Accounts payable is the vertical of the accounts department that handles all the payments specifically to the suppliers of materials also known as vendors. Credit is an important function of the business.
Any business takes and gives credit for a seamless operational cycle. A sensible working capital management is a balance between the amount of credit that can be given to customers and the amount of credit that can be negotiated with debtors to maintain healthy ratios in both accounts payable and receivable aspect.
This is the reason any accounts payable software should be flexible in integrating with other functions and processes.
Companies’ short-term debts should not cross the timelines or the threshold levels for maintaining a credible business and aid in smooth operations.
In large businesses accounts payable is a separate vertical. But in small and mid-size companies, accounts payable and receivable are usually handled by the same team.
Selecting an AP software
Once a business decides to automate its AP, the most important thing is checking the features, price, and credibility of the service provider and the training and support they offer to help you execute your plan to automate the function.
Here is a list of features that should be rich in the accounts payable software that you will select to automate the function:
1. Easy UI
When user interfaces are cumbersome, the experience of the employees is disturbed. They will be fidgeting with the software and still not be able to deliver results that match even their manual work. The idea of automation is to make the process efficient. If it is not easy to use and simple to understand then the purpose is defeated at the beginning itself.
Automation in accounts payable is possible when there is an appropriate matching of the creditor’s invoices with the purchase order and the goods received. The appropriate taxes have to be applied, and purchase returns have to be accounted for. Expenses have to be measured periodically by the software and cash management needs to be effective. Payment alerts will appear in the productivity tools as reminders to close the invoices and clear the dues.
Automation software has to integrate with existing enterprise software and third-party business applications like productivity tools. The software also integrates the entire workflow cycle and sub-tasks sequentially to avoid duplication or omissions.
4. Data extraction
The accounts payable software should be able to cross-verify the external invoices raised by outside vendors with other related records like purchase orders, goods received, and purchase returns. It also deducts any advance payment made at the time of placing the order. Data extraction is possible through optical character recognition that acts like a lens that will read the data, translate and match it with subjective requirements.
5. Data storage and security
Accounts payable software must be capable of reading the documents, extracting the information, translating and transforming, and using it appropriately. All these tasks are completed through intelligent data processing and effectively stored in a way that all authorized personnel can access it from a master file.
6. Scalable operations
The business will grow when all things are running smoothly. And when business grows, orders will likely increase and there are days when bulk orders have to be processed for multiple reasons. In these scenarios, the automation should not give up or crash. It should be able to handle the bulk invoices and arrange for payment processing after processing through the due diligence cycle.
7. Approval principles
Every business has different rules for payments. The accounts payable function involves paying dues that the company owes. Hence it should be completed only after being approved by the right authorized person. In the process of automation, call-to-action reminders are sent to the employee or person who approves these payments after completing their set of checks before approving.
When vendors are paid on time, the credibility of the business increases. The reason is that a business can pay for its operational expenses only when the amount it needs to receive is in tune and helps in easing the liquidity requirements. This translates to the trade analysts as a positive feature of a credible business.