Accounts payable automation examples

Because traditional accounts payable (AP) workflows require extensive manual work, they’re often time-consuming and prone to error. AP automation software digitizes the function, streamlining processes and increasing accuracy.

Let’s explore how these solutions work and how to choose one. We’ll also cover some accounts payable automation examples in depth to show how they can benefit your business.

What is accounts payable automation?

Accounts payable automation is the use of digital technology to streamline incoming invoice management. This typically includes processes like invoice capturing, verification, approval routing, and final payment issuance.

Letting software handle these repetitive tasks improves efficiency and accuracy. It also frees your finance team to focus on more valuable work.

Manual vs. automated accounts payable

Manual accounts payable processes require significant human input. For example, after receiving supplier invoices via email, your team might have to copy each one’s details into spreadsheets or accounting software by hand.

This can be manageable in the early days of your business, but it’s too slow to be scalable as volume increases. It also leaves you vulnerable to human errors, such as misentered data, lost invoices, duplicate payments, and delayed approvals.

These types of mistakes have a direct cost in time and company resources. They can also damage your relationships with vendors if they become recurring issues.

Accounts payable automation helps you avoid these problems by minimizing manual work. For example, it can capture invoices through a digital interface, extract their details automatically, and route them for approval according to predefined rules.

After approval, you can also schedule final settlement within the software, creating a seamless invoice-to-payment process that works with minimal human input.

By reducing processing time and preventing manual data entry errors, AP automation can significantly lower costs. The software often also improves visibility into payables, which can help inform decisions related to cash flow management.

Accounts payable automation examples

1. Invoice capture

Invoice capture is the first step in the accounts payable process. It refers to the part where your business receives the initial invoice from the vendor.

Under manual processes, teams often have to collect invoices from multiple channels, like email, mail, and the occasional hand delivery. However, this approach makes it all too easy to lose paper invoices or miss important due dates.

In contrast, accounts payable automation consolidates all submissions into a single intake channel. Typically, vendors have the option to upload invoices through a portal or send them to a designated email address that forwards their details on to the system.

This significantly reduces the time your team has to spend tracking down documents. It also helps ensure every invoice is properly accounted for, minimizing costly mistakes like late or missed payments.

2. Data extraction

Invoice data extraction comes directly after capture. It involves transferring key details from each invoice into your accounts payable and accounting systems. For example, that usually includes the vendor, invoice number, payment terms, and amount due.

When managed manually, this requires your team to review each invoice line by line and copy the information over by hand. It’s one of the most time-consuming parts in the accounts payable process—and one of the most prone to human error. 

A single typo can cause costly delays once it’s discovered during reconciliation or approval.

AP automation tools manage these kinds of repetitive tasks much more efficiently. They use technologies like optical character recognition (OCR) and machine learning to parse through invoices and extract the relevant data automatically. 

This can save your team hours of tedious data entry every week and all but eliminates the risk of inaccuracies.

3. Invoice verification

Invoice verification refers to the stage in the accounts payable process where your AP department checks each incoming invoice against supporting documents. For example, that often includes the purchase order and delivery receipt.

This helps ensure that the details of each invoice are correct, such as order quantities and total pricing. Just as importantly, it helps ensure that you only pay for goods and services you actually ordered and received.

Under a manual system, the verification process requires your team to painstakingly compare records by hand, often across different systems or email chains. 

Once again, it’s all too easy for data entry errors or misplaced documents to gum up the works, slowing down an already laborious process.

Modern accounts payable software can significantly streamline things. With three-way matching, it can cross-reference invoice details with purchase orders and receipts automatically. Your team only needs to step in when the system flags conflicts.

4. Approval routing

Once you’ve verified an invoice’s initial legitimacy, it enters a more extensive approval process. This is where a series of stakeholders review it before final payment, mainly to make sure it aligns with departmental spending limits and protects the overall budget.

Without dedicated software, teams usually pass invoices through the approval workflow using long email chains. This is inefficient, especially since emails can easily get buried in busy inboxes and cause the process to stall out for days at a time.

When you automate accounts payable, your team doesn’t have to forward invoices by hand. Instead, the software can automatically route each one to the right individuals based on predefined authorization workflows.

Automated reminders and dashboards with real-time visibility into invoice statuses help keep things moving. In addition, many tools make it easier for approvers to sign off, letting them review invoices from mobile devices and approve with a few clicks.

