The accounts payable process is necessary for running a business, but it can often be tedious, time-consuming, and heavy paperwork. Fortunately, with the right automation tools, you can streamline this process and make your life much easier. Let’s look at how accounts payable automation can help you save time and money.

What Are Accounts Payable?

Accounts payable is the process of managing company money that’s owed to vendors, suppliers, and other external parties. This includes tracking invoices, due payment dates, and payment records.

Accounts payable (AP) are an important part of the accounting process from the perspective of a business or organization. Accounts payable represent debts a company owes to its creditors and suppliers for goods or services purchased on credit. This type of debt must be paid in full before other expenses are paid, typically within 30-90 days of an invoice being issued. Managing accounts payable effectively is crucial for proper cash flow management and optimal financial health for companies and organizations.

What is Accounts Payable Automation?

Accounts payable automation is the use of technology to streamline and automate the tracking, management, and payment of accounts payable. This includes using software tools to track invoices, record payments and due dates, set up automated payment notifications, generate reports for financial analysis, and more. Automation can also reduce manual errors associated with manual data entry, such as incorrect invoice numbers, duplicate invoices, or miscategorized payments.

Nowadays, Accounts Payable Automation is increasingly seen as a must-have for small and large businesses. Accounts Payables used to be an area rife with manual work involving tedious data entry and reconciliations. Still, now by leveraging automated tools such as Artificial Intelligence and Machine Learning, companies can take control of their accounts without putting a strain on their resources. Automated accounts payable processes lend themselves to far better accuracy and reliability than manual methods, thus helping companies reduce the amount of time they spend on manual data entry while also recognizing potential invoicing problems before they become too large or costly.

What Are the Benefits of AP Automation?

Accounts Payable Automation helps organizations reduce time, improve accuracy, and increase efficiency in their accounts payable processes. It can also save money by reducing manual data entry, eliminating errors, and improving cash flow management. Let’s take a look at the benefits of accounts payable automation.

Reduce Manual Data Entry

Accounts payable automation eliminates manual data entry by utilizing automated systems to capture and store data. This eliminates the need for employees to manually enter information, which significantly reduces the potential for errors. With automated systems in place, you can easily access, update, and store your accounts payable information in one secure location.

Improve Accuracy

Manual data entry also increases the potential for human error, which can lead to costly mistakes. Automated systems help reduce these risks through real-time data validation as it is entered into the system. In addition, automated systems utilize advanced algorithms to identify discrepancies between invoices and purchase orders that would otherwise be difficult to detect manually.

Improve Cash Flow Management

Automated systems also help improve cash flow management by giving companies better visibility into their financial positions. Automated systems provide real-time updates on payment status so that companies can make informed decisions about when to pay suppliers or vendors based on available funds or credit limits. In addition, automated systems can be used to generate reports that provide detailed insights into an organization’s spending habits over some time and alert managers when payments are overdue, or past due amounts reach certain levels.

Improve Business Relationships

Accounts payable automation can also help businesses improve supplier and vendor relationships. Automated systems provide real-time notifications when payments are due, providing vendors and suppliers with the timely information they need to manage their cash flows. In addition, automated systems provide transparency into an organization’s payment status so that vendors don’t have to inquire about payments or wait for payment. This can help strengthen relationships and build trust between vendors and organizations.

How to Automate Accounts Payable?

Automation is a powerful tool for streamlining processes in any business. Automating accounts payable, or AP, is no exception. Automating your AP process can save time and money, reduce manual errors, and ensure that bills are paid on time. This blog post will look at the step-by-step process of automating accounts payable.

Step 1: Set Up a Digital Payment System

The first step in automating your AP process is to set up a digital payment system. This could be an online payment processor or a cloud-based accounting system like NetSuite. The important thing here is to make sure it’s easy to use and integrates with other systems you use for tracking payments and expenses.

Step 2: Establish Electronic Invoicing

Once your digital payment system is set up, the next step is to establish electronic invoicing. This means sending out invoices using an automated system that integrates with your digital payment system. You should also be able to track payments through this system to know when invoices have been paid or not paid on time.

