AP Automation and Your AP Department
Making a case for an automated Accounts Payable system can prove to be more essential than the accounting system itself. While analyzing the accounts payable automation process it proves to be simple and a direct way to improve any AP organization
Back in the early years of computerization, when more than a few people were concerned about computers replacing their jobs, automation served two primary purposes. The first was to efficiently perform repetitive manual tasks to achieve the same result more quickly and with greater accuracy. The second was to save the company money by being able to eliminate employees who performed the repetitive functions. This second purpose may be as cold as the computer chips and the results of its calculations, but the reality is that businesses survive through being profitable.
From an analytical viewpoint, every human that enters data into the system has the capacity to make a mistake. The fewer potential entry points for a mistake to be made, the more efficient and cost-effective the system will be. AP automation directly limits the number of entry points.
Let’s review the role of the different processes of Accounts Payable Automation.
Procurement – As can be seen, the number of data entry points in this process is severely limited, and the system is constantly evaluating the data that is being entered into the system, checking it against existing records. At the end of the process a human is involved, who is responsible for documenting any discrepancies with the order.
Invoice Processing – Processing of the invoice is virtually completely automated. Checks and balances within the system guarantee that this automated step will be completed without error. Any exceptions are handled at the end of the processing by a person.
Invoice Approval – Like invoice processing, this step is almost completely automated, with a person at the end of the step who receives and researches any exceptions generated by the system.
Payment – The end of this step is the most important to note. Though up to now the process has been almost completely automated, with people only intervening when exceptions are generated. The point where the e-invoicing system itself is checked by a human to ensure an accurate disbursement of funds gives control of the process at the most critical time. People need to be in the loop, but at select, critical junctures.
Vendor Management – Even though communication methods have largely changed because of technological advances, person-person, or in this case, AP manager-to-vendor communication takes place to ensure both automation and non-automation problems can be discussed and resolved, if necessary.
What follows next is an evaluation that in all likelihood will involve the IT department. The goal is to make the electronic invoicing process more efficient from a technical view point. In many cases this involves a system upgrade, but is unlikely to include adding more employees to the loop. The result will be a cost-effective and an even more productive system. With the basic functions of AP automation in place, Accounts Payable organizations have evolved from lacking control of the accounts payable system to total control due to business analysis and the accounts payable automation process.
Included in this progression is efficiency and cost-savings with the AP automation model. It allows continual contact with vendors, creating the opportunity to discuss how an AP department can be improved and better assist customers, while bringing key people into the loop.