Skip to content

The Pleo Blog

Looking for

Book a demo
accounts payable automation

Tools & Tips

What is accounts payable automation?

Accounts payable automation, also known as AP automation, is the use of technology to process vendor invoices digitally rather than manually.

AP automation simplifies the invoicing process and leads to more accurate, efficient and cost-effective operations – and that makes AP automation a valuable asset for your business.

In this article, we’ll cover what accounts payable invoice automation is, how it works and the benefits AP automation can bring to your business.

What is accounts payable invoice automation?

Accounts payable (AP) invoice automation refers to the use of software solutions to streamline and automate the management and processing of your vendor invoices.

Once handled manually, tasks like filing, approving and submitting invoice payments can now be handled automatically by accounts payable software – a significant advantage for businesses of all sizes.

With accounts payable invoice automation, your invoices can be processed by software regardless of how the invoice arrives.

Whether you receive e-invoices or your invoices are sent to you via e-mail or traditional post, AP automation can be used to speed up your invoice processing and save valuable time and resources for your business.

You might also be interested in: ‘How to get your accounts payable management under control

How does accounts payable invoice automation work?

The accounts payable process may vary slightly depending on your business needs. For example, larger businesses often have more complex approval requirements and therefore typically need additional features to support their workflow.

However, certain key components remain largely the same regardless of the size of your  business:

  1. Invoice capture
  2. Matching and verification
  3. Approval automation
  4. Payment processing
  5. Reporting and analytics

Let’s take a closer look at each step in the accounts payable invoice automation workflow.

1. Invoice capture

The first step in the process involves capturing the invoice data. To do this, accounts payable software uses Optical Character Recognition (OCR) technology to scan paper invoices and convert them into digital data.

This means that with AP software, you no longer need to enter physical invoices manually. All you need to do is take a picture or scan the document. The OCR technology will extract the data and convert it into digital form.

AP automation also automatically imports invoices received in digital formats such as PDF or EDI. If you receive e-invoices, they automatically land in your accounting system – it’s that simple.

2. Matching and verification

When the AP software extracts the invoice data – such as vendor details, invoice number, amounts etc. – it automatically matches the data with purchase orders and delivery receipts to verify the accuracy and legitimacy of the invoice.

Any discrepancies found are automatically flagged for manual review. This ensures that the invoice hasn’t been altered or duplicated, helping to prevent fraud.

3. Approval automation

Accounts payable invoice automation is customisable. This enables you to set up your preferred approval processes suited for your particular organisational rules.

When you receive an invoice, the AP automation software automatically routes the invoice through your predefined approval workflows, ensuring that the invoice is sent to the right person. The approver can customise approvals based on factors such as vendor criteria, invoice amounts and much more.

To expedite the process, the software also sends notifications and reminders to approvers, ensuring that invoices are paid on time – an important element in nurturing strong vendor relationships. 

4. Payment processing

Once the invoice is approved, AP automation can schedule and automate payments through a variety of methods, such as ACH and wire transfers.

You no longer need to worry about missing a payment deadline or paying at the wrong time. Taking deadlines, cash position and early payment discounts into account, AP automation software can even help you spot the best time to pay your invoices.

The right accounts payable invoice automation software also integrates with your accounting and ERP solutions to update payment statuses, keeping you on track at all times.

5. Reporting and analytics

When the payment has been completed, the accounts payable invoice automation solution generates real-time reports on invoice statuses, payment cycles and vendor performance.

The solution also provides insights for how you can improve your AP processes and cash flow management. This helps you keep an eye on your spendings, payments per vendor and other insights that can help improve your financial decision making.

The benefits: Why accounts payable invoice automation is important for your business

Accounts payable invoice automation brings a variety of benefits to businesses of all sizes. Here’s a brief overview of some of the most notable reasons why AP automation is important for your business:

  • Enhanced efficiency: AP automation reduces the time you spend on manual data entry and invoice processing. It also speeds up your approval and payment cycles, ensuring your payments are made on time – always.
  • Accuracy and error reduction: By automating data entry, AP automation minimises human errors and ensures accurate invoice matching and reconciliation.
  • Cost savings: Accounts payable invoice automation reduces your need for physical paper, printing and physical storage. It also lowers labour costs by reducing the manual workload.
  • Improved vendor relationships: By ensuring your payments are always made on time, AP automation enhances trust and collaboration with your vendors – an essential part of building lasting business relationships.
  • Compliance and security: AP automation software enhances compliance with regulatory requirements and internal policies. It also reduces the risk of fraud and unauthorised access, helping to improve security.
  • Increased transparency: Accounts payable invoice automation offers real-time tracking of invoices and payments and provides detailed audit trails, increasing transparency and improving financial control.

Easily pay and manage your invoices with Pleo

Save time and make your team happier with a smarter, simpler invoice management solution.

Get started for free

Powered in the UK by B4B partnership

You might enjoy...

Get the Pleo Digest

Monthly insights, inspiration and best practices for forward-thinking teams who want to make smarter spending decisions

Powered in the UK by B4B partnership