Step 3: Track Expenses with Software

The third step in automating accounts payable is to track expenses with software. This could be done with an expense tracking app or a more comprehensive accounting software program like NetSuite or Xero. This software can help you track all your expenses to better manage your budget and cash flow. It can also help streamline the entire AP process by automatically categorizing expenses and reconciling them against invoices received from vendors.

How to Determine the Best Accounts Payable Automation Software for Your Business?

Automating your accounts payable process can save your business time and money. But how do you know which software is the best fit for your needs? There are a variety of different accounts payable automation software programs on the market, each with its advantages and disadvantages. Next, we’ll go over some key factors you should consider when choosing an accounts payable automation software for your business.

Cost

The cost of any software will be one of the biggest considerations when making your decision. Different vendors offer different pricing models, so compare prices to get the best value for your money. Also, consider if there are any additional costs, such as implementation fees or training costs, that may not be included in the initial cost of the software.

Functionality

Another key factor to consider is what features and functionalities are included in each product. Make sure that the features offered by each product meet your needs and that it meets all of your requirements. For example, does it have a multi-language interface? Does it include document management capabilities? Does it have built-in analytics tools? All these questions should be answered before making a final decision.

Integrations

An important factor to consider is how well a particular piece of software integrates with other systems within your organization. If you already use other systems, such as enterprise resource planning (ERP) or customer relationship management (CRM), then make sure that they can easily integrate with whatever accounts payable automation software you choose. Additionally, make sure that it can integrate with existing bank accounts and credit cards so you can easily manage payments without having to enter them into multiple systems manually.

Scalability

Finally, consider the scalability of any accounts payable automation software you may be considering. As your business grows, will the software be able to scale with it? Make sure that it is capable of handling larger volumes of data and transactions as your business expands. Additionally, look for features that allow for greater customization so you can tailor the system to fit your specific business needs.

By considering all of these factors, you should be able to determine the best accounts payable automation software for your business.

Accounts Payable Automation with NetSuite

Time is money—and that’s especially true when it comes to accounts payable automation. Manual accounts payable processes can be slow, error-prone, and inefficient. Fortunately, NetSuite offers an automated accounts payable solution that can help businesses streamline their accounts payable process and save money in the long run. Let’s take a look at how NetSuite helps businesses automate their accounts payable systems.

What Is NetSuite?

NetSuite is a cloud-based software solution that allows businesses to manage their financial transactions from anywhere in the world easily. It eliminates the need for manual data entry by automating time-consuming tasks such as invoicing, payments, and reconciliation. All of these features are available through a secure web interface, allowing users to access their account data on any device with an internet connection. This makes it easy for businesses to stay up to date on their finances even when they’re away from the office.

How Does NetSuite Help with Accounts Payable Automation?

NetSuite simplifies the entire process of managing accounts payables, from submitting invoices to making payments and reconciling bank statements. Businesses can easily enter invoice information into the system and then use NetSuite’s automated payment processing feature to generate payments based on due dates or supplier preferences quickly. This saves time and reduces errors associated with the manual entry of invoice data and payments. In addition, its integrated bank reconciliation feature ensures accuracy by providing real-time updates on all incoming funds and outgoing payments.

NetSuite also offers powerful reporting options that allow users to quickly assess account balances, track expenses over time, and stay up to date on current liabilities. This makes it easy for businesses to track spending patterns across departments or locations and identify areas where improvements can be made to reduce costs or improve efficiency.

Conclusion

Accounts payable automation is the wave of the future. If you are still using paper to manage your accounts payable, it’s time to switch to an automated system. Accounts payable automation is essential for businesses that want to manage their finances efficiently. NetSuite makes it easy to automate accounts payable processes with its secure cloud-based system, automated payment processing, and integrated bank reconciliation features.

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NetSuite – Impact: How is Amortization treated different to Depreciation in NetSuite?

Thus, both equally important in the world of accounting, each of these has its unique place while dealing with tangible and intangible assets.

