Cash flow or employees - which is more important to running a successful business?
Most of the time, your answer is probably “both.” You can’t have a successful business without both a great team and a healthy cash flow.
But sometimes, in the interest of cash flow management, you likely force employees - especially finance teams and accountants - to invest extra time and effort just to have good data.
And in doing so, you put undue strain on your business. Manually managing accounts payable and receivable is hugely draining, and takes talent and skills away from the most productive tasks.
To achieve the best from every employee, you need to give them mental rest, time to think and explore, and an opportunity to innovative and produce new ideas for better business.
So how can you give them time?
By automating AP and AR, of course. This small change makes the whole process faster and less error-prone. And most importantly, it keeps your team happy.
But automation is a tricky concept, and usually leads to lots of questions. So in this article, we’ll show you how it works, and why it’s so impactful.
The benefits of automating accounts payable
We’ll tackle accounts receivable next. But let's start with AP automation technology, which can be a huge help to most businesses.
Here are five clear reasons why.
1. More accurate invoices
“To err is human, to forgive is divine.” It's perfectly natural for humans to make mistakes. And as a result of human nature, your accountants have to check invoices again and again to correct them. Which may leave them tired and grumpy, and is certainly not a smart use of time.
It's been reported that 40% of businesses know that their “correct” invoices sometimes have missing details and mistakes. While often ignored, this can affect the company reputation negatively, and leads to past due invoices going unpaid. And it can be a potential legal liability.
But robots aren’t humans, and don’t make the same basic errors. If you have an automatic accounts payable system, you’ll avoid most of the typical errors that come with manual data entry. And if these do slip through, the system makes it simple to spot mistakes and correct them without much effort.
Accounts payable tools let you feed all the data in one place. So even if you have different teams entering data, they all follow the same steps. This means a clear and streamlined system, consistency in your AP process, and flawless invoices for your finance team and accountants.
2. Digital records as a default
When the accounts payable process is managed manually, you almost always end up with mountains of paperwork. Of course, this is all a legal requirement, and needs to be stored correctly and easy to find.
The trouble is, paper gets lost easily, physical records get moved, and we still have basic human mistakes to worry about.
On the other hand, if you can automate AP, you can easily keep track of all your business activities and keep records safe inside your software. Every file is stored in the right place and can be accessed instantly from anywhere in the world.
Plus you’ll have added extras like a record of the person who approved the purchase and a digital history of each action.
Again, this is a big time-saver - you don’t have to walk to a filing cabinet or room. It saves physical storage space, and you won’t need a filing clerk to manage that space. Which is frankly pretty old fashioned in 2019.
And most importantly, digital file storage is becoming the norm today. So there’s no reason not to make this change for invoices and accounts payable.
3. More efficient employees
Humans are prone to mistakes, mistakes take time, and too much time spent on a particular task disrupts the whole company. Employees end up dedicated to the wrong tasks, mostly as a result of other people’s errors.
By automating your accounts payable process, you free them to invest their effort into real work. The result is more productivity at the individual and company level.
And efficiency is key in accounts payable. The less time they waste on pointless tasks, the more time they have to look for discounts from vendors and to find other ways to save your business money. Which is the mark of a high-functioning AP team.
Additionally, they’ll be able to look for accounts payable process improvement ideas to help your business flourish.
4. Better workplace collaboration
One clear benefit of automated accounts payable management is that every department involved in capturing and approving invoices can access these important files at the same time. The moment an invoice has been entered into the system, your team managers can see and approve it, the finance team can review the data, and your payments processor can prepare what’s necessary.
This easy accessibility gives birth to real-time collaboration on shared documents, getting clarification, confirming details, and coping with inaccuracies. It also makes life easy for remote workers, as accounts payable can basically be done from anywhere.
This leads to fewer disputes and frustrations around what can be a difficult process. Your work environment will be much happier, which allows employees to work peacefully and contribute more to building a thriving business.
