Why automated accounts payable (AP automation) is great for your clients

What is accounts payable automation and how can it help your clients?

Accounts payable automation (otherwise known as AP automation) means digitising your accounts payable process. Tasks traditionally handled by humans – filing, approving, and submitting invoice payments – are handled by technology and software instead.

Regardless of how an invoice arrives – in the post, through email, or via an online portal – software can be used to process it.

Accounts payable automation software takes care of manual data admin and helps your clients pay at the right time for their cash flow position. It’s a small tweak to their operations, but it could have a significant impact on the financial health of their businesses.

If you set the system up for them and provide basic training, they could be up and running in just a day or two. It’s an easy value-add for you and a great way to cement client loyalty. They’ll thank you every time they effortlessly approve an invoice from their mobile phone.

How does accounts payable automation work?

How you automate the accounts payable process will vary by client. Those with larger businesses and more complex approval requirements will need additional features, compared to small business clients that don’t need an approval system.

Let’s look at each step of accounts payable workflow automation.

Invoice capture with OCR and eInvoicing

In an automated accounts payable process, invoices are digitised and created as bills in your accounting software.

Optical Character Recognition (OCR) technology reads written text – like a physical invoice document – and turns it into digital information. You don’t need to enter your client’s physical invoices manually; simply snap a photo or scan the document, and OCR technology can extract all the key information for use in an accounting system.

Another way you can automate client invoicing is by adopting eInvoicing. Instead of receiving a supplier invoice via email and having to upload it to the accounting system, eInvoices land directly in your client’s accounting system. In Xero, eInvoices are created as draft bills ready for your clients to approve and pay.

Matching and verification

With the right accounts payable software, invoices are automatically matched with purchase orders and delivery receipts. Invoices captured in your accounting software (thanks to Optical Character Recognition), are readable documents that can be accurately coded and matched with payments as and when your clients make them. Just be sure to double-check that the amounts line up.

Approval workflow

AP automation software is customisable, so your clients can set up their unique approval process. Once your clients have organisational rules in place, their invoices will automatically head to the right approver. They can customise approvals based on invoice amounts, vendor criteria, and other factors.

Automatic alerts and reminders help your clients and their teams to keep on top of approvals and pay on time. And since the approval workflows are captured in software, it leaves a clear audit trail for the future.

Payment execution

Once invoices are approved, payments can be scheduled and automated. Your clients don’t need to worry about missing a payment deadline or paying at the wrong time for their cash flow. AP automation software can help your clients spot the best time to pay – taking early payment discounts, cash position, and deadlines into account.

Reconciliation and reporting

Once the bill has been paid, you can reconcile the payment transaction with your client’s bank statements. Automated accounts payable software that’s connected to your client’s accounting system will carry these transactions through to their ledger.

You can also use AP automation tools to generate reports for your clients – showing them where they spend the most, payments per supplier and other insights that aid financial decision-making.

The benefits of accounts payable automation

Here are some benefits to share with your clients.

1. Reduce errors

With an invoice processing system that relies on manual data entry, mistakes inevitably creep in. Those errors mean your client overpays or underpays. Both can cause extra work, lost money and supplier relationship difficulties.

AP invoice automation can eliminate data entry by automatically extracting data from electronic invoices. Paper invoices can be captured simply by photographing them with a phone. The system reads the picture to identify the amount due and the payment deadline.

2. Streamline invoice approval

When using accounts payable automation, your client can set up a workflow for all invoices to follow, and then the software does the rest. It can match the invoice to a purchase order number and send it along to the appropriate approvers.

The approvers can then authorise payment, deny payment or halt invoice processing for further investigation. And they can do it from their phone, so there’s no waiting for someone to come into the office to get accounts paid.

Smart software will also record each step in the approval process for later review. So if questions come up about an invoice, you can see who approved it and when. There’s no need to sift through mountains of paper records.

3. Take advantage of early payment discounts

Paying invoices on time can secure discounts and earn goodwill. Automated accounts payable systems can track early payment opportunities, while the faster approval process makes it easier for your clients to hit those deadlines. The savings can amount to hundreds of pounds per vendor, per year. The goodwill created by paying punctually can also help them strengthen supplier relationships.

