What is Accounts Payable (AP) automation?

In today's dynamic business landscape, the Accounts Payable (AP) function plays a critical role in ensuring the smooth flow of financial transactions within organizations. Traditionally, AP processes were labour-intensive, paper-based and prone to errors, leading to inefficiencies and delays in payment processing. However, with the advent of digital technologies and automation solutions, businesses now have the opportunity to completely transform their accounts payable function and unlock unprecedented levels of efficiency.

At its core, AP automation involves the use of technology to streamline and optimize the various tasks and processes involved in managing accounts payable. From invoice receipt and data entry to approval workflows and payment processing, automation solutions leverage tools such as Optical Character Recognition (OCR), machine learning and electronic data interchange (EDI) to digitize and automate manual tasks, reducing errors, saving time and improving accuracy.

Central to the success of AP automation is the digitization and exchange of business documents, particularly e-invoices. E-invoicing, or electronic invoicing, replaces traditional paper and pdf-based invoices with a digital equivalent, allowing for faster, more efficient and more secure invoice processing. With e-invoicing, invoices are transmitted electronically between buyers and suppliers, eliminating the need for manual handling, reducing processing times and enabling real-time tracking and reporting.

E-invoicing offers numerous advantages over traditional paper and pdf-based invoicing methods. By digitizing invoice data and automating the invoice processing workflow, enterprises and organizations can achieve significant efficiency gains, reduce processing times and minimize errors. Furthermore, e-invoicing enhances visibility and control over the AP process, enables faster decision-making and facilitates compliance with regulatory requirements.

While more and more parts of the AP process are being automated, these three areas in particular, are increasingly being streamlined and optimized thanks to automation.

Incorporating AP automation into business operations offers a whole range of advantages beyond process efficiency. Let's take a look:

In Accounts Payable (AP) automation, the integration of e-invoicing compliance is pivotal for businesses aiming to improve their financial operations and stay compliant with regulatory requirements.

Today, compliance with government e-invoicing and e-reporting mandates, and industry standards is of the utmost importance. AP automation can ensure compliance by automating invoice processing, data validation and payment reconciliation. E-invoicing, the electronic exchange of invoice data between trading partners, represents a transformative shift from historical paper and pdf-based invoicing methods. Integrating e-invoicing compliance into AP automation offers numerous benefits. From efficiency gains and cost savings to enhanced accuracy and transparency, compliant AP automation enable organizations to mitigate regulatory risks, strengthen financial controls and drive sustainable growth.

As regulatory requirements continue to evolve, everyone must adapt to emerging trends. These may include increased emphasis on data security, stricter reporting requirements and greater interoperability across regulatory frameworks.

1. Assess current processes and identify pain points: Before embarking on an AP automation journey, it's essential to conduct a thorough assessment of your current accounts payable processes. Identify pain points, inefficiencies and areas for improvement. This assessment will serve as the foundation for designing a tailored AP automation solution that addresses your organization's specific needs.
2. Define objectives and set goals: Once you've identified pain points and inefficiencies, clearly define your objectives and set measurable goals for AP automation implementation. Whether it's reducing processing times, minimizing errors, or enhancing compliance, establishing clear goals will help guide your implementation strategy and measure success.
3. Select the right AP automation solution: Choosing the right solution is crucial for the success of your implementation. Evaluate different vendors based on factors such as integration capabilities, scalability, security, compliance and customer support. Look for a solution that aligns with your goals and offers the features and functionality you need to make your accounts payable processes run smoothly and effectively.
4. Plan for integration and implementation: Once you've selected an AP automation solution, develop a comprehensive plan for integration and implementation. Define roles and responsibilities, establish timelines and allocate resources accordingly. Collaborate closely with your chosen vendor to ensure a smooth transition and minimize disruption to your operations.
5. Provide training and support: Invest in training and support to ensure that your team is equipped with the knowledge and skills needed to effectively use the new system. Provide hands-on training sessions, user manuals and ongoing support to help employees adapt to the new processes and maximize the benefits of automation.
6. Pilot and iterate: Before fully implementing AP automation, consider a pilot program to test the solution before a complete rollout. Use feedback from pilot users to identify areas for improvement and refine your implementation strategy. Iterate based on lessons learned during the pilot phase to ensure a successful rollout to the entire organization.
7. Monitor performance and measure success: Once AP automation is implemented, closely monitor performance metrics and measure success against your predefined goals. Track key performance indicators such as processing times, error rates, cost savings and employee productivity. Use these insights to continuously optimize your processes and drive ongoing improvements.

By following these implementation steps, finance departments can effectively deploy AP automation solutions and unlock the full potential of an automated accounts payable process. With Pagero's expertise and support, you can navigate the implementation journey with confidence and achieve tangible benefits in efficiency, accuracy and compliance.

Navigating economic headwinds: Today's businesses face significant challenges amidst economic uncertainty. With recessions looming in various countries, coupled with historically high interest rates and inflation, the landscape of business operations is undergoing profound shifts. 

Optimizing cash flow and payment terms: Efficient management of cash flow and payment terms is critical for maintaining liquidity, profitability, and strong supplier relationships, particularly during periods of financial strain. Automated accounts payable solutions offer a streamlined approach to financial management, providing real-time insights into the company's financial position and facilitating informed decision-making.

The era of mandatory e-invoicing: Governments worldwide are increasingly mandating e-invoicing to enhance tax compliance and rationalize administrative processes. The EU, for instance, is set to make e-invoicing mandatory by 2028, with several countries already implementing B2B e-invoicing requirements. Beyond Europe, countries such as India, Chile, and Brazil are also embracing e-invoicing initiatives, signalling that this is a global, rather than regional phenomenon.

The AI revolution in AP: The rise in artificial intelligence (AI) is reshaping Accounts Payable processes, promising rapid advancements in efficiency and accuracy. AI technologies can extract data from non-electronic invoices, automate coding processes, and facilitate invoice processing at the line level. Pagero is at the forefront of exploring these AI-driven innovations, offering solutions to address evolving AP challenges.

Embracing cloud-based solutions: In a post-pandemic world characterized by hybrid working models, the adoption of cloud-based systems has become more important than ever. Software as a Service (SaaS) solutions are increasingly replacing traditional software systems, offering flexibility and accessibility. Many businesses now have a ‘cloud only’ policy and are planning to migrate transactional and analytical functions to the cloud in the next three to five years.

The rise of rapid payment technology: Technology partnerships and solutions are emerging to enable faster and more transparent payments. SWIFT gpi, SEP instant payment, and same-day ACH are examples of technologies driving rapid payment advancements. Pagero's collaboration with Mastercard Cross-Border Services exemplifies our commitment to providing customers with efficient cross-border and domestic payment solutions in this evolving landscape.

AP automation is revolutionizing accounts payable processes, offering efficiency, accuracy and compliance benefits. In addition, technologies like e-invoicing reduce errors and enhance control. 

Pagero specializes in facilitating the seamless exchange of e-invoices, electronic purchase orders and other business documents, empowering organizations to digitize their AP processes and drive operational efficiency. With its robust e-invoicing platform and extensive network of connected businesses, Pagero enables organizations to navigate the complexities of digital document exchange with ease.

With Pagero's expertise, AP automation can be deployed effectively, unlocking all the benefits of an automated accounts payable process while ensuring compliance today and in the future. Learn more about automating your AP process with Pagero, book a demo.

This text was originally published 25 February 2022 and last updated 28 May 2024.