The digitize accounts payable have become necessary for all growing businesses as it enhances efficiency, cost savings, and transparency. Let’s explore the top reasons for organizations to embrace digitization in accounts payable  

What Is Digital Accounts Payable?

Digital accounts payable (AP) is the process of managing and automating an organization’s invoice and payment workflow using technology. Unlike traditional paper-based methods, digital AP leverages advanced software solutions to streamline the entire process from invoice receipt to payment approval. This transformation involves capturing invoices electronically, automating data entry, matching invoices with purchase orders, and processing payments through secure electronic methods.

By digitizing AP, businesses can significantly reduce manual errors, enhance efficiency, and gain real-time visibility into their financial operations. Additionally, digital AP solutions offer robust reporting and analytics capabilities, allowing organizations to make informed financial decisions, improve cash flow management, and ensure compliance with regulatory standards. Overall, digital accounts payable is a strategic approach that not only optimizes operational efficiency but also supports better vendor relationships and scalability as businesses grow.

How Do You Digitize Accounts Payable?

Digitizing accounts payable (AP) involves transforming traditional, manual processes into automated, efficient workflows using modern technology. This process not only enhances accuracy and speed but also provides greater visibility and control over financial operations. By adopting digital solutions, organizations can streamline invoice processing, improve cash flow management, and reduce operational costs. Here are key steps to successfully digitize your accounts payable:

• Automate Invoice Capture: Implement software to capture invoices electronically, reducing manual data entry and minimizing errors.
• Electronic Invoicing: Encourage suppliers to send electronic invoices, ensuring faster processing and reducing paper use.
• Implement OCR Technology: Use Optical Character Recognition (OCR) to automatically extract data from scanned invoices, enhancing accuracy.
• Automate Approval Workflows: Set up automated workflows to route invoices to the appropriate approvers, speeding up the approval process.
• Integrate with ERP Systems: Connect your AP software with your Enterprise Resource Planning (ERP) system for seamless data transfer and better financial management.
• Use e-Payments: Switch to electronic payment methods like ACH transfers or virtual credit cards to expedite payments and improve security.
• Leverage Cloud Solutions: Utilize cloud-based AP solutions for real-time access, scalability, and reduced IT overhead.
• Enhance Reporting and Analytics: Implement advanced reporting and analytics tools to gain insights into spending patterns and improve decision-making.
• Ensure Compliance: Use digital solutions to maintain accurate records and ensure compliance with regulatory standards.

Download the Whitepaper: 6 Ways to Cut Costs and Improve Cashflows

Why is it Important to switch to Digital Accounts Payable?

1. Eliminate Manual errors 

When your AP processes are still manual, the chances of error happening increase manifold. Your team is loaded with invoices, and missing a few steps is normal. Typically, in a manual process, the chances of the invoice getting lost, duplicate payments, or fraud happening increase when the volume of invoices increases.

The entire process becomes time-consuming and results in delayed payments. Data verification becomes difficult. This is where AI-led digitized Accounts payable processes help. The AI/ML capability of the software speeds up the invoice-matching process and identifies frauds and duplicate payments. It also reduces the time to process an invoice by more than 50%. 

Read more: Top 5 Proven Accounts Payable Best Practices

2. Be more environment-friendly

Global deforestation is a massive problem facing the entire ecosystem, and paper invoices and checks add to the woes. As per Ardent partners report, 

• One tree = 8,500 pieces of paper
• 1 million invoices = 118 trees
• 1 million invoices = 36 tons of carbon dioxide (CO2) footprint
• 1 billion invoices = 118,000 trees 

Paper invoices produce three times more CO2 than e-invoices, making e-invoices a preferred choice for sustainability. 

Digitizing accounts payable reduces the need for paper invoices, checks, and other physical documents and helps make it easier to manage and track financial operations. It also reduces the chances of misplaced documents. 

3. Improved Visibility

Digitizing the AP process provides more visibility into finance and operations across roles and businesses. AP automation solutions provide real-time updates and notifications regarding invoices, payments made, and exceptions, which gives you better control and makes informed decisions. The chances of discrepancy and fraud also reduced significantly. The real-time dashboards provide insights into the invoice status, DPO, and discount offers across departments and roles. 

AP processes have a significant role in strengthening supplier relationships. Digital accounts payable enables information about all invoices and payments in one system, and the bot can reply to all the supplier queries, including the status of the payment dues. Suppliers must run pillar-to-post in manual processes to get answers to their queries.

Digital accounts payable reduce the risk of late payments and disputes. Not only that, but accounts payable ensure fewer or no errors and faster payments. This enables the enterprise to foster good supplier relations, enabling better vendor management. 

Enterprises operating in multiple geographies must adhere to varied tax and e-invoicing compliance regulations. AP automation solution helps ensure adherence to these invoicing rules. It provides a clear audit trail for better governance and global compliance, thereby reducing the risk of penalties. 

Manual invoice processing takes more time to capture details and process payments. You require more FTEs (Full Time Employed) for a higher volume of invoices. The cost of processing per invoice is between $12-$15/invoice. With digitization, you can free up your employees’ time and move them from tactical to more strategic work.

Through Digital AP automation, you can reduce the processing time by 50% and the processing cost by nearly 65%. Digital AP automation takes care of the increased volume of invoices. The usage of electronic payments like virtual cards also helps in reducing in-efficiencies and delayed payments. 

4. Capture more discounts

Suppliers typically offer discounts if their invoices are paid on time. However, with manual AP processes, enterprises can never take advantage of this and save costs. However, with digital accounts payable, this becomes a reality with the dynamic discounting software feature. Dynamic discounting is a financial agreement where the buyers can pay the invoices before the agreed date in exchange for a discount.