4. Boost security and peace of mind

Using accounts payable software to manage supplier payments is far more secure. The cash can be transferred securely to the creditor online, creating a traceable transaction record which is easy to review. The business owner or you, as the accountant, can call up those payments on a convenient dashboard to ensure everything checks out.

This is great for fraud prevention but also protects the business against honest mistakes that often occur with manual handling. Your client won’t suffer from lost, misplaced or forgotten paperwork again.

What’s more, payment disputes can be quickly settled. If a vendor says an invoice hasn’t been paid, your client can quickly check online. If it’s been held up for a query, they can say why. Or if it has been paid, they’ll be able to prove that as well.

Similarly, the records kept by the software will help if your client is audited.

5. Get a better understanding of cash flow

With paper-based payments, it’s not always easy to see what a client’s cash flow looks like. You have to manually enter the data into a spreadsheet and then generate charts and graphs from there. Even when you go to all that trouble, the data is already old and you only get a snapshot of one moment in time.

Automated accounts payable, however, integrates with accounting software so you and your client can track cash flow in real time. This helps:

• keep track of spending
• compare cash-in against cash-out
• see and preempt emerging cash flow problems

Here’s where you can offer an extra service. Watch the dashboard for your client and quickly put together reports on the financial state of the business. It’ll be your chance to flag any upcoming issues or provide advice on how to structure their cash flow better..

6. Improve strategic financial planning

Using the information in your client’s accounts payable software, you can spot patterns and identify trends in their spending. Automated AP tools collect all kinds of data – invoices, payments, and vendor details.

Having this information to hand can make all the difference when it comes to strategic financial planning. You may be able to help clients find new vendors who are more reliable or better value. Or you could highlight where payment terms are causing issues for cash flow.

How to automate accounts payable for clients

Once your clients have an automated process for accounts payable in place, they’ll wonder how they ever did it before.

Here are some accounts payable automation best practices:

• Keep clients and teams looped in: Make sure your clients update their teams about AP automation software. If an employee receives an approval notification out of the blue, they might be suspicious or confused. And if you’re confident, be sure to offer your clients and teams training and guidance on AP software so they’re well prepared.
• Set up customisation and rules: What makes automated accounts payable software so useful is the level of customisation – your clients can tweak their approval process and payment schedule, and generate reports unique to their business. But this does require some extra set-up. Make sure you help clients customise their software at the beginning, so the right processes are in place.
• Explore integrations: No doubt your clients use a few different financial tools and apps. Encourage them to adopt AP software that links to their existing accounting software and financial tools, so that they don’t need to repeat data entry across multiple systems.
• Use AP automation software to bolster your advisory: Insights gained from accounts payable reports can be used to help clients make informed financial decisions. Track spending and cash flow based on accurate, live data in the AP software.

How to select AP software for clients

When it comes to selecting any kind of software for your clients, it’s important to think about what their most pressing needs are.

The best accounts payable automation software will be user-friendly and manageable for their AP team. If your client runs a small business, they probably won’t need the same level of functionality as your larger clients.

A software solution that integrates with their existing accounting system is preferable because this reduces the amount of manual data entry needed between platforms. It also means you and your clients can reconcile bill payments directly from their accounting software. Everything syncs together, saving you and your clients time.

Switch your clients to AP automation

Don’t underestimate what a difference you can make to your client’s business and lifestyle by introducing automated accounts payable. For example, you can automate the entire accounts payable process by using a data capture tool like Hubdoc to collect supplier bills and do the data entry for them.

The real-time cash flow dashboard will help them understand their business while enabling you to offer extra consulting services.

If your client is a Xero customer, you can find software to automate their accounts payable in our Xero App Store.

How can Xero support accounts payable automation?

Xero has inbuilt features that help you manage accounts payable. You can schedule and batch payments, review reports on your spending, and track your cash flow to see the best times to pay.

But even more is possible for practices and clients that choose one of our app integration partners. Convert invoice documents to bills in Xero, simplify the approvals process, and keep a clear and reliable audit trail for every payment made.