How your business manages its accounts payable processes (AP) can directly influence your cash flow; successful AP management means you’re not paying late fees or duplicate invoices, you’re not suffering from unreliable data, and you’re maintaining positive relationships with your suppliers. But an inefficient, poorly managed AP process? That’ll harm your cash flow and – by extension – your business.
And while there are several ways to improve your AP process, we’re going to focus on one for now: automation. Specifically, robotic process automation. If deployed properly, with a keen understanding of your business processes, then RPA in accounts payable is transformative. It can reduce errors, increase the efficiency and speed of transactions, automate approval processes, ensure regulatory compliance, and more.
Ultimately, automating accounts payable with RPA helps you save time and reduce costs, and it frees your accounts department to focus on less mundane work.
What makes AP processes a good candidate for RPA?
Unlike systems automation, RPA does not require systems integrations or APIs to automate processes. However, as with systems automation, RPA requires investment – both time, capital, and human resources – as well as additional maintenance and governance. Thus, enterprises should be confident in RPA’s ability to generate ROI and provide sufficient business value before deploying it.
AP processes are strong candidates for RPA for several reasons, including:
- The sheer volume of transactions is high. Therefore, automating AP processes saves valuable person-hours and capital.
- They are error-prone. In AP processes, human error has dire consequences. A typo could lead to an underpayment or overpayment, an oversight may lead to delayed payments, and so on.
Automating these processes not only eliminates human error, but also saves time in validation processes – e.g., RPA can automate the reconciliation and matching process, and confirm invoices against your business’s own ERP data.
- AP processes are time-bound. Additionally, these processes may require different approvals and authorizations before payments are made, which makes time efficiency vital.
Now, let’s consider an AP process and how automation improves its efficiency. Below, we’ve considered a typical AP workflow for processing supplier invoices with the help of automation. The attended automation workflow includes the following steps:
- Invoice digitization. Optical character recognition (OCR) (which is built into popular RPA platforms) is used to digitize paper invoices, and vendors can also be invited to submit e-invoices.
- Invoice matching and verification. RPA bots can match invoices against delivery receipts and purchase orders, ensuring purchase terms are correct and identifying any discrepancies or errors.
- Human approval. Based on predefined business rules (more on this in the next section), your RPA system will route invoices to relevant personnel for approval. This ensures invoices are processed on time and makes sure payments aren’t forgotten or overlooked.
- Payments processed. After acquiring the necessary approvals, proceed to schedule the payments, choose the payment method, and, if necessary, involve humans for further approval. After the payments are processed, the bots match payment transactions with bank statements to ensure the amounts and beneficiaries are correct.
3 Key accounts payable automation benefits
In the previous section, we’ve covered why AP processes are prime candidates for RPA. These considerations translate to business value in the form of:
- Improved turnaround time. RPA can be used to automate payment scheduling, with RPA bots processing invoices faster by reducing the time required for data entry, validation, and approvals. This may translate to early payment discounts, healthier cash flow management, and improved vendor relationships.
- Cost savings. By saving person-hours and improving the efficiency of processes with RPA for accounts payable, organizations reduce labor expenses and administrative costs related to paper-based processes, and even mitigate the risk of late payment penalties. The Aberdeen Group estimates that automating your accounts payable function saves costs associated with invoice processing by up to 49%.
- Increased transparency. When automated AP processes are tracked through a centralized dashboard, you’ll have real-time insights into the progress of bills, payments, and invoices. This transparency helps your accounting team spot delays, manage auditing, and maintain traceability when stakeholders can follow the development of payments.
A word of caution: don’t neglect business rules
Before we explore AP automation use cases, it’s necessary to appreciate the role of defining – and updating – business rules that are relevant to your AP processes. For example, business rules may specify how a business with multi-currency contracts should manage invoices (e.g., should the costs be converted to USD? What currency have you agreed to pay the supplier/partner in?). You might design specific approval workflows based on each vendor’s location.
Similarly, if we refer to the automated AP workflow in the previous section, one might include business rules in the workflow that outline additional approval processes for invoices exceeding $X amount.
Defining these rules is a necessary part of automating workflows because they prime RPA bots for scenarios specific to your business.
4 Use cases for RPA in accounts payable
Here are four use cases for RPA in accounts payable with proven business value.
1. Invoice data extraction
RPA systems can be programmed to extract relevant data from invoices and transfer it to your account system or ERP. By combining RPA with Optical Character Recognition (OCR) technology, these systems can precisely read and interpret invoices. They extract essential information such as the invoice number, due date, invoice amount, and vendor details. This automation not only accelerates the data entry process but also minimizes the risk of human errors.
2. Payment processing
RPA simplifies and enhances the payment processing phase of A/P. These systems can be programmed to initiate payments through various methods, including electronic funds transfers, checks, or other payment gateways. By automating payment initiation, RPA ensures that payments are made accurately and on time. Additionally, automation can help track and verify the status of payments, providing real-time information on payment progress.
3. Compliance and reporting
Staying compliant with emerging tax laws can pose a challenge for A/P departments, especially for businesses with international operations. RPA monitors for changes in regulations and automatically applies updated tax rates and rules to invoices, reducing the risk of compliance-related errors.
Moreover, RPA generates detailed financial reports for auditing and analysis. These reports provide detailed insights into transaction processes, making it easier to track expenditures, analyze vendor relationships, and ensure financial transactions comply with relevant laws and regulations.
4. PO Matching
RPA bots can match invoices against other documents to reconcile discrepancies – such as in the purchase amount or details of the beneficiaries – by comparing line-item-by-line-item. RPA bots automate two-way and three-way purchase order (PO) matching, which involves matching invoices against POs, and invoices against both POs and goods receipts, respectively.
The matching of invoices against purchase orders (POs) is called a two-way match, and when matched against both POs and goods receipts, it is called a three-way match. This process involves comparing invoices line-item-by-line-item against these essential documents to reconcile discrepancies in purchase amount or vendor contact information.
Manual PO matching is a particularly time-consuming task, so automating the process frees accounting and finance teams up to focus on more strategic work, like budgeting and planning.
Automating AP processes offers businesses value in the form of time and cost savings, reduced errors, and greater efficiency. However, to ensure the success of RPA in accounts payable, business leaders will need to approach automation strategy holistically – accounting for both process and IT considerations.
Program leaders should prioritize use cases with proven business value, to help secure internal buy-in initially. Additionally, members of the RPA team will need to standardize workflows and define business rules to ensure processes are successfully automated.