Automating Accounts Payable (AP) can reduce the time and money spent on a fairly labor-intensive process while safeguarding your firm from expensive mistakes. Tracking the status of individual transactions will be significantly reduced, as all the information is readily available on a dashboard that's automatically organized by workflow rules.
Consequently, those who embrace AP automation tools experience much more efficient AP processes with minimal errors. Additionally, they gain improved visibility, which protects against fraudulent activities. Utilizing AP automation is a great decision to streamline the accounts payable pipeline, but it's important to do so the right way to maximize its benefits for your CPA firm.
Accounts payable automation, also known as AP automation, encompasses software tools and processes that automatically perform what would typically be manual elements of accounts payable processing. Instead of a team member manually inputting data, the whole procedure occurs digitally, beginning with invoices and purchase orders.
Here are some of the most important steps for the smart implementation of AP automation at your firm:
AP automation tools can assist in establishing a workflow system to clarify who does what along the pipeline and when tasks are due. This ensures that all staff working on accounts payable are aligned, particularly regarding deadlines. In case of any bottlenecks, you can refer to the workflow's configuration on the dashboard to identify where approvals are being held up and remind the employee(s) to keep the process moving.
What are the tools that your team currently relies on? Any AP automation solution you select should be fully compatible, or at least partly capable of being integrated, with the tools your team already uses. Practice management, customer relationship management, and other foundational software are crucial. You wouldn't want your team to input data multiple times or switch between software throughout the day. Moreover, by incorporating tools you already use into your new system, you can further minimize the learning curve and gain access to comprehensive data that can be transformed into insightful reports.
Most vendors provide discounts for early payment. However, manual invoice processing for payment and approval can hinder firms from realizing some of these discounts for clients. However, this should not be an issue with AP automation, as it simplifies the process for your team to automate cash management and expedite approvals.
Automating accounts payable can significantly decrease the days payable outstanding (DPO). However, this reduction is contingent on the timing of invoice entry into the system. While digitization and AI are making automated invoice processing closer to reality, scanning them with little delay is crucial if you're still dealing with physical invoices. Make it a norm for your team to input new invoices into the system on the day they're received. You'll optimize transaction tracking and realize the DPO advantage by mitigating the lag time of this potential weak link in the automation chain.
Many tasks can be automated, but it doesn't mean you must deploy them all simultaneously. It might be more effective to introduce automated procedures incrementally along the existing AP pipeline, allowing for problem-solving between stages. Although automation resolves many challenges, incorrect configurations can lead to even more significant problems. Furthermore, there will always be an organizational period of adjustment. By progressing steadily and allowing your team to adapt to new procedures, you can guarantee the optimal advantages of automation in the future.
AP automation tools provide instant data with a simple click, which can be gathered in a dashboard and transformed into valuable insights. This data allows you to monitor cash flow and evaluate the effectiveness of various processes. For instance, your metrics might reveal that a workflow requires adjustment. It could be that there are either too many or too few steps to carry out a task effectively.
Change often brings apprehension. However, for AP automation to be successful, every finance team member should be committed and engaged. If you're in the C-suite, consider discussing with team members to explain the transition, highlighting how AP automation will simplify their work and benefit the business.
It's essential to listen to any feedback they may have and incorporate it into conversations with vendors. Ensure that any proposed solution addresses your team's actual challenges. Documenting these discussions can help build a strong case for AP automation software.
Before deciding, thoroughly explore all your AP automation software options, considering your business's specific needs and processes. This step is crucial for finding the best fit and maximizing time, cost savings, and overall business benefits.
Here are three questions to ask when shopping:
1. Is it a full accounting suite or a point solution? Some products specialize exclusively in automation, while others offer a comprehensive accounts payable/accounts receivable software suite. Depending on your existing software (or lack thereof), you may need the broader capabilities of an integrated suite.
2. Will this tool integrate with our accounting suite? Opting for a point solution must seamlessly integrate with your existing systems, including practice management. The vendor should provide clear information on whether the software integrates without custom development and detail the level of maintenance required, including frequency, costs, and responsibilities. Check product reviews and consult peers for insights into the product's integration capabilities.
3. Is this tool built primarily for accounts receivable? Point solutions may offer greater depth in either accounts payable or accounts receivable. Depending on your client's specific needs, choose the system that aligns best with your focus area.
Choosing the appropriate AP automation software involves thoroughly understanding your organization's specific needs and assessing the available options. By considering the outlined criteria, firms can invest wisely in a tool that delivers long-term value and supports operational excellence.
Cetrom is a cloud-based managed service provider specializing exclusively in accounting firms' IT needs. If you want to automate accounts payable, we're a Managed Service Provider (MSP) who can make these implementation steps a breeze. It's all in the cloud, making access to your existing suites and AP solutions a unified, straightforward task.
Contact us to learn how Cetrom can take your CPA firm to a new efficiency level.