Sometimes, companies tend to buy goods or services from vendors or suppliers on a short-term credit basis. This credit amount due is usually entered into the company’s balance sheet as an accounting entry known as Accounts Payable (AP). It is basically the sum of all outstanding amounts and comes under current liabilities on a balance sheet.
Remember, accounts payable is more than just paying dues and incoming bills. This department simultaneously handles various functions, from managing internal payments, travel expenses, and vendor payments, while coming up with strategies to reduce business costs.
That is why businesses consider account payable processes as one of the most crucial processes in managing a company’s finance, especially when considering the fact that any mistake in the accounts payable process can put the whole business at risk.
Let’s have a look at the below facts.
Here, we will discuss in detail the various challenges in manual accounts payable processing and how does automation technology help us overcome those challenges –
As we discussed, the account payable can severely impact your company’s cash flow if it is not streamlined correctly. Reports say 56% of businesses experienced cash flow forecasting problems due to AP issues. So, to keep good relations with your vendors, suppliers, or creditors, you must understand the key challenges in the accounts payable processing you are doing now and work on improving it.
So, let’s see some of the common challenges in manual accounts payable processing in detail:
Account payable data involves various processes like entering vendor payment bills or invoices, getting them approved, and completing the payment. Sounds simple, right? No, it is not as simple as it sounds. During the manual entry process, there is a chance that multiple errors may occur, as it is a ‘human tendency’ to make mistakes, unlike machines.
According to a report by Aberdeen Group, up to 20% of invoices regularly contain incorrect or incomplete information. There is a high probability of incorrect entries, calculations, and payments taking place.
Manually correcting it may take some additional time and effort, which will lead us to the next point:
Manual accounts payable processes can take a while to complete. For example, at first, the data should be entered in a spreadsheet or paper-based documents. These are then transferred from one department to another which will take some more time. And what if there are errors? Spotting errors can add extra time and effort requirements.
As per the AP Benchmarks research report, it can take more than five days for an invoice to reach account payable entry. Falling behind in payments affects your vendor relationships, reducing your reliability in their eyes.
Do you know that 63% of companies say that they had received duplicated invoices, out of which they actually paid 33%? Verifying these frauds manually can be difficult when expert criminals are creating authentic-looking invoices out there.
Another common fraud with manual accounts payable processes is unauthorized purchasing orders. This refers to unauthorized employee purchases made without the approved purchase order by the company authority from unauthorized suppliers. In other words, they may be using company credit cards inappropriately.
There are three types of account payable payment errors. One is the double payment, and the other is the accidental payment of invoices even before they are delivered. Late payments can also affect the vendor’s trust in your company.
These challenges can make vendor management difficult, which can, in turn, affect your brand’s image. They won’t even consider offering you flexible payment options and short-notice ordering privileges.
So, how can we overcome these challenges in account payable automation processes?
For that, you need to automate the accounts payable process using one of the most prominent and efficient automation technology – RPA.
Robotic Process Automation, in short, RPA is a technology that deploys software robots for carrying out rule-based, and large time-consuming repetitive tasks. Using its ability to automate a wide range of processes without any complicated programming can help companies in their accounting practices, especially in automating accounts payable.
That’s why 58% of finance organizations are implementing RPA in their accounting processes, as per a Genpact Research Institute and analyst firm HFS Research survey.
An automation technology like RPA can create programmable “bots” to avoid the challenges raised by manual accounts payable processes. AP management requires countless repetitive, rules-based tasks. These software bots can process daily repetitive, time-consuming accounting tasks such as data entry, calculations, audits, invoicing, etc., in a much faster way. They can verify and spot errors in large spreadsheets of data, like such as general-ledger or ERP containing thousands of data points, within seconds. And all this will be done with 100% accuracy, consistency, and on time.
In addition to that, RPA can take care of payment approval, processing workflows, handling orders, sending late payment notifications, etc., to vendors or suppliers within the required time frame with no errors or frauds.
This will allow the manual workforce to focus more on important tasks without wasting time, money, and effort on tedious, mundane tasks. Also, RPA can improve its overall operational efficiency, saving costs and gaining the vendor’s trust.
