From Invoice to Payment: Your Guide to Accounts Payable Workflows
by The Ottimate Editorial Team
Entrusting your Accounts Payable (AP) team with the responsibility of manually processing each invoice means they’ll spend time meticulously verifying its details to ensure timely payment. But even then, human errors do still occur in your accounts payable workflow. Invoices are commonly entered incorrectly, approval emails overlooked, and payments delayed or duplicated.
Enter AP Automation.
An effective, automated AP workflow guarantees that your vendor payments are made accurately and promptly. Let’s break down what that looks like, why it’s important, and how AP automation can streamline your team’s processes.
What is an Accounts Payable Workflow?
At its core, an accounts payable workflow is a methodical process, in which, a business structures the management and handling of their invoices and payments — much like a well-oiled machine. Your AP team must properly capture, code, approve, and ultimately pay every invoice.
While your team aims to accomplish this in a timely and efficient manner, there are a variety of roadblocks that can slow the process down — especially if you don’t have a workflow in place.
Why You Need an AP Workflow
Maintaining a structured AP workflow is crucial for your business operations. Research done by the Institute of Financial Operations & Leadership reveals that 56 percent of organizations spend over ten hours a week processing invoices and supplier payments.
This can lead to missed payments, late fees, and duplicate payments, which can add up quickly and impact your organization’s finances. It can also place a strain on your vendor relationships.
An automated workflow can help you avoid the pitfalls of an inefficient payables process and save your team time. If roadblocks, bottlenecks, and errors continuously arise, it may be time to reevaluate your workflow.
What are the Steps in an AP Workflow?
An AP workflow is a systematic, step-by-step process, where each invoice undergoes a series of tasks to optimize its lifecycle and payment. It can be either manual or automated and is the backbone of invoice processing.
Let’s break down the following steps:
1. Capture and Coding
Step one involves the capturing of invoice data and assigning appropriate codes.
In this stage, it’s essential to capture every detail of each line item and code everything accurately. This includes information such as item descriptions, quantities, prices, and more. It’s a task that requires a significant amount of time and careful attention to ensure no detail is overlooked. This thoroughness in the initial stages is what enables the rest of the process to run smoothly and efficiently.
Ottimate’s Invoice Automation feature can help streamline your AP team’s time, eliminating manual data entry and the risk of errors by over 80%. Ottimate quickly and accurately captures digital invoices via email, uploads, or EDI, as well as handwritten invoices that come in via fax, snail mail, or in person.
2. PO Matching
For companies using purchase orders (POs), the next step consists of verifying transactions by matching invoices with their subsequent POs and receipts.
The most efficient way to do this is by performing a 3-way match. This can be done either manually or via automation, and involves receiving a PO, linking it to the correct invoice, and comparing and matching the information on all documents. . This process is paramount in preventing duplicate or overpayments.
Ottimate’s PO Match feature helps improve inefficiencies by doing just that. Consider it your own personal AI assistant, doing the verifying for you.
3. Invoice Approvals
Once your AP team has captured, coded, and matched all invoice data, transactions receive verification and are now free of inaccuracies. The next step in the process should be acquiring final approvals.
Depending on your workflow, some invoices may need certain individuals to sign off. For companies not leveraging automation, this process may be cumbersome and time-consuming, often consisting of back-and-forth email exchanges or physical delivery of invoices to the desks of approvers. You can see how easily it would be to overlook an email or misplace a paper invoice, which can cause a late or missed payment.
With Ottimate’s Advanced Approvals features, you can expedite this process. Ottimate tailors this process to your custom dimensions and approval structure and automatically routes invoices to the correct individuals for instant approvals.
4. Payments
Time to send out those payments! Once you receive final approval and authorization, it’s time to pay your vendors.
Based on the agreed-upon payment method between you and your vendor, a member of your AP team selects the payment format of choice, such as check, Automatic Clearing House (ACH), virtual card, or another form of payment.
Handling this process manually could come at an increased cost. Many businesses print paper checks, sign, stamp, and mail them in advance to ensure payment, meaning you’re not only paying your vendors — you’re paying for the cost of supplies. Manual processing also often results in singular payments, where you’re processing one transaction at a time — resulting in unproductive time spent.
Electronic vendor payment portals, like Ottimate, make payments easier by consolidating all your payments. Ottimate will even cut checks on your behalf in our all-in-one VendorPay portal, ensuring a processed and on-time payment, every time.
5. ERP Syncing and Reconciliation
Finally, you’ll sync your AP data into your Enterprise Resource Planning (ERP) system. This is critical for reporting, data analysis, and record-keeping purposes. And having an automated process can help streamline this step.
Integrating Ottimate ensures seamless data synchronization with most ERP systems. With an automation solution, like Ottimate, that automatically syncs your AP data, you can:
- Maintaining an accurate record throughout the complete end-to-end AP process
- Easily access all your financial records anywhere at any time
- Audit your records and make informed decisions in the blink of an eye
- Avoid sorting through several invoice-packed filing cabinets
Manual Accounts Payable Workflow Challenges
Leaving behind a manual AP workflow can help overcome several challenges that come with it, such as:
- Human Errors: Manual data entry can lead to errors, like typos or inverted numbers, subsequently affecting the accuracy and efficiency of your AP process.
- Approval Delays: Delays in invoice approvals can lead to late or missed payments — negatively affecting your vendor relationships.
- High Paper Volume: Manual processes often involve a lot of paperwork, which can be difficult to manage and easy to lose.
- Lack of Transparency: Without a centralized system, it’s difficult to maintain visibility over the entire AP process, which can affect your bottom line
- Difficulty Scaling: As a business expands, the quantity of invoices and financial information also grows, making it difficult to manage the increased workload.
Benefits of Automating Your Accounts Payable Workflow
Automating your organization’s AP workflow brings several benefits with it, including:
- Increased Efficiency: Automation speeds up the AP process by eliminating the manual components of your workflow.
- Higher Accuracy: AI-powered automation ensures consistent, error-free data entry, reducing the potential for errors.
- Cost Savings: By streamlining the AP process, automation can help save your business time and money, so your team can focus on other revenue-driving tasks
- Better Visibility: A centralized AP system provides greater transparency over your entire AP process, leading to more informed, data-driven decision-making
- Greater Control: Automation allows for better control over the AP process, ensuring timely payments and more accurate records.
- Customized workflows: AP automation allows for the customization of the accounts payable process to suit your specific business needs
Create Your Accounts Payable Workflow with Ottimate
The AP process is the lifeline of your business’s financial management. An efficient workflow isn’t only a nice-to-have anymore: It’s an essential game-changer for managing your organization’s financial operations.
Achieving a streamlined, accurate, and cost-effective AP process is imperative for any organization! But transitioning from a manual to an automated AP workflow represents a strategic move.
Are you ready to turn the tide in your favor? Ottimate’s here to help. Start your journey towards an optimized AP process today and witness the difference. Don’t wait for the future, shape it with Ottimate.
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