Accounts payable is one of those components of a business that is crucial to smooth operations but can also become messy very quickly. In this article, we’ll explore how this happens and how thoughtful automation can help your company to navigate these waters.

What is the Accounts Payable Process?

A company’s accounts payable refers to the amount the money that a business owes to its suppliers and vendors, but has not paid yet. So, the accounts payable process lays out all the steps that it takes from placing the order, to the final payment of the invoice. These short-term payment obligations can grow in complexity quickly, and so having a well-defined and well-understood process helps to maintain high standards and ensure that all payments are being made on time, and in line with strategic objectives.

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Which Documents Are Typically Encountered in Accounts Payable?

There are three major types of documents that play vital roles in the accounts payable process:

• Purchase Orders (PO). A purchase order is a formal document that lays out the exact goods and services that are being ordered from the vendor. This is typically the last stage of the negotiation process and it commits both parties to the type of engagement, the price, and all the other details that the vendor might need to fulfill the order.
• Order Confirmations. An order confirmation is a document from the vendor that confirms the order has been received and that the process has started to fulfill the order. This is tied to the corresponding purchase order and it binds the vendor to deliver on whatever was agreed upon in the purchase order.
• Invoices. An invoice is a document sent to the buyer after delivery in order to collect payment. It details the goods and services delivered, the price, payment terms, and any other relevant information that is needed to settle payment for the order.

Each of these documents plays an important role along the process and your systems need to be set up to handle them at scale if you want to maintain a robust and efficient workflow.

Common Challenges in the Accounts Payable Process

Having an efficient accounts payable process is crucial for cash flow and general operations but there are a number of common challenges that CFOs and finance managers face as they try to build the right workflows in their organization. Some of these include the following:‍

• ‍Slow Processing.  As with any paperwork, slow processing can cause backlogs and bottlenecks that get in the way of the business moving forward – and when they happen it can be very difficult to cut through the noise and get back on track.  Sometimes this is due to limited staff or just to an over-burdensome administrative process.
• ‍Matching Errors. The invoice needs to match the purchase order (two-way) and often the order confirmation (three-way) to ensure that all vendor invoices are paid correctly.  Companies can experience incongruencies through data entry errors and incorrect billing information that take time and effort to rectify.‍
• Unauthorized Purchases.  The accounts payable department is set up to regulate and standardize purchasing behavior– but there can still be unauthorized purchases that slip through if you’re not careful. ‍
• Early and Late Payments.  If payments are made early, you could get into trouble because the money is gone before goods have been delivered.  What happens if they aren’t delivered or if you’re not happy with the quality?  Good luck getting that money back.  On the other hand, if you pay late you could find yourself liable for penalties and extra fees.  A robust accounts payable process can help you avoid both extremes.‍
• Lost Paperwork.  Accounts payable rely on documentation so when paperwork gets lost or misplaced it can cause chaos in the accounts payable cycle and during month-end closing –resulting in friction with vendors and delayed operations.‍
• Double Payments.  Typos, or forgetting to mark an invoice as paid could cause you to unknowingly process duplicate payments that then need to be reversed – causing headaches and additional administrative efforts.

These are just some of the challenges within accounts payable that many companies face – and if you can take steps to streamline your process and automate where possible, it will reduce accounts payable discrepancies, shorten cycle times, and boost overall satisfaction across the process.

How to Streamline the Accounts Payable Process

Here are some key considerations for streamlining your accounts payable process:

• Centralize all accounts payable documentation.  If you can get all of your documents in one place, that makes it easier to reconcile, manage, and process them through your systems.
• Reduce paperwork where possible.  Putting aside the crucial environmental concerns, reducing the volume of paperwork that you’re dealing with, can also minimize errors and speed up processing overall. ‍
• Streamline your workflows.  Work through your processes carefully and cut out any friction that you can – reducing the number of touches that processing these documents requires.‍
• Integrate with your ERP system.  When your accounts payable process is well integrated with your ERP it means that everything stays in alignment and team members aren’t duplicating efforts.‍
• Use three-way matching principles.  Enforcing a strict three-way matching process helps to eliminate matching errors and achieve more consistency.  Moreover, this decreases the chance of paying fraudulent invoices.‍
• Automate information extraction.  By automating the extraction of data from your documents, you can get away from human capturing errors and speed up your processing by orders of magnitude.‍
• Build in warnings and alerts.  Having proactive warnings and alerts means that you can spot problems earlier and fix them before they cause issues in the workflow.‍
• Create periodic reports.  Regular monitoring and reporting on your accounts payable puts you in a much better position to understand spending patterns and prepare for audits.

By implementing any of these actions, you’ll find that your accounts payable can see drastic improvements which, in turn, has positive effects across vital parts of the organization.

Accounts Payable Automation with Send AI

We have many enterprise clients who use Send AI to boost their accounts payable automation and to build an end-to-end workflow that prioritizes efficiency and accuracy.  This reduces the manual workload and minimizes the chance of costly errors from your staff.

Our platform can receive documents from a myriad of different sources (emails, scans, PDFs, and more) and extract the key data to be fed into the rest of your business systems.  This is done through machine learning models that can deliver accuracy scores of 98-99% which far outperforms general invoice parsers/tools which are not trained on your specific data.  Send AI is a dedicated solution rather than a one-size-fits-some solution.

The data extraction can be done at very specific levels of detail – which is crucial for certain sectors that work with complex documentation. And this data can then be integrated with ERP and other accounting tools through an API.  For the companies that are stuck with legacy systems – we can also work with your RPA team (or a consultant of our own) to establish the necessary connection between Send AI and what you currently use.

Custom cross-checks and other validation (including three-way matching) come standard – with key warnings about when a user is about to process a high amount, there is missing information or other things like that. Everything is taken care of to produce a highly efficient and functional accounts payable process.