Accounts payable automation

AP Automation

Accounts payable automation or AP automation is a term used to describe the ongoing effort of many companies to streamline the business process of their accounts payable departments. The accounts payable department's main responsibility is to process and review transactions between the company and its suppliers. In other words, it is the accounts payable department's job to make sure all outstanding invoices from their suppliers are approved, processed, and paid. Processing an invoice includes recording important data from the invoice and inputting it into the company’s financial, or bookkeeping, system. After this is accomplished, the invoices must go through the company’s respective business process in order to be paid.[1]

This process is straightforward but can become very cumbersome, especially if the company has a very large number of invoices. This problem is compounded when invoices that require processing are on paper. This can lead to lost invoices, human error during data entry, and invoice duplicates. These and other problems lead to a high cost per invoice metric. The goal of automating the accounts payable department is to streamline this invoicing process, eliminate potential human error, and lower the cost per invoice[2]

Some of the most common AP automation solutions include E-invoicing, scanning and workflow, online tracking, reporting capabilities, electronic invoice user interfaces, supplier networks, payment services and spend analytics for all invoices.[3]

Electronic Invoicing can be a very useful tool for the AP department. Electronic invoicing allows vendors to submit invoices over the internet and have those invoices automatically routed and processed. Because invoice arrival and presentation is almost immediate invoices are paid sooner; therefore, the amount of time and money it takes to process these invoices is greatly reduced. (financial Operations networks, 2008) These solutions usually involve a third party company that provides and supports an application which allows a supplier to submit an electronic invoice to their customer for immediate routing, approval, and payment. These applications are tied to databases which archive transaction information between trading partners. (US Bank, Scott Hesse, 2010) The invoices may be submitted in a number of ways, including EDI, CSV, or XML uploads. PDF files, or online invoice templates. Because E-invoicing includes so many different technologies and entry options, it is used as an umbrella term to describe any method by which an invoice is electronically presented to a customer for payment.[4]

History

Since the mid 1960s companies have begun to establish data links between their trading partners to transfer documents, such as invoices and purchase orders. Inspired by the idea of a paperless office and more reliable transfer of data, they developed the first EDI systems. These systems were unique to the respective company that developed them, meaning they were difficult to deploy across a large number of corporations. Recognizing this, the Accredited Standards Committee X12—a standards institution under the umbrella of ANSI—made preparations to standardize EDI processes. This resulted in what is known today as the ANSI X12 EDI standard.[5]

This remained the main way to exchange transactional data between trading partners for nearly 3 decades. The 1990s came with advances in internet technology. Companies began to appear offering more robust user interface web applications with functions that catered to both supplier and customer. These new web based applications allowed for online submission of individual invoices as well as EDI file uploads. Along with other methods of file uploads including CSV and XML. These services allow suppliers to present invoices to their customers for matching and approval via a user friendly web application. Suppliers can also see a history of all the invoices they submitted to their customer without having direct access to the customers systems. This is because all the transactional information is stored in the data centers of the third party company that provides the invoicing web app. This proprietary information can be regulated by the customer in order to control how much transactional information the vendor is allowed to see. (For example payment dates, or check information).[6]

One organization that helped pioneer the use of electronic invoicing as part of a web-based AP Automation software package, iPayables was founded in 1999 by Kenneth Virgin, Bobby Kolba, Jonathan Titel and Robert Ripley. Their model allows customers and suppliers to exchange transactional documents including invoices, purchase orders, remittance notes, EDI files and more using a web based application known as InvoiceWorks®. They are unique in the industry in-that they offer a dynamic discounting feature, offer free vendor adoption and no supplier fees. Other similar organizations that also offer electronic Invoicing solutions include MediusFlow, Basware, Ariba, Zycus Invocus, Transcepta, and Esker.[7] [8]

As companies advance into the digital era, more and more are switching to electronic invoicing services to automate their accounts payable departments. Some even believe it to be an industry standard in the near future. According to a report done by the GXS team in 2013, Europe is adopting government legislation encouraging businesses to adopt electronic invoicing practices. The United States has no such legislation yet, but does recognize the value of this technology. The US treasury estimated that implementing e-invoicing across the entire federal government would reduce cost by 50% and save $450 million annually.[9]

References

  1. ↑ Accounting Tools. (2013). Accounts Payable Controls. Retrieved from accountingtools: http://www.accountingtools.com/accounts-payable-controls
  2. ↑ The Aberdeen Group: Scott Pezza, w. j. (2010, October). The E-payables Solution Selection Report: A Buyer's Guide to Accounts Payable optimization, page 4. Retrieved from www.adp.com: http://www.adp.com/p2p/pdf/White_Papers/Aberdeen_ePayables_Solution.pdf
  3. ↑ Aberdeen Group: Scott Pezza, W. j. (2010, October). The E-payables Solution Selection Report: a buyer's Guide to Accounts payable Optimization, pg. 8. Retrieved from ADP: http://www.adp.com/p2p/pdf/White_Papers/Aberdeen_ePayables_Solution.pdf
  4. ↑ tieto. (2009). The future of e-invoicing, Pg. 5. Retrieved from digitdoc: http://www.digitdoc.hu/downloads/e_invoicing.pdf
  5. ↑ Hill, M. G. (n.d.). A brief history of Electronic Data Interchange, pg 6. Retrieved from BizTalk Server 2000: A beginner's Guide: http://books.mcgraw-hill.com/downloads/products/0072190116/0072190116_ch01.pdf
  6. ↑ GXS. (2013). A brief history. Retrieved from einvoicindbasics: http://www.einvoicingbasics.co.uk/what-is-e-invoicing/a-brief-history/
  7. ↑ ipayables. (2013, June 13). THE HISTORY OF E-INVOICING. Retrieved from E-INVOICING NEWS: http://ipayables.wordpress.com/2013/06/13/the-history-of-e-invoicing/
  8. ↑ PayStream Advisors. (2013, January). TRANSCEPTA CELEBRATES A YEAR OF EXCEPTIONAL ACHIEVEMENT. Retrieved from: http://paystreamadvisors.com/paystream-voices/Transcepta-Celebrates-a-Year-of-Exceptional-Achievement/
  9. ↑ Bruno Koch, G. (2013, April). E-Invoicing/ E-Billing. Retrieved from GSX: http://www.gxs.co.uk/wp-content/uploads/billentis-2013-report.pdf
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