The accounts payable cycle includes the steps necessary to pay a supplier invoice.
The cycle includes:
- Supplier onboarding
- Invoice receipt
- Invoice processing
- Invoice posting
- Supplier payment and reconciliation
Each step in the accounts payable cycle entails its own unique activities. These activities include:
A proposed supplier must be approved, verified as a payable supplier (in other words, not on any watchlists), and set up in a buyer’s vendor master database. It typically falls on the shoulders of accounts payable staff to collect and maintain the contact information for the supplier as well as their banking account details and tax documents.
Invoices can arrive via many delivery channels, including paper mail, e-mail, File Transfer Protocol (FTP) upload, a supplier portal, fax or electronic data interchange (EDI). Accounts payable staff must retrieve all these invoices and get them ready for processing. Mail must be opened. Invoices must be downloaded from an FTP site or retrieved from an e-mail box or supplier portal. And faxes must be collected.
Once invoices have been received, header and line-item data on each invoice must be captured and verified for accuracy. Invoices then are matched against purchase orders (POs) or proof-of-delivery receipts. Data on each invoice also must be recorded in the general ledger. Any invoices that do not match a PO or shipping document must be routed for approval, typically to the purchaser, but possibly to additional people. Any exceptions also must be reviewed and information must be collected for resolution.
Once an invoice is approved, it must be recorded in the buyer’s enterprise resource planning (ERP) or accounting system and scheduled for payment. An ERP is the financial nerve center of a business, managing all its financial information and terms.
Supplier payment and reconciliation
The ERP manages the scheduling of payments to suppliers, typically using pre-set payment terms established between the buyer and the supplier. While paper checks have traditionally been the most popular form of payment to suppliers, more buyers pay suppliers via Automated Clearing House (ACH) or card. When a payment is made, accounts payable must record the payment method and any discounts.
Issues and inefficiencies in any step of the accounts payable cycle can result in:
- Higher AP costs such as from time wasted keying data and chasing down information
- Erroneous payments to suppliers such as when invoice information is miskeyed
- Delayed payments such as when invoices are lost or become “stuck” in the approval process
- Upset suppliers such as when invoices are paid late, or the invoice status is unclear
- Poor AP visibility into payables information such as when data is trapped on paper
The impact of ineffective invoice processing on the accounts payable cycle can be especially big for large corporations with lots of suppliers, high invoice volumes and multiple processing operations.
The shift to Work from Home has exposed and exacerbated the shortcomings of manual, partially and semi-automated, and on premises approaches to invoice processing, resulting in more departments being challenged by the types of issues described above. Adapting paper AP processes to remote working is virtually impossible.
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Accelerating the accounts payable cycle with automation
Automation reduces the accounts payable cycle significantly, no matter where AP staff work!
Accounts payable automation solutions include capabilities for:
- Invoice receipt
- Invoice data capture
- Workflow approval
- Exceptions resolution
- Invoice posting to any ERP
- Supplier payments and reconciliation
- Invoice analytics
These capabilities digitize and simplify invoice processing for a faster accounts payable cycle.
Accounts payable robots (or “bots”) log into an e-mail box, FTP site or online supplier portal to retrieve invoices for processing. Suppliers also can use an online portal built into an invoice processing platform to submit invoices electronically or to “flip” POs into electronic invoices. The result is that all accounts payables processes are centralized onto a single standardized platform.
AP automation software uses optical character recognition (OCR), e-mail invoice extraction, robotic process automation (RPA), machine learning (ML) and proprietary technology to extract and verify data from each invoice according to pre-defined business rules. Invoice data is guaranteed 99.95 percent accurate and then matched against a PO. Matched invoices are seamlessly uploaded to any ERP application, including SAP, Oracle, PeopleSoft, NetSuite, Sage Intacct, Infor, Advantage and more.
Unmatched invoices, or those without a PO, are digitally routed for approval based on configurable business rules. If any data required for approval is missing from an invoice (such as a PO number), an AP automation solution sends an e-mail to the supplier’s billing department. The supplier then clicks a link, inputs the required information and re-submits the invoice. The data input by the supplier is validated in real-time, eliminating the possibility of back-and-forth e-mails.
Automating the accounts payable cycle enables AP departments to lower costs, reduce human error, maximize efficiency and achieve continual process improvement for best-in-class results.
Streamline the accounts payable cycle
The accounts payable cycle does not have to be complex, time-consuming or costly when staff work remotely. With the right solution, payables departments can efficiently manage invoice processing.
Looking to reduce your accounts payable cycle when staff Work from Home?
Contact IPS to arrange a time to chat with one of our automation experts today!