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Amid high inflation rates, businesses are shifting focus away from traditional bookkeeping practices in favor of finding ways to automate necessary accounting practices like accounts payable. Accounts payable records all debts owed by the company to another party. To complete a single invoice, your financial team has to spend a lengthy amount of time on a multi-step process that can take days to finish.
Instead of shelling out upwards of $70K plus benefits for a single accountant, startup founders and small business owners have been stepping into the future of bookkeeping automation.
Saving money is just one reason for automating accounts payable.
Today, we will discuss this and the additional benefits of automating accounts payable and how you can start automating your system without breaking the bank.
Accounts Payable, or AP, is an accounting term used to describe the money a company owes for goods or services. A bookkeeper records short-term debts to ensure all debts are accounted for and paid on time. Long-term obligations, such as payroll, are not included in AP.
For every amount owed, there is a specific timeline by which the company expects payment. All contracts differ depending on the company or party and the industry. Some vendors offer early payment discounts, significantly reducing a company’s cash-out total.
Examples of accounts payable are:
There are various subclasses different debts owed can fall into, such as operating expenses and fixed vs variable expenses.
Automation is the process of minimizing human input with the use of technology. Automation isn’t meant to remove people from specific jobs altogether. Its creation is an aid to workers with simple tasks that eat up a lot of time and lower error percentages in the process.
Dealing with finances on top of running a business can burn you out faster than you think. Software solutions take the mundane tasks off your shoulders allowing you to focus on what matters., but there are other benefits to automating the accounts payable process.
Your talents are needed in other sectors of your business. Handling the nitty-gritty financial obligations of a bookkeeper takes up a ton of time that could be dedicated elsewhere.
On average, single-invoice processing takes up to 25 days to go through the entire workflow. Processing time fluctuates depending on the size of the company and how efficient the process is—tasks done manually, such as data entry, extend the timeline.
The typical workflow of an accounts payable invoice from start to finish looks like this:
1. Verification and Review: Your bookkeeper, finance team, or employee handling this process will validate the invoice (paper receipts or digital) received by checking vendor ID, totals, dates issued, and itemized purchases. It is best practice to compare all invoices to purchase orders to ensure no discrepancies.
2. Approval: Before payment, purchases should be approved by whoever is responsible for company AP. Price, use, and quantity are verified and sent to the next step.
3. Entry: The total expense is recorded in the general ledger and filed for tax purposes and company records.
4. Payments: Payment is sent to the party owed. The payment is matched to the proper account owed, and then the invoice is closed.
This isn’t a laundry list of steps, but they are tedious and time-consuming. If you don’t have a background in finance, it can get complex quickly. With automation, you won’t have to worry about completing all these tasks in tandem with your other responsibilities. Set up your desired automation process and let the computer do the rest.
When you automate your accounts payable, you can better track your bills and expenses—no need to worry about paper invoices or manually entering numbers on a physical ledger. Most software does the legwork for you and organizes all AP information into categories once it learns from your initial inputs.
Automating bill pay saves your company money on late fees from vendors or banks. You can create a payment schedule to ensure all invoices are paid at or before the due date. Instead of waiting on your bookkeeper to update you on the status of your invoice, you can track it through each stage.
Automation software is also cheaper than paying an in-house accountant, and hiring an entire financial team can run up to $500K per year or more.
Consistent on-time payments to your company make you more willing to cater to that customer, right? Vendors apply this same logic to companies that buy goods and services. Vendors typically offer discounts to loyal customers when your payments are on time.
All the reasons we suggest tracking AP come down to three words: cash is king.
Companies on the first leg of their journey need to be careful with their cash flow. Cash flow forecasting gives you a glimpse into the future, but if your AP is full of errors or incorrect payment dates, you can miss the mark entirely.
Automating accounts payable processes is a big project, especially for a company with a limited or small team. Finances are tight to keep your company’s runway extensive until production starts.
We know the struggle. Startups are who we had in mind when we created our smart-powered bookkeeping software solution. Streamlining accounting processes saves time and lowers the percentage of errors, but we didn’t stop there. All your financial information is available at your fingertips day and night. Check balances, confirm payments, and more whenever you need, wherever you are.
Every transaction on your accounts payable with Zeni is broken down by company with the following information:
We added a spend-trend bar graph at the bottom of each invoice to track recurring spending for the specific vendor. It’s a great tool if you’re trying to decipher where you can trim the fat in company spending to help recession-proof your business.
What more could you ask for? Book a demo below to view our dashboard live.