For many SMEs in Lancashire, there are plenty of challenges to overcome in order to thrive in today’s market. If your business isn’t grappling with intense financial constraints, it’s probably struggling to stay ahead of a fierce competitor.
However, one challenge that has been dragging everyone down is the traditional management of accounts payable. Manual procedures like these continue to slow growth and pile on the already high operational costs. It is for this particular reason that an increasing number of SMEs in the region (and across the globe) have started automating their accounts payable processes.
What is Accounts Payable Automation and how can it benefit your SME?
Accounts payable automation (AP automation) refers to the use of digital tools to handle invoice processing. These tools take care of every process you would normally need a team to do manually, including invoice receipt, data capturing and forwarding for approvals and payments. So, right off the bat, automating can significantly cut your operational costs.
To get a clearer picture of how these systems work, see more here.
Some of the key steps in the AP automation process include the following:
Invoice capturing
An automated AP system will first scan and read the details of received receipts. It uses Optical Character Recognition (OCR) technology, which allows it to convert paper-based documents into digital data.
Details verification
Once it has captured the details, the next step is to compare them against corresponding purchase orders and receipts. This step is done to ensure the invoiced items and terms of purchase align perfectly before the invoice moves to the next stage.
Routing invoices for approval
If there are no discrepancies, the system will route the invoices to the relevant desks for approval. The decision of what invoice goes where will depend on your predefined rules. For example, if you run an SME, the finance work is probably shared between you and a finance manager. Based on your predefined directions, the system will know which invoices go to your desk and which to send to the finance manager for approval.
Payment execution
The next step, once invoices are approved, is to facilitate the payment process. Again, this step will depend on your predefined rules – you can decide to let the system execute the payments automatically or allow for minimal human intervention. Regardless, it will help with things like scheduling payments (based on cash flow) and selecting preferred payment methods.
Accounts reconciliation
Once the payment is complete, the automated AP system will carry out an account reconciliation process. You want to ensure the money paid is the right amount and has gone to the intended supplier. The system will do exactly that and provide you with a detailed report for your financial books.
The impact of AP automation for Lancashire SMEs
Automating your AP processing will benefit your SME in a variety of ways.
For starters, it reduces your operational costs significantly. For example, instead of hiring five people to handle your finances, you might only need one, who will still have less work than as a member of the whole team processing AP manually.
In addition, automating AP eliminates the errors associated with manual data entry. Since the system will be doing most of the data capturing and reconciliation, human intervention is significantly cut, lowering the chances of costly errors.
With reduced errors, you also get clear audit trails and accurate reporting, which helps your business become better at compliance.
Conclusion
With all these benefits, automating your AP is a no-brainer. The automated system can help your SME run more efficiently and relate better with vendors, ensuring you are keeping up with competitors. In a market where innovation and resilience are the key to survival, switching to AP automation is more about future-proofing your business than just saving money.
