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  • Writer's pictureIrina Kavchik

What is AP invoice automation?

What is AP invoice automation

In this blog post, we will explain what AP invoice automation is (Accounts Payable Automation), what you need to know before getting started, and how your entire business can benefit from AP automation.

Every successful business is passionate about automation - technologies that can eliminate routine tasks, such as data entry, free up time and increase productivity. Let's discuss in detail the benefits of AP automation and problems it solves.

What problems AP automation solve?

AP invoice automation can reduce data entry tasks and free up your time up to 40%. However, many companies are still using manual data entry approach for all AP incoming documents. Often these documents pile up and time required entering all data into your financial system becomes a bottleneck in your AP process. This also results in late payments to your suppliers and low visibility into your liabilities.

Some companies spend thousands of dollars on hiring and training temporary staff on relatively easy-to-automate tasks. Some take their work home, stay long hours in the office or outsource it using the specialised AP software. The software way is robust and more cost-efficient in the long run.

When you automate your accounts payable processes, your AP staff or accountants can focus on financial reporting and building supplier relationships instead of manual, routine tasks.

What is AP automation exactly?

AP invoice automation is a system that captures all incoming invoices, including credit notes, and extracts all invoice data from paper or electronic-based documents. The AP dedicated software will extract header and line details, including amounts, descriptions and freight costs. It will help you manage payment details, export data to your financial system with a click of a button and produce customised reports to track your AP performance.

Companies without AP automation process come across multiple issues:

  • Invoices get lost or double paid

  • Human errors accumulate and add stress

  • Suppliers are not happy about payment delays

  • Early payment discounts are ignored or missed

  • The number of people involved in AP process is increasing

  • The time required to process invoices is steadily increasing

You can now see that AP automation brings financial benefit to your company and overall transparency. It reduces the number of labour hours and help your company grow without adding new stuff to your AP department.

5 core functions of AP invoice automation software:

  1. Capture and data extraction through OCR and AI

  2. Ability to reduce an operational cost per invoice

  3. Ability to integrate with a wide range of ERPs and financial systems

  4. Reduce the time required to process each invoice

  5. Three-way match information from your invoices and your ERP or financial system

Getting ready for AP automation

The successful implementation dependents on internal processes optimisation and company policies. We recommend introducing internal KPIs before the implementation starts. Here is the list of most common:

  • Average time required to process an invoice starting from the email to a payment

  • Average labour cost per invoice

  • The number of invoices per person in your company per month

  • The percentage of invoices paid on time

  • The rate of Purchase Order invoices – received from your ERP system

Estimating ROI for AP automation in your company

There are multiple ways to evaluate ROI. The most common is estimating the cost involved in processing a single invoice, from receiving and paying the invoice. It is different for every company; however, the overall industry benchmark is from 4$ to 15$ per invoice.

The average time required to return investment on AP automation is about 6 months, in Ocerra we’re trying to push this border down to 3-4 months.

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