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What is Accounts Payable?

Understanding Accounts Payable in finance: Key functions and essential tasks
Tuesday, February 13, 2024
Reading time: min.

In the realm of finance, Accounts Payable (AP) constitutes a vital segment of a company's financial operations, primarily focusing on the management of outgoing payments to vendors and suppliers. It plays a pivotal role in maintaining financial health, advancing vendor relations, and ensuring adherence to financial protocols and regulations.

Accounts Payable serves as the linchpin within a company's financial framework, overseeing the seamless processing of invoices, securing necessary approvals across the organizational hierarchy, and ensuring timely disbursements of payments to the appropriate vendors. This pivotal function ensures healthy vendor relationships and provides a clear financial overview of the company's liabilities and payment schedules.

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What tasks are handled in Accounts Payable?

Core responsibilities in Accounts Payable include invoice processing, vendor management, and a multitude of tasks that support financial processes—all with the help of the right AP software. The Accounts Payable department functions as a cornerstone of a company's financial operations, diligently managing payments, strengthening vendor relationships, and ensuring compliance. This contributes significantly to the financial well-being and integrity of the organization.

Invoice processing

Efficiently managing invoices from vendors or suppliers, whether in physical or digital format, is a fundamental task within Accounts Payable (AP). Invoice processing involves meticulous handling of payment deadlines, obtaining necessary approvals within the organization, and ensuring compliance before payment execution. AP automation software streamlines this process, optimizing accuracy and efficiency.

Payment processing

Timely and accurate disbursement of approved invoices is a critical aspect of AP responsibilities. Facilitating on-time payments not only maintains balanced cash flow but also nurtures positive vendor relationships. Moreover, it capitalizes on early payment discounts, thereby strengthening financial stability

Vendor management

Effective communication with vendors about invoice discrepancies, payment inquiries, and sustaining strong relationships is important in AP. Ensuring smooth, regular payments facilitates the swift resolution of occasional issues and a seamless payment process.

 

 

Expense reporting

Managing employee expense reports, ensuring compliance with company policies, and processing reimbursements constitute a significant facet of AP duties. This involves thorough scrutiny of expenses - ranging from mileage to per diems - incurred through both company and personal credit cards, facilitated by either manual reconciliation or dedicated expense management software.

Reconciliation

Precision in reconciling AP transactions with financial statements is paramount for ensuring accuracy. This process involves careful examination of bank statements against financial records to detect and rectify discrepancies, thereby ensuring the integrity of financial data.

Fraud prevention and problem resolution

Implementing secure workflows and authorization protocols within AP mitigates the risk of fraudulent activities. Fraud prevention in Accounts Payable involves safeguarding against attempts such as fake invoicing by leveraging optimized workflows and technical solutions to detect and prevent potential fraud incidents.

Software in Accounts Payable

Software is an integrated part of modern Accounts Payable. And whether you use a dedicated invoice handling software or a more extensive ERP system (like Microsoft Dynamics 365 Business Central) the way you handle invoices is most likely going to happen on your computer. And Accounts Payable Software is here to help.

There's a range of ways to handle invoices: from manually entering each invoices and making sure approvals are done face to face – or having a fully automated setup that utilizes workflows and AI or OCR to help ease the burden of trivial daily tasks in accounts payable. No matter the size of your company, there is solutions that can help automate processes.

 

Accounts Payable automation

The best ERP systems will let you set up every part of the payment process as automated tasks handled in the background. Incoming invoices can be scanned, all payment information can transferred to the relevant fields with the help of AI or Optical Character Recognition - in the form of OCR invoice scanning - and approvals and payment terms can be set up based on vendor information, amounts, or type of purchase.

AP automation and the right software can free up large amounts of time in Accounts Payable that can be used to solve more serious issues and let small teams handle a growing number of invoices without adding more employees – thus saving both time and money.

 

Job titles in Accounts Payable

Job titles in Accounts Payable range from finance or accounting assistants to highly specialized roles depending on the size of the company. Each job role contribute to the efficient processing and solving of tasks and problems that arise from the daily operations. The job titles include:

  • Accounts Payable Manager
  • Accounts Payable Coordinator
  • Accounting Assistant
  • Accounts Payable Specialist
  • Accounts Payable Clerk

 

What are the benefits of AP automation?

