The main duty of an accounts payable department is to effectively handle the procure-to-pay cycle of the business. The main steps in this cycle are preparing a purchase order for a purchase that is to be made, receiving invoices from suppliers and processing them, managing relationships with suppliers, and ultimately approving payments to the suppliers. An effective accounts payable department can complement all other systems of a business. However, all the steps in a procure-to-pay cycle require time and proper attention to complete effectively and, therefore, it may take a long time for a single cycle to complete. If the accounts payable department still uses traditional paper-based systems, then this process can also be very inefficient. With advanced automated systems, this process can be easily turned into an efficient self-running machine. By automating the accounts payable process of a business, the business can gain considerable advantages. More information regarding how these automated systems work can be found on https://iqinvoice.com/how-iq-invoice-works/.
There are a few ways that automation in the AP department can be beneficial for a business. These are as below.
Automation in accounts payable can save considerable costs for a business. This is because there are many steps in the procure-to-pay cycle of a business that can take up many labour hours. If done manually, these steps can take a lot of time. Manual processes in the accounts payable process are one of the major contributors to the costs of an accounts payable department due to manual repetitive tasks that take a long time.
One of the major culprits in increasing the costs of any accounts payable department is invoice processing costs. According to the Institute of Financial Management, a single invoice can cost a business up to $21 to process. This is only the case for manual invoice processing, though. With invoice automation, these costs can be reduced to a minimum, even down to $1 or less.
Similarly, costs related to all other aspects of an accounts payable process can significantly be reduced through accounts payable automation. AP automation eliminates or minimizes the manual processes in the accounts payable department and replaces them with automated processes.
Accounts payable automation can also significantly increase the efficiency of an accounts payable process. As mentioned above, in a manual accounts payable process, processing a single invoice can take a lot of time. This can also consume the time of accounts payable personnel which can be utilized in other, more important tasks around the accounts payable department.
With accounts payable automation, this time can easily be freed up. Accounts payable department personnel can use the time to focus on other value-added activities once the process is automated. The time that the accounts payable department personnel need to spend on manual tasks is reduced to a minimum and limited to managing cash flows, managing budgets, contract compliance, etc.
A manual system in any department is prone to errors. In the accounts payable department, an error can cost the business either financially, in terms of money, or non-financially, in terms of relationships with their suppliers. Rectifying these errors can also contribute to increasing the costs of the accounts payable department. These errors can happen in the simplest tasks, like cross-checking purchase orders with invoices or ensuring payments are made to the right suppliers.
With an automated system, these errors are reduced to a minimum if not eradicated. The automated accounts payable process replaces many manual checks, such as the ones mentioned above, and eliminates or reduces the need for any manual input in these processes. This system can also detect and eliminate other errors such as duplications, casting errors, overpayments, etc.
In a manual system, data can be easily manipulated to commit fraud. Due to the nature of the manual process, it can take months or years to trace the origin of the fraudulent activity. By the time a business can identify and track any fraudulent activity, there is considerable damage, both commercially and reputational to the business. While some checks may exist over the accounts payable process such as authorizations, they still cannot prevent fraudulent activities.
In an automated system, fraudulent activity is easily identified by the system and prevented. An automated system also significantly reduces the opportunities to commit fraud due to the minimal manual input required for it.
The accounts payable department of a business has many duties, which mainly consists of being responsible for the effective implementation procure-to-pay cycle of a business. However, the effectiveness of an accounts payable process can be significantly limited in a paper-based accounts payable system. Automation in accounts payable can have many benefits for a business such as cost savings, increased efficiency, fewer errors, and preventing fraud. A full list of all the features provided by IQInvoice can be found on https://iqinvoice.com/features/.