Maximizing Efficiency: Evaluating The Full Cycle Of Accounts Payable Automation

What Is The Full Cycle Of Accounts Payable

For the busy finance executive, automating the accounts payable (AP) process provides time-saving benefits and streamlined workflow. When looking to integrate an accounts payable automation software, however, it is important to consider the full cycle of the AP process. This article will outline and explain each of the steps in this cycle, helping finance executives and other decision makers evaluate the potential benefits of automating the AP process.

AP automation software, also known as purchase-to-pay (P2P) software, works to streamline the process of obtaining, approving, and paying for goods and services. By automating the process, business can improve workflow, increase accuracy, manage vendor data more effectively, and better track and investigate expenses.

The AP process can be broken down into multiple pieces, each with critical responsibilities. Specifically, the full cycle of AP automation can be divided into nine distinct steps:

1. Vendor Registration: All vendors, both new and existing, must register and submit onboarding information, such as tax and payment details, and should be evaluated for risk.

2. Purchase Order (PO): Managers can purchase and approve for goods, services, and supplies, with detailed descriptions of the items, and conditions of delivery, payment, and quality.

3. Receiving: The goods received must be compared to the PO, and any discrepancies should be reconciled prior to payment.

4. Invoice Management: Invoices should be verified, analyzed, and approved. Invoice information should also match PO details.

5. Invoice Payment: Payment terms should be met and payment results tracked.

6. Data Integration: All of the above processes must be fully integrated with other businessestems, including ERP and financial planning and analysis (FP&A).

7. Reporting: Reporting should be automated and include financial, operational, and vendor performance metrics.

8. Reconciliation: All payment and revenue should be compared to actual expenses and revenue, and any errors reconciled.

9. Credit Memo: Returned items, price change adjustments, and other corrections must be processed and recorded.

The full cycle of an automated AP process is complex one, with the potential for significant savings and operational efficiency. For those looking to improve their existing AP process with automation software, it is important to thoughtfully consider each step outlined above and evaluate their own business needs. By understanding the nuances of the full AP cycle, decision makers can make more informed decisions and help ensure the successful integration of an automated AP system.