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Your company’s success is explicitly linked to the efficiency and accuracy of your Accounts Payable (AP) operation. Without a clear picture of how much money you owe to your suppliers, any understanding of your company’s overall financial health is purely speculative.

Key takeaways
    • Failing to address these 13 AP challenges could cost you your business
    • Why automation is crucial to solving your AP problems
    • 2 simple steps to developing a successful AP automation strategy
    • Best practices your AP team must master:
      • Automating
      • Processing
      • Planning and Implementation
    • What tasks can AP software automate — it’s a lot more than data entry
    • How Plooto can help cure your biggest AP pain points

With the accuracy of your financial projections compromised, your ability to plan for growth and innovation, take advantage of investment opportunities, or be ready to handle economic downturns or unexpected expenses becomes problematic.

Poor accounts payable operations can also damage your company’s brand and supplier relations due to habitually paying bills late.


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    SHORTCUTS

What are the top AP challenges?

Among the most prominent AP challenges facing companies today:

 

1. High AP processing costs

According to Deloitte, as much as 35% of businesses report high accounts payable processing costs as one of their biggest challenges with traditional payment methods. Aside from 62% of costs related to labor, businesses have to spend $8 to process each supplier payment.

 

2. Growing data remittance workload

Reconciling several invoices while simultaneously receiving and processing remittance data can overwhelm an AP department, leaving it awash in errors. Processing remittance data is a serious challenge, especially when AP is dealing with different file formats, lacks complete data elements in the files, and doesn’t have back-office support to facilitate automated remittances.

 

3. AP processing payment delays

Delayed invoice processing ultimately causes a higher cost per invoice. Payment delays stem from several issues, ranging from delays in approval, slow routing, and inefficient processes. Consistently late invoices lead to unhappy vendors persistently asking about the status of their payments.

 

💡See: Rethinking B2B Payment Processing for a more in-depth look at inefficient workflows, manual processes, and why automation changes everything.

 

4. Manual processing inefficiencies

Having your staff review each invoice individually and then match it against relevant documents, such as purchase orders, line by line, is highly inefficient, error-prone, and leads to delays and wastes resources. Ask yourself this: Does your staff really have the time to launch a time-consuming, multi-step investigation every time there’s a problem invoice?

 

5. Risk of fraud

The risk of fraud in AP processes is high. 

 U.S. Businesses will lose an average of 5% of their gross revenues to fraud.

        - Study by The Association of Certified Fraud Examiners

 

The most significant contributing factor is the lack of internal controls. The study also found that small businesses with fewer than 100 employees were even more susceptible to fraud because they were less likely to use a centralized AP solution.

 

6. Supporting multiple payment types

Often lacking the necessary resources and technical infrastructure, matching multiple supplier payment methods is a never-ending challenge for AP departments.

 

7. Limited transaction visibility

A restrictive end-to-end view of transactions connected to multiple payment methods can lead to errors, extra costs, delays, and disruptions in the payment cycle.

 

8. Unauthorized purchases

Processing unexpected invoices can take an immense amount of time while more important invoices decay.

 

9. Sending payment before delivery

If a shipment arrives damaged or with missing items, achieving a resolution is much more difficult when you’ve already paid.

 

10. The mysterious disappearing invoice

It’s not uncommon for invoices to be misplaced or accidentally trashed where AP departments manually process hundreds of invoices. Increasing AP volume — without the ability to scale — could delay payments and generate late vendor fees.

 

11. Difficulty maintaining excellent supplier relationships

Late payments due to failing to process invoices on time can cause punitive fees and poor relations with your vendors.

 

12. Auditing and document tracking Issues

Some AP departments deploy batch processing to save time. Batch processing creates a singular paper trail for all of your invoices instead of an individual paper trail for each invoice. Batch processing can make tracking down a single record extremely difficult, however, because you don’t have a proper audit trail for each invoice.

 

13. Inaccurate data

Inaccurate data is the most significant error in accounts payable and invoice processing. Inaccurate or missing data can cause several problems for vendors, including delayed or incorrect payments, which can ruin business relationships, not to mention generate late fees, which can affect your company’s bottom line.

 

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What is the best solution for AP problems?

AP processing entails large volumes of data inflow from multiple sources in different formats. Your AP team faces no shortage of big, complex — though not insurmountable — challenges. AP workflow automation offers the best solution to address rising AP costs, errors, and inefficiencies driven largely by increasing volume. By implementing software and automation to digitize your processes, your AP team can scale — without breaking the budget or their backs.