This helps the enterprises have efficient cash flow management, effective vendor management, and reduced expenses and helps the vendors in effective working capital management.  

5. Enhanced Security and Compliance

Digital AP solutions offer robust security features like encryption and secure access controls, protecting sensitive financial data from fraud and cyber threats. Additionally, these solutions help ensure compliance with regulatory requirements by maintaining accurate records and providing audit trails, reducing the risk of non-compliance penalties.

6. Scalability and Flexibility

Digital accounts payable systems are scalable and can grow with your business. They provide the flexibility to adapt to changing business needs and can handle increasing volumes of invoices without compromising efficiency. This scalability is crucial for businesses experiencing growth or seasonal fluctuations in transaction volumes.

7. Improved Cash Management

Digitizing accounts payable helps in better cash management through timely payments and optimized cash flow. By leveraging early payment discounts and avoiding late payment penalties, businesses can maintain a healthier cash flow and reinvest savings into strategic initiatives.

Download our whitepaper- 6 Attributes of a Best-in-Class Accounts Payable Operation

Getting started with Digital Accounts Payable automation- How can Zycus AP automation help?

The Zycus Accounts Payable Automation Software targets holistic AP transformation by leveraging the AI/ML capabilities of the Zycus Merlin AI platform.  

Key features and benefits associated with Zycus AI-led AP Automation Solution include: 

Time and cost savings:

Zycus has a template agnostic approach to invoice extraction and has an accuracy of 95% up to line items. Using Zycus, you can reduce your invoice processing time by 50% and the invoice processing cost by up to 65%. It helps to deliver a higher rate of straight-through processing (STP). 

Better supplier communications:

Automated email review and reply via AP Smart Desk that frees up your AP team time strengthens supplier communication, and improves vendor relationships. There are no more missed emails, and suppliers get answers to all their queries on time. By using an AP smart desk, one can save up to $2.7/email.  

Anomaly and fraud detection:

Identification of potential fraud cases (duplicate invoice, phantom supplier, etc.) plus safeguards against phishing and spoofing .

Global compliance:

Zycus e-invoicing software helps you comply with all global e-invoicing compliance, tax regulations, and content compliance in association with a third-party tax engine. With Zycus, it becomes easier to operate in multi nations and be compliant, Request a demo today!

FAQs

1. What is digital accounts payable?

Digital accounts payable is the process of automating the invoice and payment workflow using technology. It involves capturing invoices electronically, automating data entry, matching invoices with purchase orders, and processing payments through secure electronic methods. This approach enhances efficiency, accuracy, and visibility in financial operations.

2. Why should businesses digitize accounts payable?

Businesses should digitize accounts payable to improve efficiency, reduce errors, enhance visibility and control, achieve cost savings, strengthen vendor relationships, ensure compliance, and improve cash management. Digitization also provides scalability and real-time analytics, enabling better decision-making and strategic planning.

3. What are the key benefits of digitizing accounts payable?

The key benefits include improved efficiency and productivity, enhanced accuracy, better visibility and control, cost savings, strengthened vendor relationships, enhanced security and compliance, scalability, improved cash management, real-time reporting and analytics, and enhanced collaboration.

4. How does digital accounts payable improve efficiency and productivity?

Digital accounts payable automates manual tasks such as data entry and invoice processing, reducing the time and effort required to manage these tasks. Automation speeds up the approval process, reduces delays, and allows staff to focus on more strategic activities.

5. How can digitizing accounts payable enhance accuracy and reduce errors?

Automation reduces the risk of human errors associated with manual data entry and processing. Technologies like OCR (Optical Character Recognition) extract data accurately from invoices, ensuring that the information is consistent and correct.

6. What impact does digital accounts payable have on vendor relationships?

Digitizing accounts payable leads to faster and more accurate payments, which enhances vendor trust and relationships. Timely payments help businesses take advantage of early payment discounts and avoid late payment penalties, fostering better collaboration with suppliers.

7. How does digital accounts payable ensure compliance and security?

Digital AP solutions offer robust security features such as encryption and secure access controls to protect sensitive financial data. They also help maintain accurate records and provide audit trails, ensuring compliance with regulatory requirements and reducing the risk of non-compliance penalties.

8. What are the cost-saving opportunities with digital accounts payable?

Digital accounts payable reduces paper usage, lowers processing costs, and minimizes manual labor. Businesses can also avoid late payment penalties and leverage early payment discounts, leading to significant cost savings.

9. How can digital accounts payable improve cash management?

By digitizing accounts payable, businesses can better manage their cash flow through timely payments and optimized cash flow. Leveraging early payment discounts and avoiding late payment penalties contributes to a healthier financial position.

10. What role does real-time reporting and analytics play in digital accounts payable?

Real-time reporting and analytics provide businesses with actionable insights into their financial operations. Organizations can track key performance indicators, identify bottlenecks, and make data-driven decisions to improve financial performance and maintain a competitive edge.

Related Read:

1. AI-led AP Automation for Anomaly and Fraud Detection
2. AP Workflow Automation: From Tedious Tasks to Automation-led Time and Cost Savings
3. Paperless Accounts Payable Best Practices
4. Webinar – Driving AP Transformation and Cost efficiency with AI-led Automation- EMEA webinar
5. White Paper – 4 Pillars to Accounts Payable Automation
6. Whitepaper- E-invoicing Maturity Model for Accounts Payable Process Improvement
7. Solution- Accounts Payable Automation for Touchless Invoice Processing
8. Solution- Streamline Your AP process with Paperless Accounts Payable Software
9. Solution- Accounts Payable Automation Software
10. Solution- Accounts Payable Automation Software for AP Leaders