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About Author

Shruti

CPA & Certified NetSuite Suite Foundation| Certified NetSuite Financial User I NetSuite-ARM Badge|Revenue Business Analyst| Speaker| Auditor| Freelance Writer| Revenue ASC 606

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Businesses must fulfill financial obligations while maintaining communication with customers who have outstanding debts. Despite the potential complexity for an accounting department, many companies divide these tasks into two segments, Accounts Payable Accounts Receivable.

Managing your company’s outstanding accounts, known as accounts payable (AP), involves organizing and paying financial obligations. This encompasses paying suppliers and human resources promptly. Effective account management is crucial for business operations, ensuring commitments are fulfilled and financial losses are avoided.

What are Accounts Payable (AP)?

Accounts payable encompasses the management, organization, and payment of your company’s outstanding accounts, representing all the financial obligations assumed. Timely payment to suppliers and human resources serves as an illustration.

For seamless business operations, interaction with service providers, suppliers, and various stakeholders is imperative to hire human resources and acquire services and products. Effective account management becomes indispensable for fulfilling commitments and preventing financial losses.

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When reading the concept of this strategy, it seems like a very simple process: just organize the slips, pay attention to the due date of each one and pay them on the correct date, right? This dynamic exists, but the accounts payable sector has an even greater responsibility.

In addition to having to align with an established financial plan, organizing accounts payable involves understanding the company’s financial health and its ability to invest and assume new debts/costs.

In this way, accounts payable is not just a strategy to settle a company’s debt every month. This is a process that helps an organization achieve the goals defined in its growth plan, such as expanding its business.

Classification of Accounts Payable (AP)

Accounts payable are classified according to the maturity time agreed with the creditor:

Short-term accounts payable: these correspond to current liabilities that must be paid within a year from the acquisition of the debt. There are even payments that are made monthly to daily.

Long-term accounts payable: These are also non-current liabilities; the payment is made in a period greater than one year.

For this, specific data must appear in the accounts payable:

• Name of the biller, the provider to whom the debt is owed
• Company account number
• Invoice number helps ensure accurate accounting
• Type of expense the nature of the good or service purchased
• Invoice receipt date
• The payment term allows that time delays and charges for it are not generated.
• Status if the invoice has been paid or is pending payment

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What Are the Accounts Payable of a Company?

Accounts payable can be very varied, such as:

• Payment to suppliers for merchandise or products purchased.
• Wages to pay
• Rent payment
• Services provided by third parties such as electricity, water, gas, heating, internet, etc.

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Accounts Payable Process Steps

• Receipt of the invoice: When goods or services are purchased, the company receives a physical or electronic invoice that contains information such as the name of the item, amounts, etc.
• Review of the detail of the invoice: In it, you will find data such as the name of the supplier, date, amounts, and number of items purchased, among others.
• Updating and validation of the records: These must be completed based on the values contained in the invoices received and may require approvals and consultations with internal systems. If they are physical invoices, they are stored in the corresponding place.
• Payment Made: All payments made to the provider within the established due date. A series of documentation is required, such as purchase orders, and bank account information, among others.

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Tips to Improve Accounts Payable Management

Here are some tips that may be useful to improve the administration of your company’s accounts payable:

Maintain a Balance Between Your Income and Expenses

From the outset, this point might sound quite obvious. However, it is important always to keep it in mind and ensure that the level of expenses equals the income the business receives. This is to be able to keep finances healthy and prevent too many debts from accumulating in the future to such an extent that the management of accounts payable gets out of hand, making it impossible to pay them and, therefore, other serious consequences such as the cessation of operations of the business.

Choose Your Suppliers Beyond Price

When choosing the suppliers with which a company wants to work, most of them can be carried away by the price factor. However, consider the different payment conditions offered by each one since having more flexible conditions can be more beneficial than having lower prices.

Take Advantage of the Payment Terms Offered by Suppliers

And organize the payment of your invoices based on the above so that you can prioritize those with a term closest to expiration.

Maintain Good Communication With Your Suppliers

On some occasions, when your company cannot adhere to the timely payment of an invoice, it is recommended to proactively notify the supplier, explaining the situation and initiating negotiations for an alternative payment date.