 

Developing a successful AP automation strategy

Achieving a successful AP automation strategy requires planning:

  • Have a clear vision of the goals, resource capacity, and user acceptance to address the challenges of the transformation.
  • Develop a process map that identifies the roles of stakeholders, the technology required, the steps, costs, and timeframe associated with the workflow, and the key metrics to track performance.

 

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How can automation help AP management?

By providing a digital workflow to manage steps previously handled by an AP staff member, AP automation enables companies to touchlessly process supplier invoices. Eliminating human intervention significantly reduces costs and errors.

 

Beyond increased savings and accuracy, AP automation enables you to:

  • Optimize your vendor portfolio
  • Avoid duplicate or erroneous payments
  • Take advantage of early payment discounts
  • Integrate your record-keeping systems with AP to maintain a complete, up-to-date audit trail

Simplifying AP workflow

The number of tasks and sheer volume of data handled in AP makes it a long and labor-intensive process: data must be extracted, reviewed, and entered to create and approve payments and to maintain accurate records. Invoices requiring approval by specified personnel add extra steps —and complexity — to the AP workflow.

 

AP automation uses technology such as optical character recognition (OCR) to automatically identify relevant data from documents, make entries, and create records. Invoices can then be routed automatically to appropriate personnel with system notifications reminding individuals to deal with pending invoices promptly.

 

Because the AP workflow moves faster, deals are closed more quickly, increasing the organization’s cash flow. AP automation further simplifies the AP workflow by digitizing data and making payments automatic.

 We tested pretty much all the solutions on the market to be honest, and the Plooto Capture feature is one of the most complete and effective OCR solutions available. Not only does it extract with a lot of accuracy, but it also connects directly with our payables which provides us a good overview of our business numbers.”

                                                                                                                                - Justin Forest of NJ Construction

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Accounts payable management best practices

Regardless of the size or nature of your business, implementing best practices can benefit your business. A best practice is a standard or set of guidelines that have proved successful in producing positive outcomes.

Digitizing the invoice-to-pay workflow is an example of an AP best practice.

 

Studies have documented that automating an invoice management system
can eliminate over 80 percent of the manual workload, allowing the organization
to scale increasing AP volume without having to increase AP department staff.

 

You can apply AP best practices in 3 distinct areas:

  • Automation
  • Processing
  • Planning and implementation

8 Accounts payable automation best practices

  1. Implement technology with the objectives of streamlining, accelerating, and making the AP process more secure.

  2. Centralize AP information management to streamline workflow and keep track of all incoming invoices.

  3. Digitize paper data to eliminate costs associated with storage space and the manual processing of paper invoices.

  4. Automate rules and establish robust governance practices to minimize the risk of manual errors and strengthen AP department internal controls.

  5. Set up supplier portals to enable the supplier to track delivery schedules electronically, payments received, potential product shortages, and the status of their orders.

  6. Implement three-way matching to avoid exceptions and double payments while paying early enough to receive supplier discounts.

  7. Integrate AP processes with other company systems to eliminate data silos and enable more informed decision-making.

  8. Invest in an AP system with fraud detection features, including:
    • Transaction monitoring to identify unusual activities
    • Access customization to allow file access to only specific individuals
    • Account information masking so that only authorized personnel can view and edit the data

8 Accounts payable processing best practices

  1. Standardize how your AP team handles each process step in a workflow.

  2. Prioritize invoices by the due date and payment terms. Prioritization helps businesses align invoices with their cash flow needs.

  3. Establish supplier portals to help organize data, facilitate communication, and ensure supplier information is current.

  4. Limit access and establish internal controls and separation of duties within your AP process.

  5. Standardize payment terms to improve workflow efficiency and free up working capital while optimizing payment processing.

  6. Check for duplicate payments. This includes duplicate invoices coming in and duplicate payments going out.

  7. Keep track of disputes and resolutions to maintain positive vendor relationships and resolve invoice disputes as quickly as possible.

  8. Review data regularly to:
    • Reconcile accounts
    • Identify risk and reduce fraud
    • Show trends in your AP processes
    • Improve cash flow planning
    • Increase working capital
    • Monitor the value and volume of invoices and payments
    • Establish an audit trail for all activities

7 AP planning and implementation best practices

  1. Match AP automation objectives with company objectives. This ensures AP priorities and successes contribute to the long-term success of your business.

  2. Think strategically. Start by identifying areas you can automate to produce the highest return with minimum investment.

  3. Map AP workflows to identify bottlenecks, inefficiencies, and waste.

  4. Seek input and commitment from your team and others to ensure you’re addressing the right problems and root causes.

    - Ask your team members the following questions — and follow up each answer with “why?”.
    - What current processes are working?
    - What current processes are not working?
    - What solutions do you think will have the most significant impact on improving processes and outcomes?
    - What will ensure the successful implementation of changes?

