What is paperless accounts payable system?

Paperless accounts payable solution, including a paperless invoice approval system, is a modern approach that can help enterprises streamline their accounts payable (AP) processes and improve the efficiency of the paperless accounts payable process as part of a broader digital transformation. The accounts payable department often faces challenges such as lost invoices, fraud, and delays, which the paperless accounts payable workflow addresses by automating and tracking invoices efficiently. With hundreds of thousands to millions of invoices to be processed every year, enterprises often employ dozens of accounts payable executives to do this job.

However, even with partial automation in place, such as with OCR tools, a majority of the processing requires human intervention. With paperless invoicing, we refer to a transformational shift towards e-invoicing or electronic invoicing, with paper-based invoices gradually reduced in an enterprise. Traditional invoice processing is time-consuming, prone to errors, and requires significant manual labor. This not only increases costs but also leads to payment delays and a lack of visibility into the AP process.

IOFM’s article on the pain points in accounts payable in a good read for finance leaders to know on the different pain points and challenges faced by AP teams across organizations.

Why do OCR tools not help in making paperless accounts payable system?

Optical character recognition (OCR) is a legacy software tool used for the digitization of paper-based information assets, often requiring manual data entry to correct errors. OCR tools transform scanned documents or photos into editable and searchable text. However, OCR tools have their shortcomings, including:

1. Limited accuracy:

OCR tools have limitations in extracting data from invoices as they are not template agnostic. This can lead to errors in data entry and validation, ultimately impacting the accuracy of the data extraction in an AP process. The best OCR tools have a data accuracy of only 60%

2. Limited flexibility:

OCR technology is not flexible enough and we are often unable to extract data from different invoice layouts and formats. This can make it difficult to process invoices from a variety of vendors and suppliers, hindering the benefits of invoice automation.

3. Time-consuming approach:

OCR tools are error-prone and require manual intervention to correct extraction errors, leading to increased invoice processing time and costs, which can be mitigated by workflow automation.

4. Limited security:

OCR tools do not provide the same level of data security as paperless accounts payable software, which can include encryption and access controls to protect sensitive financial information.

How to make paperless accounts payable system?

To transition your accounts payable to a paperless system, start by selecting a paperless accounts payable processing or paperless accounts payable software that integrates with your existing financial software. A digital invoice can significantly reduce processing time, cost, and the need for physical storage space. A paperless invoice processing system can significantly reduce processing time, cost, and the need for physical storage space.

Ensure it offers features like electronic invoicing, automated workflows, and digital payment processing. This transition will streamline your accounts payable workflow from a paper-based process to a digital workflow. Train your team on the new system, focusing on how to handle electronic invoices and approvals. It is crucial to train the accounts payable team on the new system to ensure they understand how to use it effectively and can help reduce errors and improve efficiency.

To streamline the process, set up a central email address or portal for receiving electronic invoices. Communicate with your suppliers about your move to a paperless system and encourage them to send invoices electronically. Implement document management software that allows for easy storage, retrieval, and management of digital documents. A streamlined and efficient approval process is crucial, featuring real-time tracking of invoices, automatic reminders, and centralized approval dashboards.

A good platform can automatically code incoming invoices and route them for approval while giving you complete control. Create custom tolerances to pass invoices instantly through the system. This isn’t just a one-time process either. A good platform will allow a business to continuously adapt the setting to accommodate growth.

Use automation to route invoices for approval and payment, reducing manual intervention and speeding up the process. Establish clear policies for digital document retention and security to comply with legal requirements. Regularly review and optimize the processes to ensure they remain efficient and effective.

Lastly, monitor the performance of your paperless system through regular audits and feedback from users, making adjustments as necessary to improve functionality and ease of use.

What are the benefits of paperless accounts payable system?

1. Advanced data extraction:

Paperless accounts payable software uses advanced AI/ML models that drastically improve data accuracy and invoice data extraction accuracy with minimal training.