5. Streamlined processes
Perhaps the clearest benefit of automation is just overall smoother processes. People can’t forget or skip steps, and everyone has the same workflow for processing and paying invoices.
And while normally we’d assume that more thorough processes are slower, it’s the software that does all the heavy lifting. And the software is faster than humans will ever be.
But faster doesn’t mean less secure. You might assume that, if everything happens automatically now, you lose oversight. But AP managers can still review every single invoice along the way. And more importantly, you have technology to double- and triple-check your work.
Which makes everything simpler, faster, and more effective right away.
Benefits of automating accounts receivable
Now that we’ve seen the impact of automation on accounts payable, let’s look at the other side of the coin.
1. Reduced costs of payments processing
It’s surprising how many companies still spend huge amounts on payments process. By automating your accounts receivables, you eliminate most of these in one fell swoop.
Pretty much all of the processing - reviewing payments, transferring sums to different accounts, and entering records into ledgers - can be completely automated.
There’s plenty of great software that will take this hassle off your hands and ensure that your team members can use their time doing something more creative or productive.
And aside from the time you save on busy-work, you also get through payments more quickly.
2. Faster payments
82% of businesses fail because of cash flow problems. And while for some of these the issue is generating revenue, for lots of companies the problem is simply getting customers to pay on time.
This is only made worse when you rely on team members to manually send out invoices each month. If these are delayed - or if someone is away - you don’t get paid.
With invoice automation, you can prepare invoices at lightning speed and set your system to send them to your customers on a fixed schedule. This saves you time at one end, and increases the likelihood that they’ll actually receive and pay invoices when you need them to.
Speedy invoicing and faster payments will obviously play a huge role in giving your business a boost.
3. Time saved
You don’t only lose time in processing payments. If you’re manually preparing and checking invoices one at a time, you’re looking at a significant time investment.
And automation lets you remove this burden altogether. The software knows how much you need and can put together flawless invoices every time its own. And as stated above, accounts receivable systems will then notify customers on their own, so you don’t even have to send an email.
This also helps to keep everyone in the company happy. Accountants too often have to ask other team members to help them prepare bills, which gets on the nerves of everyone involved.
4. Improved customer service
Your customer service has a huge role to play in the growth of your business. The better it is, the happier your customers will be, and the more they’ll keep on paying.
Giving them an easy and convenient way is actually crucial to good customer service. The ability to pay smoothly every time reflects well on your business and is an extension of customer care.
So if automation can grease this wheel, that’s a big win.
But because accounts receivable software integrates with your existing CRM and ERP systems, you’re also able to find misplaced invoices and incorrect details immediately, and help customers resolve any issues they find along the way.
You can ward off lots of conflicts that could arise in the future and spoil relationships with them.
5. Less human error
Even a minor mistake in the accounts receivable process can make things too complicated to handle easily. The wrong digit or a misplaced comma can throw off everything.
Once again, automation is basically guaranteed reduce the number of errors, giving you an assurance that every invoice is tracked carefully and properly prepared.
The less manual work is involved, the less time will be required to correct mistakes, and the number of unsatisfied customers will also likely decrease (as above).
And all of these factors combine to make your business more productive (and eventually more profitable), thanks to a little bit of well-built software.
So there you have it - the most valuable benefits of AR & AP automation in a nutshell. Manual management of accounts payable and receivable leaves employees irritated and devoid of energy, which is turn leads to errors, which then makes everyone more irritated and even more tired.
And the crazy thing is, that’s the way these processes have always been done. Most finance and accounting teams have just accepted that these tasks are a burden - that certain times of the month are just going to be tedious.
On the contrary, having automation lets you give your employees more free time to bring new and valuable things to the table. They can think more innovatively, discover discounts and tempting offers from vendors, and boost overall team productivity.
The most noticeable advantage of AR & AP automation is to have a tension-free and improved atmosphere in your workplace, benefiting employees and giving them more room to work creatively.
Which is exactly how things should be.