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What Is AP Automation and How Does it Work?

AP (Accounts Payable) automation refers to the use of technology to streamline and optimize the processes associated with managing and processing invoices, payments, and other financial transactions within the accounts payable department of a business. The goal of AP automation is to enhance efficiency, reduce manual tasks, minimize errors, and improve overall financial management.

Here’s how AP automation typically works:

Document Capture:

Invoices and other relevant documents are captured electronically. This can involve scanning physical documents or receiving digital invoices directly.

Data Extraction:

AP automation software uses advanced OCR (Optical Character Recognition) technology to extract relevant data from invoices automatically. This includes details such as invoice number, date, amount, and vendor information.

Invoice Approval Workflow:

Automation tools facilitate the creation of customizable approval workflows. Invoices are routed electronically through the predefined approval process, ensuring that the right individuals review and approve them in a timely manner.

Integration with ERP Systems:

AP automation systems are often integrated with the organization’s ERP (Enterprise Resource Planning) or financial management system. This integration ensures seamless data transfer, reducing the need for manual data entry and minimizing errors.

Matching and Validation:

The system automatically matches purchase orders, delivery receipts, and invoices to ensure accuracy and compliance. Any discrepancies or exceptions are flagged for further review.

Automated Payments:

Once invoices are approved and validated, the AP automation system can initiate payments. This may involve electronic payments, checks, or other payment methods, depending on the organization’s preferences and vendor relationships.

Reporting and Analytics:

AP automation provides comprehensive reporting and analytics tools. Businesses can gain insights into their spending patterns, track key metrics, and generate reports for financial analysis and decision-making.

Audit Trail and Compliance:

AP automation maintains a detailed audit trail of all activities within the system. This not only ensures transparency but also helps businesses comply with regulatory requirements and internal audit standards.

Vendor Portals:

Some AP automation systems offer vendor portals, allowing suppliers to submit invoices, track payment status, and communicate with the accounts payable department. This enhances collaboration and reduces manual communication efforts.

Mobile Accessibility:

Many AP automation solutions offer mobile accessibility, allowing users to manage invoices, approvals, and payments from anywhere, providing flexibility and convenience.

Implementing AP automation can result in significant time and cost savings for businesses, reduce errors, enhance accuracy, and improve overall financial control. It is particularly beneficial for organizations that deal with a high volume of invoices and transactions.

So many businesses rely on manual back-office operations – bookkeepers manually typing in invoices and walking stacks of checks to desks for signatures. Vendors waiting for checks in the mail and matching them to invoices. Controllers having to verify ACH numbers prior to manually transferring/wiring funds for payment.

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Don’t Just Automate AP.   Ottimate It.  A smarter way for AP managers, approvers, controllers, and CFOs to work through the entire invoice lifecycle.

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