Time is money, and if your team is bogged down with monotonous manual tasks, you could be losing out on profit. Adopting financial automation is one way to buy back your team’s time and increase efficiency and productivity.
Financial automation allows for streamlined processes, efficient workflows, and reduced errors, which create a foundation for an efficient and productive work environment where your team can confidently focus on strategic, specialized tasks.
Why Automate?
When tasks require a human touch, you face two main problems:
- The high costs involved with employee training and wages
- An increased risk of human error
By shifting toward automating systematic tasks, you free up your team’s time, allowing them to focus on analytics and idea generation. Shifting toward automating systematic tasks reduces the possibility of errors in documentation and reporting.
Generally, finance departments are divided into two essential areas: finance and accounting. Each division has very specific duties.
Accounting Department
Traditionally, the accounting division was tasked with manually maintaining and updating general ledgers. Usually, staff accountants would manually enter journal entries. The task was time-consuming, and the risk of error was high as accounting policies evolved. There was also the risk of error due to employee turnover.
This, in turn, affected the accounting department as it was necessary to spend countless hours reviewing entries for accuracy. Additionally, time was spent managing payables and receivables, accrual and depreciation schedules, and the time-consuming task of preparing financial statements. Financial reporting has crucial time demands for accounting departments with particular accounting guidelines.
Finance Department
Financial automation transfers the data entry burden from employees to machines, saving time on training employees. Cutting time spent on manual tasks reduces the cost of employee wages that could be better spent elsewhere. The benefit of financial automation is data entry that is constant and consistent. This consistency of entries permits staff accountants to perform their tasks more effectively, performing more in-depth reviews.
Finance departments can become inundated with requests for data that can take significant time to collect. Not only that, accountants must create reports that display data in such a way that those requesting it can understand. Financial automation saves time and hassle with dashboards that provide data that both departments can use in real time, saving finance time that would have been spent creating custom reports.
Numerous businesses have seen reduced costs and accelerated implementation of vital processes such as collections and month-end close cycles. With the shift away from manual input and dashboards, businesses benefit from reduced human error and transparent operations.
Let’s examine how financial automation benefits two vital processes: accounts payable and invoice processing.
Addressing the Problems of Accounts Payable
One monotonous, routine financial activity most businesses deal with is accounts payable (AP) — the money your business pays vendors and suppliers after you receive an invoice.
A smooth AP process is critical to your company’s financial health and cash flow. Managing AP involves:
- Making payments on time to avoid damaging relationships with vendors or incurring late fees
- Keeping accurate, up-to-date records of invoices and payments to catch errors or discrepancies
- Optimizing cash flow to take advantage of early payment discounts and credit terms when available
- Complying with standards and regulations within the accounting industry so you have proper reports for stakeholders
Proper management of AP demonstrates that your business operations are functional and efficient. It also enables you to maintain good credit and relationships with suppliers and vendors so you can continue to thrive in your industry’s space.
The relationship dynamics between suppliers and buyers are shifting rapidly today. Due to the global economy, buyers have lost the power to push one-sided terms and conditions on suppliers. With the massive disruption to the global economy, suppliers of in-demand products are holding tight to their bargaining chip.
Now more than ever, buyers and suppliers must find common ground to work effectively with one another. Today’s AP team has a heavy influence on supplier relationships. The AP team must be accurate and effective to maintain a solid relationship with vendors and suppliers. The health of that relationship is in the hands of the AP team.
The Power of Financial Automation for Invoice Processing
Invoice processing is one piece of the AP process. Invoice processing involves numerous steps, including verifying and approving invoices, scheduling payments, making said payments, and reporting on accounts. So, timely payments are crucial to maintaining good credit and solid relationships with suppliers and vendors.
Benefits of Invoice Automation
There are numerous benefits of automating invoice processing:
Visibility
Financial automation systems allow complete visibility into all invoices and their approval statuses. With this increased visibility, you can ensure no payment delays could impact your company’s cash flow.
Efficiency
Automation technology drastically reduces the amount of time your team spends approving and posting invoices.
When you eliminate the need for human-driven manual data entry, your team can allocate their time to activities that support your company’s mission or increase its bottom line. Additionally, automation software removes paper-based processes, which allows for better documentation and a fail-safe paper trail. Also, consider the time saved from employees manually storing paper documentation and the physical space required.
Accuracy
Automated invoice technology ensures that data is both up-to-date and free of errors. This is especially important when trying to stay compliant and avoid costly mistakes. By using automatic record keeping, invoice information is correct upon submission. Invoices are automatically uploaded, so when it comes to audit concerns, audit trails are complete, up-to-date, and accurate.
Timeliness
Financial automation systems can send automatic reminders for upcoming invoices or invoices awaiting approval. These features ensure that invoices are processed promptly, which is critical to maintaining good relationships with your vendors and suppliers. This also helps prevent delays and disruptions within the supply chain and solidifies the vendor’s and supplier’s view of the buyer as a trustworthy partner.
Measuring Success with AP Automation
Paymerang, a leading financial automation platform, is at the forefront of transforming invoice processing. Their CEO, Nasser Chanda, recommends paying attention to specific metrics that can help you measure success with AP automation.
Chanda explains, “Measuring AP performance is crucial for success, but manual, paper-based processes make evaluating how well your department performs challenging. Key metrics to assess the success of your AP automation solution include days payable outstanding (DPO), average invoice processing time, cost per invoice, early payment discount utilization, card spend, and electronic payment adoption rates achieved through ongoing enrollment efforts.”
Considerations when Choosing an Automation Platform
There are key considerations to keep in mind when choosing an automation platform:
- Simple Integration: Choose a platform that you can implement quickly and integrate easily into your existing accounting software and workflow
- Functionality: Choose a platform that aligns with your specific needs
- Security and Compliance: Financial data is sensitive, and you could face financial consequences for data leaks — look for software that ensures data security and compliance
- Customer Service: Choose a platform provider known for outstanding customer service to support your team
By keeping these considerations in mind, you’ll land on a system that comprehensively meets your needs while fitting seamlessly into your workflow.
Featured Image Credit: Photo by Pixabay; Pexels; Thank you.
Deanna Ritchie
Editor-in-Chief at Calendar. Former Editor-in-Chief and writer at Startup Grind. Freelance editor at Entrepreneur.com. Deanna loves to help build startups, and guide them to discover the business value of their online content and social media marketing.