Accounts Payable Automation: Best Practices for Beginners by Zahara

Are you new to the world of accounts payable (AP), or are you a seasoned veteran who just wants to make sure you have all your bases covered? Wherever you are on your journey towards AP automation enlightenment, there’s always more to learn.

In this guide, we’re covering all the accounts payable automation best practices and rules to follow when bringing on new software, and how to generally be the best AP professional possible!

Choosing the Right Accounts Payable Automation Software

First things first, let’s analyse what your current process looks like. This allows you to both be critical and identify your pain points, as well as making note of the aspects you do like and want to keep doing going forward.  

Start by asking yourself (and your wider team) some important questions.

Are you tired of keying in invoices? Are you concerned about security? Do you want to enhance your accounting system, or move to a new one before automating? Are you frustrated about your lack of control in your current process? Have your colleagues made significant or costly errors that could have been avoided? 

Make note of everything you and your team come up with. Work out which features would be non-negotiable, and which elements of your existing system that you want to take with you going forward.  

Integrating AP Automation with Your Accounting Software for a Streamlined Process:

It’s an important, and thoroughly overlooked, step in the process to really think about the current accounting system you’re using. Before you do anything else, you need to know whether you’re happy with your current software, like Xero or Sage, in which case you may just need additional features that you can get with automation software. However, if you feel like you're being let down by your provider it might be time to consider if you need a new system entirely. This will massively dictate the direction your AP automation journey will go in.

There’s no point doing demos with your current software in mind if you know deep down you need to switch providers before automating. Think about which of your pain points can be solved with AP automation software, and how many require a new system altogether. Whether you decide to stick or switch, it’s essential to find a bolt-on that seamlessly integrates with your chosen primary accounting software.  

Once you've decided and know what you would like from your perfect software, it’s time to see what’s out there. Some key features people find most helpful are optical character recognition (OCR) for invoice scanning, automated approval workflows.

It's also important to read customer reviews. Find out if your front-runner has a reputation for terrible customer support, or if there’s a feature you hadn’t considered but users rave about. Once you have a rough idea, you can draw up a shortlist of your favourites.  

Setting Up Workflows for Accounts Payable Automation:

Once you've done demos, are happy, and have decided on a provider, it’s time to make the most out of your software’s functionality. Worthwhile AP software will allow you to have complex but effective approval workflows in app. Instead of emailing POs and invoices to higher-ups and having to wait for them to approve them, with software they will be sent for approval automatically to the right people. There’s no lengthy sign-off process, they’ll be able to ‘approve’ or ‘reject’ with the press of a button. Some software will even reward users for having super-fast approval times, utilising our competitive nature speed the whole process up. 

Have you ever sat and considered that it's probably not necessary to get approval every time you go to buy a pint of milk for the office fridge? It's good practice to spend considerable time customising your workflows so you can set specific budgets for certain departments and expenses. Purchases under an amount of your choosing can skip certain approvers in your regular workflow, meaning that small (yet important) purchases get approved that much quicker. Luckily, when you do this in-app you’ll get a full audit trail so even though you don’t need approval for these purchases, you can still monitor your spend.  

Oh, and if you're an approver remember to keep your notifications on!

Training Employees on Accounts Payable Automation:

It can’t be emphasised enough how important this is, and how many well-meaning finance teams skip this step. You can set yourself up for success by making sure everyone understands the software in–and-out. It can be understandably difficult, because members of the team will join in the implementation process at different points, meaning that you’re working with varying levels of knowledge. Providing thorough training, and budgeting for professional training if needs be, will ensure a smooth transition.

Accounts Payable Automation Best Practices for Cost Savings

Automating Invoice Processing:

At Zahara, OCR is utilised every time you take a picture of a receipt or a supplier emails in an invoice. Instead of you reading the documents and then typing them up, the OCR reads them for you and inputs all the data for you. If you have experience of keying in large batches of invoices, you’ll understand how much of an asset OCR is! Companies who use OCR generally end up paying their invoices 9 times faster, with significantly less effort required. Zahara’s in-built OCR can accurately read your invoices for you, down to the line item. It's one of the best ways to follow lots of accounts payable automation best practices, by unleashing the full potential of your time and resources.

Optimising Cash Flow Management:

A saying you’ve probably heard a million times (which makes it no less important) is ‘cash is king’. Essentially, you could be the most profitable company in the world, but that doesn’t mean anything without positive cash flow. You need to be able to see what you owe, or have committed to buying, to get an idea of your profits and available funds. This is the easiest way to avoid short-changing yourself.

Using AP automation software with a purchase order system is a great way to gain full visibility of your cashflow. When you have a purchase order system in place, the purchase orders themselves act as legal promises that you will pay for what you’ve ordered when you’re invoiced. Instead of scrambling to get the cash together when the invoices come in, you already know how much you’re going to spend in advance when you use purchase orders. When you’re making large volumes of orders every month you can lose track, so when invoices come in you may pay them without question.

Reducing Fraud and Compliance Risks:

Following on from our last point, a purchase order system will help you cut costs while also boosting your compliance and reducing the risk of fraud. If fraudulent or duplicate invoices appear in your AP software, they’ll be flagged for your attention. A number of things could raise the alarms; not having an adjacent purchase order, a different total cost on the invoice, or the items not aligning. Fraudsters find new ways to con people all the time, and usually in ways which wouldn’t be immediately obvious, even to seasoned professionals.

There are other ways you can reduce your risk of fraud as well. We recommend a segregation of duties, so that there’s never anyone on your team who can approve their own purchase orders and can be committing fraud from within your company. No one wants to think that it could happen to their team, but with AP automation software, there is no chance of it happening so that you can fully trust your team to do their jobs.

As a side note, this is your sign from the universe to deactivate your old employee’s accounts and access to your finance software when they leave the company, immediately! The sooner you do it and lock down who has access to your systems, the more secure you’ll be.

AP Automation Best Practices: Closing Thoughts

There’s a bajillion factors that come into play when wanting to use AP automation software the ‘right way’, and so many reasons to get automating if you haven’t already. Our last blog has a detailed guide on how to automate your accounts payable process if you want the comfort of step-by-step instructions (which we wish we’d had back in the day!). Even without our last guide, we hope it brings some peace of mind to know that there are tangible steps towards maintaining or improving your accounts payable best practices through automation.