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Seek to Negotiate With Suppliers to Obtain Discounts for Early Payment

Paying early, when you have the possibility, not only contributes to a good relationship with suppliers but also gives you the opportunity to obtain early payment discounts, which can positively impact cash flow.

Check That Your Suppliers Meet Their Commitments

You must confirm that each supplier is complying on time with the previously agreed commitments. If non-compliant, make the corresponding return or claim.

Set Payment Alerts or Reminders

This helps you remember the dates on which you must carry out the corresponding transactions of the various invoices. These do not have to be physical, but some technological tools give you the opportunity to have them digitally and automatically.

Automates and Standardizes the Management of Accounts Payable

It keeps track of cost and expense invoices under a standardized form. It is also advisable to manage these invoices by cost centers and projects for greater ease.

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Accounts Payable and NetSuite ERP

NetSuite ERP (Enterprise Resource Planning) is a cloud-based business management software that contains all the processes for managing accounts payable, from invoicing and tracking to payment processing.

NetSuite’s Accounts Payable module helps automate invoice approval workflow, eliminate manual data entry errors, gain visibility into vendor balances and payment status, and handle purchase orders and expenses.

NetSuite helps reduce the time spent on administrative tasks related to accounts payable, maintain control over the company’s cash flow and have greater certainty of what has been paid or will have to be paid in the future.

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Benefits of Automating Accounts Payable Process

Undoubtedly, including technology in the day-to-day of companies allows greater productivity and efficiency when managing accounts payable and digital expenses.

We will tell you about the benefits of automating the AP process and their importance for companies.

Connection Between Documents or Departments

Automating processes through a system creates the potential for more effective traceability of all documents. This allows for a comprehensive understanding of elements related to accounts payable, including invoices, credit notes, debit items, dispatch guides, payments, expiration dates, and credits, among others.

In addition, today’s solutions allow all members of accounts payable management or those in charge of this area to view all the information on the same platform in real time. Thus, they can perform their tasks more efficiently.

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Availability of a Portal for Suppliers

There are specific software or systems that allow providers to access their platforms to find out the payment status of an invoice or any other information generated around it by their own means, improving customer service times. And it reduces the work of those in charge of finances to answer calls, questions or claims to take advantage of it in developing strategies and actions that improve the accounts payable processes.

This way, the provider will always have information about their pending account, remaining collections, or any generated payments.

Error Reduction

Automating the billing and document reception processes facilitates the approval of payments to suppliers since the information can be verified quickly and simply if the data is correct.

This allows a more accurate recording and monitoring of invoices and, consequently, the reduction of possible errors such as the payment of double invoices, the disregard of credit notes, the verification of errors in amounts or amounts issued by the supplier and the fraudulent income invoices, inaccurate figures, among other actions.

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Similarly, when conducting expense audits, the likelihood of detecting errors reduces. Centralizing and storing all information in a single platform simplifies this procedure, enhancing data accuracy.

On the other hand, the solution reduces employees’ workload when carrying out this type of management.

Execution of Punctual Payments

Automating control for accounts payable significantly reduces the likelihood of payment delays caused by oversight, lack of awareness, or document misplacement. The system meticulously registers each invoice, aligning it with automated payment reminders based on its expiration date.

These platforms or software not only streamline processes but also provide functionalities for authorizing and approving payments. Furthermore, they automate the process of sending payments, ensuring suppliers receive remuneration on the specified date. In essence, this automated process simplifies and expedites the overall transaction flow.

Prepare Financial Reports in Seconds

Clicking just a few times on the Accounts Payable Automation enables the generation of reports, offering timely information to facilitate better decision-making when needed.

Thanks to the elaboration of these reports, it is possible to obtain data referring to the economic situation of a company, the total accumulated debts, the documents pending payment, the movement of cash flow, or any other element of expenses in general.

In this way, it is also possible to determine if a business has sufficient resources to meet pending obligations. On the contrary, it needs to search for and obtain other alternatives as potential sources of financing, which facilitates more effective cash flow management.

What Are Accounts Receivable (AR)?

