When a business is in its early stages, an off-the-shelf solution for tasks like bookkeeping, taking orders or customer relationship management is often good enough.
But when that business starts to grow, the one-size-fits-all approach that worked early on can suddenly become an impediment, limiting a company’s flexibility when it needs it the most.
One area where such a scenario often plays out is with accounts payable. Successful companies find out soon enough that their AP processes need to evolve and become more efficient as their business grows.
Having AP staff filling out checks by hand or relying on cookie-cutter accounting software like QuickBooks inevitably becomes painfully inefficient as purchase orders, vendor invoices and related paperwork increase exponentially.
It's at this stage when AP managers often turn to automation software. The broad benefits of automation are clear: The AP workflow is significantly faster, ensuring vendor invoice verification and payments are processed quickly and accurately.
But how do you know you're using the best AP automation solution for your business’s long-term needs? There’s much to consider when zeroing in on the best AP automation software for your organization.
In this article, you’ll get a detailed overview of AP automation so that you can:
- Explore the ways AP workflow automation can boost efficiency, improve cash flow and future-proof your payment processing
- Understand the key differences between point and platform-based AP software
- Assess whether point or platform-based AP automation solutions are the best fit for your business
Digital Transformation is Accelerating
When companies suddenly couldn’t return to the office in 2020, a lot of AP teams were left scratching their heads about how to access those paper checks and invoices they needed to process payments. Many automated their accounts payable out of necessity, and the trend shows no sign of slowing.
Even now that we’re past the worst of the pandemic, automating AP has never been more important. From freeing up your team to tackle mission-critical tasks to improving cash flow visibility, here’s why it pays to automate AP–no matter if you’re facing uncertain economic times, or business is humming along.
1. Maximized Efficiency
Juniper Research projects that the average business will be making over 1,400 payments per year by 2027, so improving efficiency in payments processes is critical.
An automated AP workflow moves a business away from processing invoices and payments manually, a slow and often error-laden approach that can lead to payment delays.
An automated payment processing provider can minimize the occurrence of errors that lead to exception items on ACH transfers and other types of transactions by reducing human error and quickly identifying and correcting any issues.
This means faster transaction speeds, more accurate remittance processing and more time for your AP staff to focus on higher-value tasks.
2. Improved Cash Flow Management
Few things have as wide-reaching impact on a business as accurate, timely cash flow management. By speeding up invoice processing and payments, AP automation software gives businesses a real-time view of their cash flow, which optimizes expense management.
3. Payment Flexibility
Automated AP workflows will also go a long way toward ensuring your business remains a high priority client for your vendors.
Slow vendor invoice handling and limited payment options can sour a client-vendor relationship. This can be an unintended consequence of success, for example, if a company’s payables increase sharply and it hasn’t upgraded its AP processing to manage the heightened demand on its system.
A survey by PYMNTS.com last year found that most businesses processing at least 2,500 payables a month said automating was essential to their growth.
Automation can simplify your AP workflow so that you’re using the optimal payment type for each vendor without having to collect and update their payment information manually.
Point vs Platform
Despite some similarities, AP automation software generally falls into two types: point-based (a partial solution) and platform-based (and end-to-end solution).
Simply put, point-based software is good for handling a specific set of tasks, while platform-based solutions are designed to be holistic, performing a multitude of processes while integrating fully into a company’s existing systems.
Here are some key differences between the two approaches:
The Single-Use Solution
Point-based business software is most useful in addressing a single need for a company. In the case of an AP automation solution, it would be an effective tool for handling the payables workflow.
Such solutions are often less expensive than platform-based ones and can be put in place and ready to go in significantly less time–in just a few weeks versus months.
On the downside, point-based solutions are not easily capable of scaling as a business grows. Because they specialize on a single application, they can’t be integrated into software running a business’ other key areas, such as human resources, accounts receivable and legal, among others.
The Holistic Approach
Platform-based software are by design tailored to meet a business’ different needs because they are built to be integrated with any number of other systems and access multiple databases.
This makes such an approach inherently scalable, which makes it possible for a company to operate the entire business within a single software platform.
A key benefit of this is that new hires can be brought up to speed faster because they only need to learn one system, not a hodgepodge of different software with various logins and interfaces.
All that functionality, adaptability and ease of scaling means platform-based solutions will cost more, at least initially, than single-purpose point-based software. And they can take much longer to implement.
Making The Choice
One-size doesn’t fit all, and that applies to the point versus platform question. Determining which type of AP automation solution is best for your business depends on several factors. Here are three of the major ones to consider:
1. Size Matters
Smaller companies ready to graduate from mostly paper-based payables processing may find point-based AP workflow automation software a less costly out-of-the-box option to make the transition to a more optimized way of handling their payables.
They’ll have to reconsider once their payables volume grows significantly, however, because a single-solution approach can make a company less efficient as it grows.
2. Managing Complexity
The configurability of a platform-based solution is essential for companies that have complex AP workflows, which is especially common within the B2B sector.
A point-based AP automation solution just can’t keep up with the various demands that a complex workflow brings, like being able to quickly manage invoice approvals on the fly, or assigning customized rules to payments.
This is a big reason why medium-to-large companies currently using a point-based approach should consider shifting to a platform-based solution.
3. Are You Ready To Scale?
Point-based AP solutions work well when businesses are starting to level up, adding customers and increasing their need for suppliers. And, yes, it’s more affordable at the outset than a platform-based approach.
But forward-looking businesses should consider the value that creating a single-software foundation can have for their company in years to come.
Processing payments may be your biggest challenge right now, but going with a platform-based AP automation solution early on will set a foundation for your company’s growth in the years ahead.
What To Look for in a Platform-Based AP Solution
DocuPhase's hosted and integrated AP solution is ideal for companies in need of a highly configurable and customizable platform that can support high volumes of complex electronic payments.
Unlike other platform-based payment software providers, DocuPhase integrates seamlessly into an existing ERP, eliminating the need for users to enter information multiple times.
Its strength is that it functions within an open API environment, which enables users to create a tailor-made solution that can handle complex business processes while also accommodating even the most nuanced workflow requirements.
This capability allows DocuPhase's platform to quickly process multiple data fields or tables at once, and then layer in calculations or other company-specific rules.
Regardless of your AP processing configuration needs, DocuPhase can figure out a way to incorporate them and build around it.
Ready to upgrade to a platform-based AP automation solution? Request a demo today.