Change is a challenge for most people, especially for accountants well-known for their preference for traditional methods when managing accounts payable. Further, the transition everyone had to make due to the pandemic has been difficult. Yet, many businesses have taken lessons from the COVID-19 crisis, including those signaling their time to update their manual processes with accounts payable automation. Even before remote work became the norm, manual accounts payable processes have caused ongoing problems with inefficiency, human error, and even fraud. Some of the most significant pain points include missing or lost invoices. According to the Business Insider Accounts Payable Automation Report, AP automation can decrease 81% costs while improving efficiency by 73%. So let’s take a look at some of the typical accounts payable processes and where automation can provide welcome assistance.
What is accounts payable?
When an organization purchases goods or services from a vendor on credit, which requires payment within a specified amount of time, the accounting term is Accounts Payable (AP). When documented on a balance sheet, it is listed under “current liabilities.” Within a business, the AP team is responsible for sending payments owed by their organization to other vendors or even creditors.AP can function as a department in larger companies or combine payables and receivables within smaller companies. On top of paying bills, AP also manages business travel expenses from airline ticket purchases to hotel stays for company employees and executives. Once business travel has taken place, AP will settle the payments and travel reimbursement requests.AP also takes care of holding and distributing petty cash along with internal reimbursements for various company-related expenditures. To receive a refund, employees typically have to turn in a log report and receipts for approval. AP is also responsible for sales tax exemption certificates. There are also vendor payments to manage, such as payment terms, W-9s, and contact information. AP usually addresses all pre-approved purchase orders and month-end aging analysis reports that describe how much the company owes its vendors and creditors. Other functions handled by AP include working on strategies and implementing protocols to help the business save money. For instance, they may recommend making payments during an offer or discount period. AP may also manage the vendor relationships and help to negotiate better rates.