  5. Ensure key decision-makers understand how the new technology — and the strategy behind it — will benefit the business and achieve a justifiable ROI.

  6. Make ongoing improvement your mantra by continuously looking for ways to reduce steps and automate inefficiencies.

  7. Track key performance indicators (KPIs) to gauge the success of your efforts.

     


    Following AP best practices requires flexibility and tolerance for change. You test, implement, and evaluate new systems and strategies. And you stay focused on the end goal: better performance and quality results.

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What tasks can AP software automate?

Accounts Payable automation is the technology used to streamline and automate accounts payable processes. AP automation removes manual tasks and enables better visibility and control over critical financial data.

 

10 Tasks AP software can automate

  1. Data entry: accounts payable automation starts with capturing invoice data in a digital format, usually through a scanning or capture method, such as optical character recognition (OCR).
  2. Record-keeping: By automating AP processes, you can integrate your record-keeping systems with your automated AP software. All documentation automatically uploads to your record-keeping system to keep a complete, up-to-date audit trail.
  3. Populate forms with invoice data automatically: You can connect your database to the workflow with automated invoice processes.
  4. Automatically validate invoice data: With automated accounts payable software, digital forms automatically validate to ensure all invoice data is correct.
  5. Automate invoice approvals processes: With an automated accounts payable solution, you can design complex workflows, so digital forms automatically route through the appropriate approvers based on the information in the documents.
  6. Communicate with suppliers automatically: With automated AP software, automatic communications are forwarded to suppliers to keep them updated on the approval status of their payments.
  7. Built-in compliance: Automating AP builds compliance rules into the system, so you can track and prevent common risks and instances of fraud.
  8. Invoice matching: You can automatically match invoices to supporting documents, such as purchase orders and receiving documents (three-way matching).
  9. Coding invoices: You can designate rules that automatically set the correct general ledger code for each invoice, eliminating the time and inconsistencies inherent in manual coding.
  10. Approval routing: Electronic routing to all the necessary approvers is faster than manually sending documents to each of them, and it also provides better tracking throughout the workflow.

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How Plooto helps you overcome accounts payable’s biggest pain points

Plooto dramatically reduces accounts payable processing costs and manual touches through smart automation and robust integration with your accounting software

Digitally collect and collate all the data you need just once:

  • Upload your invoice into Plooto using Plooto Capture — AI-powered optical character recognition technology. Plooto Capture seamlessly extracts and collates all the information on the invoice to publish from Plooto into your accounting software. The accounting software then records it as a bill.

  • Plooto then automatically pulls the data from your accounting software showing you have an outstanding bill and that it appears on your payables.

  • Plooto automates the manual processes associated with inputting a bill. You don’t have to create a bill manually. You don’t need to record every single field in your account manually. And you’re saved the extra step of logging in to your accounting software.

Confirm approvals, data, and pay bills in a few clicks:

  • Plooto’s dashboard enables you to identify and review the bills you want to pay.

  • Money is pulled from your bank account electronically and deposited into your vendor’s bank account, confirming that the payment is complete.

  • Plooto will then take that confirmation, sync it back into your accounting software, and mark that outstanding bill as paid.

  • Payments are reconciled at the end of the month, and you can track the entire process entirely through Plooto.

Integration ensures accuracy:

  • Seamless data integration between Plooto and your accounting software ensures accurate recording of information, correct payments, and a more manageable, faster end-of-month reconciliation.

  • Plooto ensures there are fewer errors because of bad manual processes.

Plooto increases overall processing efficiencies, enabling your AP team to focus on high-value tasks

  • Less effort devoted to repetitive manual tasks allows the AP team to concentrate more on activities that will contribute to the growth and success of the company.
    • This could mean AP has more time to analyze data, identify trends, and develop strategies to generate insights that will help the business run smarter and more efficiently.

Plooto helps companies gain greater efficiencies by automating all the processes around data entry

  • Through Plooto Capture, data is collected, collated, and made available for review.

  • The entire process becomes one of point, click, and confirm.

Overcoming the many problems the AP department faces today is essential to your company’s success. It is a never-ending story of streamlining and automating your AP systems through technology and smart workflows. Meeting today’s AP challenges requires a strategy that matches AP priorities with company objectives, and is invigorated by input from team members. In the end, a successful AP team can solve what might be its most critical problem: the ability to scale while controlling costs and ensuring quality.

 

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CHAPTERS

00  Everything you need to know about today's B2B payments

01   Rethinking B2B payment processing

02  From pain to gain: Solutions for accounts receivable problems 

03  How AP teams are solving their toughest problems

 

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