Robotic Process Automation has the power to completely transform the AP process automation landscape of your company by taking care of the burden of repetitive, time-wasting tasks. Here are some of the benefits of Robotic Process Automation (RPA) in Accounts Payable Automation –
In the manual account payable process, the streamlining of vendor invoices can take days since it involves humans capturing, entering, and matching invoice data. This can lead to unexpected delays in invoice execution.
RPA, on the other hand, when implemented, can replicate the whole chain of these repetitive tasks of capturing, inputting, and matching the invoice data against purchase orders accurately within seconds.
By implementing RPA, companies can save a lot of money. First, they don’t have to outsource their account payable process anymore. Secondly, since RPA can improve the vendor’s trust in the business, it may offer flexible payment terms with discounts. And of course, since there is no delay of payments there, there won’t be any penalties.
Another advantage of using these software bots is that they are highly scalable. It can process a large volume of data in no time. They also can be reused all across the company, even in different departments.
As we all know, account payable processes can be tedious, which means the chances of errors and mistakes from the workforce is inevitable since RPA technology is programmed to work 100% accurately. There will be no payment processing delays due to unintentional errors. Every process is smooth and error-free.
Also, there will be no unauthorized purchasing order, duplicate invoices, double payments, or fraud attempts.
Robotic Process Automation can boost the speed of payment processing, thus making the vendors happy. Also, these software bots will send real-time notifications to them if any payment delay offers complete transparency. This will help you to improve your vendor relations.
Now we are going to discuss various use cases of Robotic Process Automation in Accounts Payable automation.
Companies usually receive account payable invoices through multiple channels like e-mails, website portals, paper-based mails, etc. In order to get these invoices approved, its data should be matched to a respective purchase order. Just imagine how hard it must be to match each invoice data manually when you have a bundle of them to get checked. Also, this whole invoice approval process will involve juggling between multiple departments, leading to accidental errors.
Here is when RPA comes into the picture. Through automating the invoices and PO matching processes with these ‘smart’ bots, you can eliminate the chances of errors. The invoices can also be easily routed to the relevant departments without any delay, resulting in faster invoice approval.
In the accounts payable process, getting all invoice data coded into the accounting system with no error can be challenging, especially when using a manual workforce to do the job involving lengthy spreadsheets.
With RPA technology that offers 99.5% accuracy, you can automate the invoice data entry process with no error. All the data will be quickly captured automatically into the accounting system.
When it comes to executing the invoice payment, the individual handling the processing should keep track of payment deadlines. It can be a challenging job, considering that there will be thousands of invoices to be processed monthly.
With RPA, you just need to hand over the job to the software bot. They will fulfill the payment execution within the time frame, without the security risks usually associated with online payments.
RPA can easily be integrated with your accounting systems with minimum disruption to the existing IT infrastructure. For this, you have to follow the following implementation steps:
First, you need to identify the scope of various account payable processes when they are automated. Consider tasks like data entry, matching, auditing, etc. Tasks that require human intelligence, like decision-making or budget estimation cannot be automated with RPA technology.
Instead of implementing RPA in all the departments, start with a small process in a single department. It will give you an idea about how efficient RPA will be for your company’s AP process.
The account payable process has two parts- the transactional part and the decision-making one. RPA automation can be beneficial in the transaction part, like invoice matching, data capturing, and processing- since it involves a lot of repetitive, time-consuming tasks.
Before implementing Robotic Process Automation in accounts payable automation, you should standardize all the processes involved along with the workflow. Since RPA is a set of software tools run on commands, the whole automation will be less efficient if there is no standardization.
Now comes the most crucial step- RPA implementation. Choose a suitable RPA tool. Test it out with the help of a qualified RPA vendor.
Robotic Process Automation (RPA), without a doubt, is transforming the Accounts Payable process by making it more efficient. According to Forrester’s report, the RPA market is estimated to reach $2.9 billion by 2021. This shows how the global businesses are looking forward to RPA.
Automation technology can help companies overcome the traditional account payable processing challenges by benefiting both the company and the workforce. It is also important to standardize the various tasks and processes to implement RPA in your company’s Account Payable Automation effectively. If you would like to implement RPA technology in your business, our experts can help you out. Reach out to us today.