support services.
   It's also crucial to consider security features and compliance with industry standards. The right provider will not only help streamline your AP processes but they will also provide a secure and scalable solution that grows with your business.
3. Train Employees and Stakeholders for the Transition: Implementing a new system is only going to be successful if your team is fully onboard and trained. Conduct training sessions to familiarize employees and stakeholders with new software and processes. This should include hands-on training, tutorials, and ongoing support to address any concerns or questions. Ensuring that everyone understands the benefits and functionalities of the new automation software will facilitate a smoother transition and encourage faster adoption.
4. Set Up a Robust Data Backup and Security System: As you move toward paperless AP, data security becomes paramount. Establish a robust data backup and security system to protect sensitive financial information. Use encryption, secure access controls, and regular backups to safeguard your data. Ensure that the AP automation software you’re looking at complies with data protection regulations and has strong security measures in place to prevent unauthorized access and data breaches.
5. Develop a Step-by-Step Implementation Plan: Develop a detailed implementation plan outlining each step of the transition. This plan should include timelines, responsible parties, and milestones to track progress. Start with a pilot program to test the new system with a small group of users. Gather feedback, make necessary adjustments, and then gradually roll out the system to the entire organization. Regularly review the implementation process to identify and address any challenges promptly.

Prepare to Go Paperless in Accounts Payable

Whether you’d like to start going paperless with your invoice documents or you’d like to find an end-to-end automation solution able to digitize and automate all of your AP processes, CloudX can assist you in exploring your options.

For more information about CloudX’s APSmart and PAYSmart, please fill out our online form here or call 860-787-5323 for a no-obligation consultation.