Although accounting software has been around for many, many years, many accounts payable (AP) operations still heavily rely on manual processes. Often, accounting staff is forced to manually enter vendor bills into outdated systems and generate check runs and mail payments from platforms that weren’t built to grow with the business or today’s technologies. This, in turn, means team members spend many hours a day, performing mundane, redundant tasks that could be done in minutes if their companies’ systems were automated. This is extremely inefficient and welcomes a host of problems, including manual data entry errors and messy financial data that can be quite costly for the business down the line.
The Hidden Price of Manually Administered AP Processes
Any process that’s administered manually costs a lot of extra time and labor, not to mention, it’s prone to error. Systems that still operate on manual entry put a strain on accounting resources and take time away from greater-valued tasks, such as analyzing data and examining anomalies within the data. If your company relies too much on manual AP processes, you’re likely also spending a lot of money on overhead costs—often five times more to process a single invoice than your competitors who have fully automated systems.
Manual AP processes can also cause friction with vendors when payments are delayed. If your payments are frequently late, you might experience higher supply costs and miss opportunities for saving money. That’s because a lot of suppliers offer their best customers the best prices. Sure, purchase volume is usually the first factor considered, but suppliers will also look at your customer/supplier relationship. If you always pay late, it’s damaging your relationships, and you’re unlikely to get the same pricing as a competitor who always pays on time.
Let’s not forget early-pay discounts. These are offered often, but you may not have any idea they exist if you’re not only not able to pay early—but you’re always paying late. Manual AP setups can make it difficult to even pay on time, let alone early, leaving these potential savings on the table for the next guy.
Then there are the errors. If you’re operating on a manual data entry system, you’re increasing your risk of errors and financial fraud. People can easily transpose numbers or omit a digit when submitting vendor invoices or transferring information between two systems. If you’re able to catch these situations in a timely manner, you can easily correct them, but when the close process is limited, it’s not always feasible to review every single transaction.
When you operate under a manual umbrella, it becomes increasingly more difficult to identify and correct misapplied accounting rules. You might not even be aware that these mistakes are happening, but they can be incredibly costly in a short amount of time.
Payment fraud is also an ongoing problem; when you rely heavily on manual processes, you’re increasing your risk of becoming a victim to this crime. You need to maintain separation of duties and other financial controls in order to prevent staff members from submitting and approving fraudulent invoices. If you want to avoid this type of fraud, you need to carefully monitor each transaction as a means of ensuring approval hierarchies and other procedures are being followed consistently. When your controllers and leadership team have too many other things on their plates, reviewing these daily transactions can be an unreasonable expectation. Thus, the enforcement of internal controls becomes spotty at best.
AP Automation Opportunities
When you automate AP, you’ll simplify invoice processing, approvals, and payments. This assists your accounting team by helping them track billing due dates and reducing the risk of fraud to your companies by making sure vendor bills are genuine. With your process in place, you can pay on time—or maybe even early—so you can take advantage of early bird discounts.
The following are three huge automation opportunities you can realize with you switch from your antiquated AP system.
1. Invoice Capture
When your team has to deal with manual entry of vendor billing data, it takes way more time than it should have to, and it can often be a main source of errors within the payment chain. Fortunately, technology exists with elements such as object character recognition (OCR) and machine learning, so you can easily convert PDFs and image files into digital formats with a high level of accuracy.
For accounts payable teams, this means bills in digital formats can be automatically brought into the system, rather than manually entering them, thereby reducing the time needed to deal with billing and the amount of errors associated with the process.
2. Invoice Matching and Approvals
You need to ensure your goods and services are where they’re supposed to be before you pay your vendors. Matching the P.O., invoice details, and associated paperwork is standard operating procedure, but this process usually relies on eyes from a number of departments, which can cause bottlenecks and delays.
Thankfully, you can automate three-way matching, which makes this process so much easier. You can receive information, capture it electronically, and link it to the purchase order and invoice in your accounting system, thereby ensuring it’s as easy as possible to review documents and ensure they’re accurate.
3. Making Payments
If you print and mail physical checks, you’re wasting time, increasing processing costs, and making it more difficult for your team to pay bills early or on time. When you automate the payment process, you’ll improve your accounts payable efficiencies by eliminating manual tasks. Electronic payment options afford your organization more flexibility to decide when and how to make payments, giving you the opportunity to hold onto your cash longer while still making sure you’re not paying late fees.
Automating Accounts Payable with NetSuite and MIBAR
NetSuite is built to help you save money, minimize risk, and enhance efficiencies in your processes by removing manual processes from the entire vendor bill settlement situation. NetSuite AP Automation offers you an easy-to-use, quick, secure way to process invoices and make payments.
NetSuite makes your AP system digital and automated, saving time for your staff and making it simpler to pay suppliers as your business grows. All of these benefits, without increasing your AP headcount!
Ready to learn more? We provide superior knowledge of NetSuite’s features and functionality, allowing us to architect, configure, and implement NetSuite to meet your business needs. Schedule a free consultation to get started.