5. Payment scheduling and processing

Payment processing is the final stage in the main AP workflow. Once an invoice has been captured, verified, and approved, it’s when your team schedules and completes the actual transfer of funds.

Traditionally, this involves tracking due dates in spreadsheets or calendars. Someone must review them regularly to determine when invoices are coming due and manage scheduling to optimize cash flows.

When it’s time to send the funds, someone also has to initiate each transaction by hand. That typically means logging into a bank portal to set up ACH transfers or writing and mailing physical checks.

Accounts payable software eliminates this manual work, automatically scheduling approved invoices for payment based on your preferences. 

Your preferences might be paying sooner to capture early payment discounts or paying on the due date to preserve cash flow without late fees. Once set up, it can also execute payments without further input.

6. Tracking and auditing

There’s more to managing accounts payable than the primary invoice-to-payment workflow. Your team must also keep an accurate and organized record of all bills received, even after final invoice processing.

This is essential for accounting and compliance purposes. 

For example, your team may need to confirm expense details when performing account reconciliations, preparing financial statements, or filing tax returns. In the case of an audit, these records also help verify the legitimacy of your deductions.

When you manage your invoice records manually, locating a specific document can mean digging through spreadsheets, email threads, or physical folders. It’s highly time-consuming and often less than reliable.

But with an AP automation system, you get a centralized database that simplifies tracking. Your team can filter through invoices by vendor, date, or amount, making it easy to find individual records and drill into transaction details when needed.

7. Vendor relationship management

Managing vendor relationships is another important part of accounts payable automation best practices. 

This involves keeping details like vendor contact information, transaction histories, and payment preferences organized. It often also includes sending proactive communications to improve transparency, such as payment confirmations.

Without accounts payable software, this can be tough to manage efficiently. Updating vendor information stored across spreadsheets or shared drives is labor-intensive, and communicating back and forth with each merchant requires significant manual work.

Once again, modern accounts payable platforms can simplify the process. In addition to gathering all vendor information in one place, they often have built-in communication tools that can automatically send out pre-arranged status updates.

8. Tax compliance

Accounts payable software can do more for tax compliance than store supporting documents for accounting and audit purposes. Notably, many systems can automatically collect or issue tax forms as needed.

For example, accounts payable software can often identify potential 1099 recipients automatically using transaction and vendor data. It can also streamline W-9 collection and Taxpayer Identification Number (TIN) validation during vendor onboarding.

When done manually, these processes can be much more time-consuming. 

For example, determining who to send 1099-NEC forms to means reviewing vendor payments from the past year, identifying anyone who paid $600 or more for services, and confirming their business entity type—since corporations generally don’t receive 1099s.

How to choose the right AP automation software

Which AP automation solution is right for your business depends on several factors. Take these steps before committing to help ensure you choose one that suits your needs:

• Map your current processes: Identify which stages of your accounts payable workflow take the most time or cause the most errors. Use this information to determine which automation features your new system has to include.
• Consider necessary integrations: Make sure the software connects smoothly with the related parts of your tech stack. For example, that might include your AI bookkeeping platform or ERP system.
• Read through customer reviews: Paying attention to feedback on ease of use, reliability, and customer support can help you identify potential red flags. Just remember to take individual reviews with a grain of salt.
• Take advantage of free demos: A hands-on trial is the best way to assess the user experience for yourself. Consider involving members of your accounts payable team to make sure it’s intuitive for the actual end users.

Pricing should also be an important consideration, but don’t let it be the only deciding factor. Choosing a lower-cost tool that lacks important functionality will only result in inefficiencies that cost you more down the line.

Why choose Zeni to streamline your AP process

Zeni offers accounts payable automation software that automatically captures incoming bills, routes them through approval workflows, and schedules timely payments via ACH with no processing costs.

Our AI Bill Agent takes the software’s capabilities even further. For example, it can create journal entries, troubleshoot issues, and simplify system interactions. Instead of clicking through menus, just ask it questions or give it commands in natural language.

Zeni also provides much more than accounts payable automation. In addition to virtual bookkeeping services, our comprehensive financial management platform offers payroll, tax preparation, and fractional CFO services—all enhanced by artificial intelligence.

By subscribing to any of these, you'll also unlock our full suite of financial tools. 

This includes accounts payable automation, which comprises of employee reimbursement software, business checking accounts, and business credit and debit cards.

Because all of our products and services integrate seamlessly, you won’t have to worry about juggling disconnected solutions. Schedule a demo today to see firsthand how Zeni can streamline your AP operations and improve financial efficiency.