Accounting Automation Benefits and Best Practices (2024)

Is your business among the many companies struggling with manual accounting processes? Although applying automation to accounting tasks can lead to big business benefits, the data burden in that department makes automation seem daunting. Still, the benefits of accounting automation far outstrip the front-end work of implementing such a solution.

Understanding the challenges of AP helps companies automate the right processes, get the right workflows and policies in place, and ensure that they build efficiency into the purchasing process through streamlining and technology.

If you’re wondering where to begin the accounting automation process, this article covers the basics of accounts payable best practices for automation: what it is, how it works, and where to start your preparation for automation.

Download the free ebook: How Automation Can Solve Finance Teams’ Biggest Challenges

What is accounts payable accounting automation?

Accounts payable (AP) accounting automation uses software and technology such as robotic process automation (RPA) to manage and execute financial tasks. Many of these repetitive tasks traditionally require manual input and processing.

Using accounting automation software, the AP team can automate a wide array of activities, including and related to:

• Bookkeeping
• Procurement
• Invoice processing
• Payments
• Tax compliance
• Financial reporting

By streamlining routine accounting functions, businesses can reduce human error, increase efficiency, and free valuable time for strategic planning and decision-making. Accounting automation tools also often provide real-time financial data and insights, enabling better cash management and business decisions.

How does accounting automation work?

Accounting automation uses software to handle financial transactions and recordkeeping activities. It employs AI or algorithms to automatically process, categorize, and update financial data, eliminating manual entry. It also connects seamlessly with bank accounts and invoicing systems, providing accurate, up-to-date financial reports.

7 Benefits of AP accounting automation

Software helps teams overcome AP automation challenges to bypass obstacles and increase efficiency in administering accounts payable processing. Consider automation to gain these seven top benefits:

1. Reduced processing costs

By automating accounts payable processes, businesses can significantly decrease costs associated with manual invoice processing and other financial transactions. Cost reduction not only streamlines operations but also frees up financial resources for allocation to other growth and development areas.

2. Enhanced accuracy

Automation minimizes human error in data entry and spreadsheet calculations, ensuring more accurate financial records and reports. Increased accuracy strengthens compliance with financial regulations and reduces the risk of costly mistakes. It minimizes journal entries and corrections in the general ledger and improves data integrity between systems.

3. Improved efficiency

AP automation streamlines the entire accounts payable process, from invoice receipt to payment authorization, reducing time spent on these tasks. This efficiency boost accelerates the financial cycle and enables staff to focus on strategic endeavors instead of time-consuming manual processes.

4. Increased visibility

Real-time tracking of invoices and payments provides greater visibility into the company's financial obligations, improving cash flow management. Increased visibility allows for better decision-making since the accounting team can accurately forecast and manage budgets to ensure effective resource allocation.

5. Strengthened vendor relationships

Timely and accurate vendor payments facilitated by automation help maintain positive relationships and may qualify businesses for discounts or better terms. This builds a foundation of trust and reliability, leading to long-lasting partnerships that benefit both parties while enhancing operational efficiency and opening up new avenues for business growth.

6. Fraud prevention

Automated systems can include controls that reduce the risk of fraud by enforcing company policies and providing detailed audit trails. Visibility and accountability in automated systems also act as deterrents against fraudulent activities, ensuring that financial transactions are conducted with the highest level of integrity.

7. Scalability

As a business grows, AP automation software can expand to handle an increasing volume of transactions without the need for additional staff. A scalable solution ensures the company can continue to manage operations seamlessly, adapting to higher demands without compromising the speed or accuracy of the accounts payable processes.

Steps in the accounting automation process

Strong automation starts with a well-defined and documented process. When moving to automation for all or part of your accounting tasks, follow these steps to ensure a smooth and comprehensive transition:

Collect historical data: Gathering and centralizing historical financial data lays the groundwork for migrating it to an automated system. When compiling data, include past invoices, payment logs, tax documents, ebilling data, invoice tracking info, and other relevant financial records from various sources. This ensures the new system has a comprehensive foundation for accurate analysis and reporting.

Select the right software: Conduct due diligence when selecting the appropriate software for your needs. While many systems can accommodate basic business needs, asking certain specific questions will ensure you choose the right software for your company.

• Can users purchase supplies directly through the platform, and how do purchases tie into the approval process?
• How does the platform integrate with our existing financial systems and software?
• What specific accounting processes can we automate with this platform?
• Can the system scale to accommodate business growth and increasing transaction volumes?
• Which measures are in place to ensure data security and compliance with relevant regulations (e.g., GDPR, CCPA)?
• How user-friendly is the interface, particularly for team members with limited technical expertise?
• What level of customization is available to tailor the system to our company's unique needs?
• Are there any hidden fees or costs associated with implementing or using the platform?
• How reliable is customer support, including response times and resolution effectiveness?
• Can the provider offer case studies or references from other businesses similar to ours that have successfully implemented the platform?
• What training resources are available to ensure a smooth transition for our team?

