How AP Automation Enhances Vendor Relationships

Having solid relationships with your vendors is an aspect of doing good business, as it ensures your operation consistently gets the supplies and services needed to perform optimally. And while it’s ideal to always be paying vendors accurately and on time, this isn’t the case for many businesses. In fact, a survey by Atradius in 2023 found that 55% of all B2B invoiced sales in the US were overdue.

So, what can your organization do to build more strong and trustworthy relationships with your vendors? Accounts Payable (AP) automation has some of the answers, and this CloudX blog will highlight various ways this software technology is able to help out.

Faster and Easier Onboarding

One of the main advantages of AP automation in vendor onboarding is the ability to capture and store vendor data electronically. Automated systems facilitate online submission of vendor documents, such as tax forms, banking information, and compliance certifications–removing the need for physical paperwork. This digital approach not only speeds up the data collection process but also ensures that all necessary documents are easily accessible and organized in a centralized database.

Besides efficient data capture, most AP automation tools are able to perform real-time validation of vendor information. Automated systems will cross-check the submitted data against external databases and internal criteria, flagging any discrepancies or missing information instantly. This reduces the risk of errors and ensures that only compliant and verified vendors are onboarded, therefore minimizing back-and-forth communication and expediting the approval process.

AP automation also enhances communication with vendors if self-service portals are an available feature. These portals allow vendors to enter and update their information, track the status of their onboarding, and receive automated notifications regarding required actions. This self-service model empowers vendors to take an active role in the onboarding process, reducing the workload on AP staff and speeding each task.

A Higher Percentage of On-Time Payments

A major benefit of most AP automation solutions is their ability to process invoices quickly. Automated systems capture invoice data through various means, such as scanning and optical character recognition (OCR), eliminating the need for manual data entry. This reduces the time AP staff spend during the initial stages of processing, allowing for quicker movement through the payment pipeline.

AP automation also enhances communication and collaboration within an AP department and with vendors by sending real-time notifications and alerts to relevant parties. This immediate communication reduces bottlenecks, accelerates approvals, and helps maintain a steady flow of payments.

Another aspect of AP automation you don’t want to overlook is the reduction of discrepancies and errors, which are common causes of payment delays. Automated 2-way and 3-way matching ensures that only accurate and verified invoices are processed for payment, therefore reducing the time spent resolving disputes and correcting errors.

Enhanced Visibility of Invoice Activity

Because automated AP systems provide real-time access to invoice statuses, vendors are able to track their invoices from submission to payment. This increased visibility reduces uncertainties and enhances communication between vendors and AP departments.

One of the key benefits of this feature is the implementation of vendor portals. These online platforms allow vendors to log in and view the status of their invoices at any time. They can see whether an invoice has been received, approved, or is pending payment. In turn, this immediate access to information minimizes the need for constant follow-up emails or phone calls, streamlining the communication process and building a more efficient working relationship.

Enhanced visibility through AP automation also helps vendors to better manage their cash flow. By having a clear view of when payments are expected, vendors can plan their financial activities more effectively.

Improved Payment Accuracy

By automating various stages of the accounts payable process, AP automation solutions significantly reduce the likelihood of human error, which is often the root cause of payment inaccuracies.

One of the primary ways AP automation improves payment accuracy is through automated invoice matching. This involves cross-referencing purchase orders, invoices, and delivery receipts to ensure that all details align before a payment is made. Automated systems can instantly flag discrepancies, such as mismatched amounts or missing documents, allowing accounts payable staff to address these issues promptly. This preemptive approach ensures that only accurate and verified invoices move forward to payment processing.

Another advantage of AP automation is the elimination of manual data entry. In traditional accounts payable processes, human error in data entry can lead to mistakes such as incorrect amounts, dates, or vendor details. Automated systems use technologies like optical character recognition (OCR) to accurately capture invoice data, minimizing errors and ensuring that the information entered into the system is correct from the outset.

AP automation also enhances payment scheduling. Automated systems can track payment due dates and prioritize payments based on predefined criteria, such as early payment discounts or critical vendor relationships. This ensures that payments are made on time and in the correct amounts, further reducing the risk of errors.

Moreover, automated systems maintain comprehensive audit trails, recording every action taken during the invoice processing and payment cycle. These records provide a transparent and easily accessible history that can be invaluable for resolving any discrepancies that arise.

Higher Security of Payment Data

One of the key security benefits of AP automation is the encryption of data. Automated systems use robust encryption methods to safeguard sensitive information, such as vendor bank details and invoice data. As a result, the information remains confidential and secure during transmission and storage, preventing unauthorized access.

Another layer of security comes from the implementation of stringent access controls. AP automation platforms allow administrators to define user roles and permissions, ensuring that only authorized personnel can access, modify, or approve financial data. This reduces the risk of internal fraud and unauthorized activities, as every action is tracked and can be audited.

Automated systems also facilitate secure payment processing. By integrating with secure payment gateways and banking systems, AP automation ensures that payments are made through trusted and encrypted channels. This minimizes the risk of interception and fraud during the payment process, providing vendors with confidence that their transactions are secure.

Besides these measures, AP automation platforms often include real-time monitoring and alerts. These features continuously scan for suspicious activities or anomalies, such as unusual payment patterns or unauthorized access attempts. Immediate alerts enable quick action to mitigate potential security threats, ensuring the integrity of the financial operations.

Improved Vendor Relationships Starts with Automation

Manual AP processes are not only time-consuming and costly, but they can also affect your vendor relationships negatively if error rates run too high. Using AP automation, however, can help you improve process timing and accuracy as well as provide you reliable tools to improve vendor relationships.

By adopting CloudX’s AP automation solution, your business will be able to improve cost savings, manage processes more efficiently, and build better vendor relationships. Get more information about APSmart and PAYSmart by filling out this online form.