Accounts Payable (AP) automation streamlines business processes, reinforces internal controls and simplifies the overall auditing process for considerable gains at reduced costs. The AP process is not new, and every business has its own set of rules and regulations that keep changing with time. Companies are plagued with common problems such as paper-based AP processes, rejection of flawed documents, long approval times and low productivity. However, with an accounts payable automation system in place, a company’s auditing process can become considerably simpler and less stressful for the accounts department. AP automation solutions offer increased visibility to your payment and invoice management process. It’s easy and simple to employ, and doesn’t affect your existing business processes and workflows. In fact, it helps your accounts department survive an audit. Here are three ways in which AP automation reinforces your auditing process:
1. Smart Document Management
The auditing process is complex, and you may be questioned for any unusual proceeding or transaction. It can be anything like multiple payments to a vendor, a huge payment to the same seller or an atypical payment to a new seller. And, all these in a very limited span of time. You need to stay prepared for such audit proceedings, and be ready to furnish supporting documents if questioned about any unusual financial transaction. All purchases made must be supported with proper documentation like contracts, purchase orders, invoices or receipts. These documents show what was bought as well as the quotation or price of the goods before the transaction was initiated, including any rebates or discounts. The documents also confirm that the products were received and the expenditure was aptly categorized.
With the growth and expansion of your business, documentation will increase, and so managing papers would soon become a pain in the neck. AP automation simplifies the process as you are not required to rummage through desks, banker boxes or file cabinets to find the document an audit professional asks for. AP automation is the best way to store, manage and retrieve documents easily, and in a jiffy. When documents are stored digitally, you have all your business-related documents in a centralized place. Moreover, every document in a PDF format is easily searchable by finance professionals. This provides more flexibility when it comes to looking for some precise information in an invoice.
2. Easy Fraud Detection
New or small companies spend more time discussing their business plans, sales figures and bottom line instead of focusing on the prevention of fraud. Thefts or misappropriation of funds can cost your new business a lot of money. And, embezzled money is difficult and costly to recover. There are three major frauds related to AP including vendor, check and employee frauds. Embezzlement can be stopped if your company’s internal controls are respected and obeyed. As an internal control measure, ensure that no staff of your company is in a position to execute a fraud and then hide any error or misdoing. All employee duties and responsibilities must be segregated. There should be authorization of a transaction, its execution, and reporting on the same. With an AP automation solution in place, it’s difficult to commit any fraud, and the overall transparency of the process means it becomes easier to identify any misappropriation. As accounts payable automation has a direct bearing on the whole invoice-to-pay process, it comes with secured and advanced features such as dual approvals, compartmentalization of duties, safe payment controls, and two-factor validation.
When it comes to paying your vendors with AP automation software, segregation of responsibilities ensures that a person who approves an invoice is never a payment approver, thus reducing or eliminating the chances of fraud.
Duals approvals are also mandatory for some payments that are above specific thresholds. This feature offers an additional layer of security to make sure that your invoice is internally accepted and approved. As far as the two-factor authorization is concerned, it lets the payment authorizer to get a verification code on their smartphones that he must enter into the platform before executing the payment. AP automation thus minimizes the chances of vendor, check and employee fraud.
3. Removal of Duplicate Vendor Payments
Duplicate payments are a pressing issue for the accounts department of many companies. Now, the question is how can a seller initiate a duplicate payment? Payments are often issued more than once because of lost mails, misplaced envelopes, or miscommunication within the department itself. This point can be explained with the help of a suitable example. Say for instance, a seller calls you up saying that he is still waiting for your payment despite the fact that you’ve already issued and sent the check a couple of weeks ago. You issue a second payment after properly reviewing the scenario, and in the meantime, the seller tracks your original payment, and deposits the check without intimating you. This means that there is the second check that you’ve just sent, and possibly it’ll be cashed once the vendor receives it. Unfortunately, there are some unscrupulous vendors, who will not inform you about such duplicate or over payment.
With AP automation software, executing duplicate payments is next to impossible. An advanced AP automation solution will instantly identify that a duplicate invoice is being issued by tracking the vendor name and invoice number. Once a payment is made, it’s posted and also applied to the corresponding bill within the platform. This is further synced to your company’s accounting system with the right check number. This means that all payment-related information is updated and accurate.
An advanced AP automation solution also sends the details of payment directly to the seller. This makes the vendor aware of the payment date and the present status of the invoice As far as the remittance detail is concerned, it’s necessary to minimize duplicate or over payment.
A feature-rich accounts payable automation solution makes your finance department’s job simpler and more convenient, and helps them focus on daily operations. It keeps your senior management informed and confident about the fact that the company’s AP operations are well-managed and controlled.