2. Greater flexibility:

Paperless accounts payable system can handle a wide variety of invoice formats and layouts using AI/ML capabilities, making vendor management easier.

3. Automated workflow:

The paperless accounts payable system can automate the entire invoice processing workflow, from data extraction to approval, through process automation, which reduces the need for manual intervention and increases overall accounts payable process efficiency. Automating the payment process can improve visibility and internal controls, ensuring accurate and timely payment to suppliers. Implementing a paperless invoice approval system not only automates the coding and approval workflow but also minimizes human errors and paperwork.

Converting to Paperless Accounts Payable Software AvidXchange’s paperless accounts payable software could allow invoices to be scanned into the system where accounts payable teams can receive, track, and approve them on one platform that may be intuitive to navigate. After the invoices are scanned, they will appear on the AvidXchange dashboard. From this one location, accounts payable teams could quickly move invoices to the next step needed for processing.

Read more on how paperless accounts payable process in CFO office can help large enterprises move up on the maturity curve here: paperless office to move your organization up the maturity curve

4. Advanced security:

Paperless accounts payable software has advanced security features such as encryption, access controls, and multi-factor authentication to help you protect sensitive financial information and meet compliance requirements.

5. Better collaboration:

Paperless accounts payable automation allows multiple user collaboration for approval based on the defined approval hierarchy.

The Biggest Challenges with traditional and manual accounts payable processes?

Handling invoices in different languages and multiple country-specific formats is a difficult proposition. Another important challenge that enterprises face when processing invoices is global invoicing, which involves handling invoices in different languages, including non-Roman scripts. This can be a significant challenge for companies that do business globally or with vendors and suppliers from different countries.

Furthermore, invoices from different vendors and different countries often have very different formats, which can make it difficult for companies to standardize invoice processing. This can lead to inefficiencies in the AP process and increase the risk of errors.

Paperless Invoice processing eliminates complex country-language barriers

To overcome these challenges, companies can turn to AI-led paperless accounts payable automation. This type of software uses AI/ML capabilities to extract data from invoices and ensures a higher level of accuracy, even when processing invoices in multiple languages. With automated accounting software, anyone in the AP department can initialize invoice processing. AP managers can even approve invoices remotely.

In addition, most paperless accounts payable system offers a template agnostic approach to invoice processing, aiding in invoice management. This helps them to handle a wide variety of invoice formats and layouts, making it easier for companies to process invoices from multiple vendors and suppliers, regardless of their location or the format of their invoices.

Traditional invoice processing has a negative environmental impact

In addition to the operational efficiencies and cost savings that paperless invoice processing can deliver, it has important sustainability benefits. The cost of handling, storing, retrieving and archiving paper-based invoices can be significant for enterprises.

One of the main ecological benefits of paperless accounts payable automation is that it helps reduce the use of paper and ink. This can have a significant impact on the environment, as the production of paper and ink consumes a large amount of energy and natural resources. Additionally, the transportation and storage of paper-based invoices can also lead to increased carbon emissions. By switching to paperless AP software, companies can significantly reduce their environmental footprint.

For more on how to plan and successfully transform your AP, read: Secret ingredients for a successful AP transformation

How to Implement a Paperless Accounts Payable process

Implementing paperless accounts payable at your organization involves assessing your current processes, addressing resistance from different departmental stakeholders, and reviewing possible AP automation solution as part of effective change management. A paperless invoice processing system can significantly reduce processing time, cost, and the need for physical storage space. It is crucial to select a paperless accounts payable software that fits your budget and integrates with existing accounting software.

Assess the Pain Points in your Current AP Process

Understanding where you are first can help you see what’s possible and where you want to go. Identify current pain points so that you can find solutions that will address them. The biggest pain points are manual processes, which are time-consuming and error prone. Your vendors may call wanting updates, and you may not be able to answer their questions.

