Handling accounts payable is time-consuming and can be error-prone. Yet putting it off or getting it wrong will cost you money. Automating the process can make your life easier.
The administrative effort tied up in accounts payable is a big burden for many small business owners. It takes them away from their core business and often encroaches on evenings or weekends.
Yet it’s a job that can’t be rushed because mistakes can be costly. When invoices aren’t paid properly, you can miss out on early-payment discounts and run the risk of late payment fees. It can also upset suppliers, damage your reputation or even hurt your credit rating.
There are no shortcuts. But there is automation.
Achieve business and lifestyle goals
A third of small business owners say they need to save time but almost half aren’t doing anything about it. That’s because they don’t understand how software can help.
Setting up with automated accounts payable could be the biggest impact you have on your business and job satisfaction this year.
What is automated accounts payable?
Regardless of how an invoice arrives – in the post, through email, or via an online portal – software can be used to process it.
- You can scan paper invoices into the system with a mobile phone or upload electronic invoices from an email.
- The software advises you when invoices are due.
- You can approve and pay invoices from within the software.
This slimmed-down workflow is much more efficient and therefore your business will be too. With a little assistance from your accountant in setting the system up and with some basic training, you could be up and running in just a day or two.
Five benefits of automating accounts payable
Here are five advantages of automating accounts payable.
1. Reduce errors
With an invoice processing system that relies on manual data entry, mistakes inevitably slip in. Those errors mean you overpay or underpay, neither of which is good. Both can cause extra work and lost money.
Software can eliminate data entry by automatically extracting data from electronic invoices. Paper invoices can be captured simply by photographing them with a phone. The system reads the picture to identify the amount due and the date to be paid.
2. Streamline invoice approval
When using automated accounts payable, you can set up a workflow for all invoices to follow, then the software does the rest. It can match the invoice to a purchase order number and send it along to the appropriate approvers.
Those people can authorize payment, deny payment or halt an invoice for further investigation. And they can do it from their phone, so there’s no waiting for someone to come into the office to get accounts paid.
Smart software will also record each step in the approval process for later review. So if questions come up about an invoice, you can see who approved it and when. There’s no need to sift through mountains of paper records.
3. Take advantage of early payment discounts
Paying invoices on time can secure discounts and earn goodwill. Yet an Institute of Financial Operations’ study found that about half of businesses are missing out on early-payment discounts.
Automated accounts payable systems can track early-payment opportunities, while the faster approval process makes it easier for you to hit those deadlines. The savings can amount to hundreds of euros per vendor, per year. The goodwill created by paying punctually can also help create a stronger relationship with your suppliers.
4. Boost security and peace of mind
Using software to pay accounts is far more secure. The cash can be transferred securely to the creditor online, creating a traceable record of the transaction which is easy to review. The business owner or accountant, can call up those payments on a convenient dashboard to ensure everything checks out.
This is great for fraud prevention but also protects the business against honest mistakes that often occur with manual handling. You won’t suffer from lost, misplaced or forgotten paperwork again.
What’s more, disputes about payment can be quickly settled. If a vendor says an invoice hasn’t been paid, you can quickly check online. If it’s been held up for a query, you will be able to say why. Or if it has in fact been paid, you will be able to prove that as well.
Similarly, the records kept by the software will help if you are audited by the revenue.
5. Get a better understanding of cashflow
With paper-based payment, it’s not always easy to see what your cashflow looks like. You must manually enter the data into a spreadsheet and then generate charts and graphs from there. It’s labour-intensive and slow. Even when you go to all that trouble, the data is already old and you only get a snapshot of one moment in time.
Automated accounts payable, however, integrates with accounting software so you can track cashflow in real time. This helps:
- keep track of spending
- compare cash-in against cash-out
- see and pre-empt emerging cashflow problems
Here’s where you can offer an extra service. Watch the dashboard for your client and put together quick reports on the state of the business. It’ll be your chance to flag any upcoming issues or provide advice on how to better structure cashflow. The information will give you greater confidence in business decisions.
Switch onto automation
Moran and Partners can help you set up Receipt Bank which is an App that integrates with Xero Accounting software and processes purchases invoices/expenses efficiently by setting up intelligent supplier rules to deal with the automation