Automating the processes in the AP department has a large range of benefits, that will provide you with valuable improvements in all tasks. 

 

Increased accuracy

Automation bolsters transaction accuracy by mitigating the chances of human mistakes, thereby reducing instances of payment discrepancies, including double payments or fraudulent transactions. Automated systems check invoice details against ERP systems early on, identifying potential payment issues promptly.

 

Better use of resources

Automation refines the invoicing and payment sequence, diminishing the time needed for approvals and boosting overall productivity. AP automation tools can seamlessly integrate with pre-existing financial frameworks, augmenting efficiency and ensuring a smooth exchange of data across platforms.

 

Better efficiency

Automation refines the invoicing and payment process, diminishing the time needed for approvals and boosting overall productivity. AP automation tools can seamlessly integrate with pre-existing financial frameworks, augmenting efficiency and ensuring a smooth exchange of data across platforms.

 

Cost efficiency

Implementing AP automation can drastically reduce the expenses associated with invoice handling, offering savings in both monetary terms and resource allocation. Automation alleviates labor costs by minimizing manual data entry and removes expenses related to document storage, mailing, and invoice creation, among others.

 

The financial benefit of AP Automation

Thinking about bringing an accounts payable automation system on board? It's smart to weigh up the return on investment (ROI) first. But working out the ROI for AP automation isn't always a walk in the park. Because it touches so many parts of your business, and the benefits really start to stack up as you ramp up the volume. 

When you're crunching those ROI numbers for AP automation, remember to think about the whole picture. This includes the cash you'll save and the other perks that don't directly hit your wallet but still make a big difference.

 

The financial ROI of AP automation

Lots of factors impact the ROI figures when you're thinking about AP automation. It's not a one-size-fits-all situation. The digits will shift based on what industry you're in, how many  invoices land in the inbox each month, and how much you're using right now to keep the process going.

Here are a few key things to keep in mind:

  • You'll likely see a dip in how much you're spending on getting invoices processed.
  • Fewer mistakes. Expect errors to go down, along with the losses they cause.
  • More of your payments will hit their deadlines, keeping suppliers happy and maybe even boosting your rep.
  • Time is money - and you will save more of it by by being more efficient.
  • Getting early payment discounts becomes a whole lot easier.
  • And, last but not least, you might not need as many hands on deck, which means savings on staffing costs too.

The non-financial aspects

When evaluating the ROI of AP automation, it's crucial not to overlook the non-financial benefits alongside the financial ones. These advantages encompass gaining more control over financial operations, making processes more efficient, simplifying the auditing process, enhancing business relationships, and boosting employee satisfaction.

Taking into account both these non-financial benefits and their financial consequences will provide a comprehensive understanding of the potential ROI that AP automation could bring to your organization.

 

Handle AP faster - and more securely

Accounts Payables is prone to human error. Wrongful entry of dates, amounts or accounts can lead to errors and at the same time, fraud attempts are hard to spot. But there's great news, when you apply automated processes handling your Accounts Payable: better fraud prevention. When using AP Automation it becomes easy to apply rules and processes that secures against fraud and minimizes the time spent on manually keeping track of errors and possible fraud attempts.  

  • What is AP short for?

    AP is short for Accounts Payable - the part of the financial department in a company, that handles payments to vendors as well as approvals and matching of payments.

  • What is AP automation?

    AP Automation is processes in Accounts Payable that can be handle by software in order to be automated. This includes invoice processing, payment management and reconciliation

What does Continia do in Accounts Payable

Continia is dedicated to help companies using Microsoft Dynamics 365 Business Central to succeed. Our solutions are fully integrated in Business Central and helps companies automate their entire financial process. Accounts Payable will benefit from a range of possibilities handling both invoices and payment processes automatically.

Document Capture

Document Capture lets you automate your entire Accounts Payable by streamlining your invoice process from start to finish.
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Payment Management

Payment Management lets you automate your vendor payment and bank reconciliation processes with seamless bank integration.
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More solutions for Business Central

Find all Continia's Solutions - BUILT INSIDE Business Central for easy financial management and automated processes.
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Join a webinar

Join a webinar to learn more about how you can transform the way your Accounts Payable work in Microsoft Dynamics 365 Business Central.

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