Obtaining approvals or tracking down physical copies of documents may take too much time for your department. Burnout may result from repetitive tasks. Take a look at your entire AP process and make a list of these problems to identify opportunities for process improvement.

Review Automation Platforms

Once the problems in your current AP processes are identified, you need to hunt for AP platforms that solve all your problems. Most importantly, your AP platform should integrate with your ERP system to ensure seamless technology integration for a holistic AP transformation.

What to look for in a paperless accounts payable software ?

Below are some of the best practices to follow while selecting a paperless accounts payable software to ensure a positive user experience. But before you start looking at successful AP Automation strategies and advantages, it is crucial to set up an efficient paperless accounts payable workflow. The Institute of Finance and Management (IOFM) suggests financial leaders understand some nuances before you or your organization is in the process of proposing or implementing an automated solution. A paperless invoice processing software can save time, storage space, and money for the accounts payable department and the entire company.

Functionally at its Best:

The paperless accounts payable system should be able to handle a wide variety of invoice formats and layouts and should include advanced data extraction and validation capabilities. It should support multiple languages and scripts.

Easy Integration:

The product should be able to integrate with the company’s existing systems, such as accounting and ERP systems, to ensure system compatibility and a seamless accounts payable paperless workflow.

High Security:

It should include advanced security features, such as encryption, access controls, and multi-factor authentication to ensure data protection and safeguard sensitive financial information.

User-friendliness:

It should be easy to use for business users and should offer a compelling user interface (UI) offering a seamless paperless accounts payable system.

High Scalability:

The product should be a scalable solution that can handle the organization’s current and future needs and scale up as per the organization’s growth.

Support:

The product should be offered with comprehensive customer support and training to ensure that the organization’s staff can effectively use and maintain the system.

Read Our Whitepaper about: Best 6 attributes of a good AP software

To know more on what the top challenges are to keep in mind while designing a paperless AP system, read: Tackling AP automation challenges

True Accounts Payable maturity can be achieved by going beyond OCR and manual processes to a paperless office. A paperless strategy can lead to a whopping 82% cost reduction on invoice processing.

Zycus recommends a combination of electronic invoicing and an inclusive supplier enablement strategy that can help AP departments overcome the limitations of scanning and OCR technology and obtain the vision of paperless office. Get acquainted with the best-in-class strategies employed by mature accounts payable organizations towards charting a successful AP maturity story.

To know more on how to leap up the AP maturity curve, read: the paperless office

Conclusion

Choosing the right paperless invoice processing software product is an important decision and it’s essential to evaluate the various products based on several key criteria. AI-led AP automation can transform the AP function of an enterprise while delivering paperless invoicing.

To get started with Accounts Payable Automation, request a demo today! Our experts will guide you through the process and show you how Zycus can help streamline your accounts payable process.

FAQs: 

What are the types of paperless invoice? 

The 5 main types of paperless invoices are: 

1. Email invoices sent directly to customers 
2. PDF invoices in a digital format 
3. Online invoicing platforms for creation, management, and payment tracking 
4. Electronic Data Interchange (EDI) for business-to-business transactions 
5. Cloud-based solutions for remote access to invoicing information. 

What can be automated in accounts payable? 

There are 7 main processes that can be automated in Accounts payable. 

1. Invoice processing and matching to purchase orders and receipts 
2. Approval workflows for invoices 
3. Payment processing and scheduling 
4. Vendor statement reconciliation 
5. Electronic fund transfers and direct debit payments 
6. Sales and use tax calculation 
7. Audit and compliance reporting. 

Related Read:

1. What is Invoice Approval Workflow?
2. Setting Up Internal Controls in Accounts Payable Processes
3. Top 5 Proven Accounts Payable Best Practices in 2023
4. 5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool
5. How to get started with Automated AP Process?
6. Leveraging AP Automation to Stay Ahead in a Competitive Market
7. Top Benefits of AI & Intelligent Payment Automation in Accounts Payable