Implement and integrate: Once you select the right software, execute an agreement and begin integrating the program into your company’s processes. A strong AP automation system will also communicate with other financial systems to ensure data flows seamlessly.

Migrate data: For existing businesses, migrate historical financial data into the new system. Look for ways to automate the migration process, such as connecting the platform to current programs, vendors, and data sources.

Set up automation rules: Establish rules within the software to automate tasks like invoice processing or payments. These rules dictate how and when the system should perform certain actions automatically.

Train the staff: Educate your team on how to use the new system and any changes to the existing processes. Adequate training ensures everyone understands how to leverage the automation tools effectively.

Monitor performance: Once automation is in place, monitor its performance for issues or inefficiencies. This ensures the program remains effective and secure.

With software, businesses can harness accounting automation's full potential. Companies that automate some or all of their AP process enjoy more efficient operations and better financial management.

Which AP accounting processes can be automated?

Automation can make every stage of the accounting process easier and more accurate. When looking for options to streamline procurement and payment, seek out a platform that can help you with these common accounting processes:

• Purchase approvals: A digital workflow system can route purchase requests to the appropriate department heads or managers for approval based on predefined criteria such as budget limits and expense categories. This ensures the business obtains approvals swiftly and reliably and also creates automated tracking records.

• Invoice processing: By processing invoice data using an automated accounting system, you can match invoices to purchase orders and approve payments without creating more manual tasks. This is a huge benefit to accounting, considering over 80 percent of AP departments still manually key invoices.

• Payment processing: Automated payments ensure that remittances for received goods happen automatically according to the net terms agreement. With a system like Order.co, finance teams and procurement professionals can use consolidated billing to pay all vendors with one click. Automation allows these teams to complete monthly tasks in less time as well as access financial statements and reports quickly, creating confidence in the numbers.

• Financial reporting: Software makes it easy to create ad hoc or scheduled financial reports, such as spend overviews for every category, vendor, department, or location. It can also handle reporting for multi-entity accounting.

• Accounts reconciliation: With auto-reconciliation, companies can compare internal financial records against bank statements or other financial data to identify discrepancies.

• Budgeting and forecasting: Using historical data, managers can project future revenues and expenses, helping organizations plan their financial strategy efficiently.

Types of accounting automation tools

The accounts payable software stack covers a lot of territory, helping finance teams manage every facet of budgetary control, taxation, compliance, and more. When selecting an automation tool, consider the other systems it could interface with, such as:

Enterprise resource planning (ERP): Comprehensive software solutions integrate all aspects of an organization's operations, including accounting, HR, procurement, and sales.

Cloud-based accounting software: Platforms such as QuickBooks Online, Sage Intacct, and Oracle NetSuite offer real-time financial data access and management tools over the Internet.

Invoice automation tools: Applications designed to streamline the invoicing process can automatically generate and send invoices, track payments, and integrate with accounting solutions. Examples include invoice automation software like Invoice2go and Zoho Invoice.

Expense management systems: Tools like Expensify and Concur automate expense report creation, submission, approval workflows, and reimbursement processes.

Financial reporting tools: Software like Tableau or Microsoft Power BI can extract data from multiple sources to generate comprehensive financial reports and dashboards for analytical review.

Procurement automation solutions: These systems automate the entire procurement process, from vendor selection to purchase order generation and payment processing.

Using procurement software to unify accounting automation

Choose a procurement and spend management solution like Order.co that integrates with your accounting operations tech stack to streamline operations and enhance accuracy. The platform unifies your procurement workflow, vendor management system, payment processes, and reporting tools with your primary accounting program to achieve seamless data flow. This helps accounting departments take advantage of better efficiency and also offers the following additional benefits:

• Minimization of manual data entry errors
• Real-time access to financial insights for informed decision-making
• Accelerated processing time for routine tasks to optimize working capital
• Freeing of valuable time for strategic financial planning and analysis

Integrating automation within the accounting framework not only boosts efficiency and accuracy but also provides a competitive edge through enhanced analytical capabilities and operational resilience.

Streamline accounting with Order.co

Automation for your accounting processes can make a big difference in your revenue, cash efficiency, and quality of life for your accounting department. Order.co makes it easy to automate every aspect of the accounting process, from invoice intake and ordering to payments and reporting.

Learn more in Order.co’s ebook: “How Automation Can Solve Finance Teams' Biggest Challenges.”