Accounts receivable serve as the prevalent payment method in transactions, be it for services or goods. In the economic system, the focus is often on the receivable amount rather than the immediate availability of liquidity or cash during the payment. This payment mechanism is referred to as Accounts Receivable.

As per Financial Information Standards, an account receivable is defined as a justifiable entitlement of an entity to collect consideration for a transaction, reflecting the fulfillment of an obligation through the provision of services or the sale of goods.

Typically appearing as a debit balance on a company’s balance sheets, accounts receivable constitute a range of entitlements favoring the company against other parties. These arise from the company’s regular economic operations involving the provision of services or the sale of goods.

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How Do Accounts Receivable Affect the Business?

Accounts Receivable, as previously explained, represent future income derived from installment or deferred payments.

Hence, effective financial planning must prioritize this account, ensuring optimal organization.

Accounts receivable profoundly impact decision-making; they shape investment choices and commitment to expenses by anticipating funds in the future, not the present.

Certain financial instruments, such as working capital loans, may acknowledge accounts receivable as a viable guarantee.

Any business finding itself in such a scenario often reflects inadequate planning.

Therefore, maintaining control over the timing of future payments is imperative for the company to assess and manage its commitments proactively.

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Accounts Receivable and Decision-Making

In making financial decisions for the company, understanding accounts receivable becomes crucial. It provides insights into future guarantees and potential commitments. With the widespread use of credit cards, businesses must anticipate and strategize to synchronize cost and expense payments with incoming capital. This proactive approach ensures financial preparedness and effective management in the current financial landscape.

In addition, there are many other advantages, such as:

• Identify good and bad payers;
• Make payment management more efficient;
• Offer a cash estimate for subsequent months;

All these analyses are extremely important for the decision to be the most appropriate for the company’s scenario, avoiding unpleasant surprises in the future, which can often lead the enterprise to fragile situations.

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Characteristics of Accounts Receivable

These accounts act as a kind of credit or loan to a client. Defined in the invoice:

• Expiration date or collection period
• account amount
• Payment method
• Client data

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Types of Accounts Receivable

Accounts receivable should be part of a business’ accounting from a business and accounting standpoint. The collection term is essential since it defines the type of account receivable. Thus, accounts can be classified into two types:

• Short-term accounts payable: Current liabilities due within a year.
• Long-term accounts payable: Non-current liabilities payable in over a year.

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Managing Your Accounts Receivable

Efficient control of accounts payable and receivable requires constant monitoring and pragmatism. Key practices include:

• Establish Effective Billing Processes
• Keep Your Customer Database Updated
• Define Credit Approval Processes
• Perfect Your Payment Application Process
• Optimize Your Collection Processes
• Invest in Technology

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Accounts Receivable and NetSuite

NetSuite ERP is an ideal tool for managing accounts receivable. This solution automates one system’s billing, credit review, collections, and customer service processes. 

NetSuite centralized database helps reduce errors and improve your teams’ workflow. Optimizing receipts and collection processes can make a massive difference in cash flow and customer relationships. 

Investing in technology like NetSuite can also optimize your processes and make financial operations easier. With a good Accounts Receivable management strategy, any business will have a greater chance of success.

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Accounts Payable vs Accounts Receivable

The distinction between these two types of accounts lies in their purpose: Accounts payable exist to reduce debt, while accounts receivable exist to increase sales.

The accounts payable vs accounts receivable difference also lies in their relationship. Accounts payable describes the amount of money that you owe, while accounts receivable reflects the amount that customers owe your business. 

This means that when a customer pays for goods and services provided, it will show up as an increase in accounts receivable and a decrease in accounts payable. On the other hand, when you make payments to suppliers for goods and services, it will show up as an increase in accounts payable and a decrease in accounts receivable.

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Conclusion

Accounts payable (AP) and accounts receivable (AR) are two important aspects of any business. In this guide, we’ve outlined the basics of each process and what you need to know in order to effectively manage your company’s finances. 

Contact us at OdeCloud today if you’re looking for more information or thinking of optimizing your AP/AR with NetSuite ERP. Let us assist with the tech so you can focus on running your business. Thanks for reading!

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