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Why AP and AR Automation are Essential for the Long Run

The evolution of technology has drastically evolved and opened doors to innovative approaches to how things were once done for decades. As these waves of changes improved the traditional methods, the old practices must be left aside, and time to adapt to the changes to stay competitive.

Of these disruptive innovations, automation for business processes, especially for managing business finances, has removed redundant tasks and enabled increased volumes of transactions to be handled effortlessly with better accuracy. Now accounts payable and accounts receivable automation are essential to a business for long-term success with a strong cash flow.


What is accounts payable automation?


Accounts payable are the money your business owes to a vendor, supplier, or another company that has provided you with goods or services. In simple words, it’s the payments that need to be made by your business, the expenses. The typical traditional methods of handling payments for businesses were by paper check payments, purchase orders, or visiting the bank to make bank transfers.


AP automation removes the manual aspects of business payments backed up by cloud technology, facilitating the digital transformation allowing transactions to occur from anywhere at any time, starting with eliminating the geographical constraints. Automating AP will also lead to digitizing and automating different payment functions like payment approval workflow, reconciliation, and replacing traditional paper check payments with online check payments.


What is accounts receivable automation?


On the other hand, accounts receivable is the money your business collects from consumers, clients, or anyone you have provided goods or services to. Being on the other end of the payment without AR automation, your business would be receiving payments by waiting for the mailed check to be received by your business and then for the responsible representative to visit the bank to deposit the check. Then once again, wait for the bank to clear the deposited check and release the funds. If payments were collected through bank transfer and the payee initiated the bank transfer from a different bank institution than your business, there is an extra processing time before cash becomes available for your business to use.


Accounts receivable automation will ease the payment collections process for your business. Cash flow is essential, and you want an efficient and secure way to receive funds. Automating accounts receivable will reduce manual efforts to collect payments and shorten the time to access the collected money.


What are the of benefits accounts receivable automation?


Regardless of business types and sizes, not only can you consolidate better and streamline the process of accounts payable  and accounts receivable, but there are also more benefits to automating accounts payable and accounts receivable. 


Decreases cost, increase time, and improve cash flow


Adopting a payments and receivables solution comes with a price tag, and it may feel like it’s increasing the operation cost for your business. However, that’s not true. PYMTS reported that “digital accounts payable and accounts receivable automation has the potential to collectively save firms billions of dollars.” In fact, as efficiencies and productivity increase, it allows businesses to minimize the number of administrative staff, cutting costs.


A report published by PwC stated that 30% of the finance team’s time is spent on manual reconciliation. Now that’s a lot of time used in shuffling papers. Eliminate the inefficiencies and reallocate these times towards financial activities like financial forecasting to contribute to business growth.


With faster turnover time on payments and automated reconciliation, it allows for better monitoring and transparency of the financial status of your company. As a result, accounts payable and accounts receivable automation increases speed in making and collecting payments, naturally improving cash flow. As the working capital cycle is enhanced for the business, it is easier for companies to act on revenue-generating activity with the available funds.


Employees’ well-being and reducing human errors


Cash flow matters, but so is yourself and your employees. An organization is formed of different individuals working towards a collective goal. Thus, the well-being of yourself and everyone around you impacts the performance of your organization. High productivity requires everyone involved to be at their best state. As the manual process of accounts payable and accounts receivable are highly stressful and energy draining. Minimizing redundant manual financial processes like data entry with automation opens more time to allocating time for strategic and goal-oriented work to be completed and guarantees eliminating human errors.


Risk mitigation


Automating accounts payable and accounts receivable reduces the number of loopholes for fraudsters to attempt fraud as there is an increase in complexity and security measures integrated into a solution providing the accounts payable and accounts receivable  automation. As a result, it prevents the risks of both internal and external fraud.


As accounts payable automation allows your business to automate the payments in advance through scheduled payments, your business can avoid making late or missing a payment that could affect business operations.


On the other hand, automating accounts receivable can streamline collecting the recurring payments by automatically collecting payments from the payee’s bank account with the pre-authorized agreement (PAD) that comes with accounts receivable automation. As a result, lower the risk associated with collecting check payments that could bounce, threatening the business’s cash flow.


Wave goodbye to mountains of paperwork and countless hours to find the misplaced invoice as well. Automating accounts payable and accounts receivable comes with benefits like maintaining seamless audit trails. As you are aware, digital records of business transactions are part of a legal requirement. Accounts payable and accounts receivable automation will allow your company to meet regulatory compliance effortlessly.


Benefits of AP and AR automation for businesses


The startup owner, the entrepreneur, usually manages most functions of the business, including finance. As for small and medium-sized businesses (SMBs), the owner can continue to work the finance or have another employee manage finance along with other responsibilities.


Without accounts payable and AR automation, one of the common risks for a startup is mixing personal and business finance. Being on a journey to building a business with an overload of things to look after to operate the company and the investments mostly coming from family and friends makes it easier for less strict financial management. However, this will create a massive headache and issue in time for the audit and tax season.


As for SMBs, as business scales, it increases the volume of invoices that needs to be taken care of and having a financial representative wearing multiple hats can lead to inescapable human errors.


With an overload of priorities, it’s easy for startups and SMBs to build a bad habit of late or missing payments. Interest and late fees aren’t the issues in this case. Repeated late or miss payments can damage supplier relationships having a significant negative impact on business operation.


Through accounts payable and accounts receivable automation, both startups and SMBs can save time and reduce human errors with minimal effort while strengthening supplier relationships.


Moreover, balancing the workload will lead to better team collaboration. When an individual is overloaded, not only does it reduce productivity, but it can harm their teamwork. As startups and SMBs have fewer employees, the relationship between everyone can impact the company’s overall productivity. Decreasing the time spent on redundant work with automation will positively influence the company.


Benefits of AP and AR automation for accountants and bookkeepers


As an accountant or bookkeeper, the manual work is multiplied by the number of clients. Now that’s uncountable hours wasted on tedious and low-productive work. Automating accounts payable and accounts receivable will condense to minimize the unnecessary hours spent on repetitive but essential work. 


Accounts receivable automation solution comes with different features that further save time on time-consuming tasks like mailing checks, chasing after your clients for authorized signatures to complete a payment, waiting for the check to be deposited to complete the reconciliation to close the book.


Modernize your accounting or bookkeeping business to become more competitive, and with the saved time, your business will have time for more clients. Also, the saved time can be used towards analyzing and forecasting client’s financial status to provide better insight and advice to clients, increasing satisfaction which could lead to referrals adding back to your business.


Bottom line


This underscores the importance of establishing accounts payable and accounts receivable automation. Adopting a solution like Plooto to automating accounts payable and accounts receivable  has crucial benefits that will reinvent your business payments. Embrace the power of accounts payable and accounts receivable automation with a 30-day free trial today.


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