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What Is Accounts Payable Automation and How Does it Work?

By Daniel Argintaru | American Express® Freelance Contributor
6 Min Read | August 30, 2022


Accounts payable is a crucial business process, but it’s also a time drain. In a survey of U.S., U.K. and Canadian small businesses, the Institute of Financial Operations and Leadership (IFOL) found that 56% of respondents spent more than 10 hours per week managing, processing, and paying supplier invoices.[1] Accounts payable (AP) automation software can simplify these processes, cutting time, costs, and human error from invoicing and supplier-management workflows.



Small businesses in particular stand to benefit. While very large businesses may outsource AP to an external provider, there are many  software-based payments solutions that help small businesses digitize and streamline their accounts payable operations, making them more efficient while keeping up with important considerations like payment accuracy and compliance.


The shift to remote work and rising importance of supplier management in the wake of COVID-19 has put more pressure on businesses to digitize their billing and invoicing practices, which is in part why more than 40% of companies plan to automate their accounts payable systems in 2022, according to the IFOL survey.


As with any new technology, the key to reaping the benefits of AP automation is to understand how it works, how it can help your business, and how to choose the best solution for your needs.

What Is Accounts Payable Automation?


AP automation allows businesses to automate administration-heavy AP processes, from invoice receiving to payment and reconciliation, without human intervention. You will still need a qualified stakeholder to approve invoices and payments, but with AP automation software they can complete the task on virtually any device at the click of a button.


In addition to speeding up AP processes, automation software provides finance teams with visibility across their invoicing, billing, and payment data. That makes information easier to search and audit, a major advantage for compliance. AP automation software also provides finance teams with a real-time view of how invoice and billing processes are running. Data analytics and dashboards offer companies a clean and low-touch way to spot and address performance issues when needed, rather than dedicating hours to performance management.

AP Automation vs Manual Processes


In addition to converting supplier invoices into digital format, AP automation software also cuts steps from the invoicing and billing workflow.


For example, in a manual workflow for receiving an invoice, the supplier must first complete and share that invoice. Next, your company needs to receive, scan, and validate the invoice, after which a staffer must enter data from the invoice into the accounts payable system, or enterprise resource planning (ERP) system in the case of midsize and large businesses.


By contrast, when using an automated system, suppliers can create and share their invoices digitally. Invoices can be automatically validated and sent to your accounts payable system or ERP by the AP automation software, turning a process that previously may have taken a week or more into one that takes hours.

Benefits of AP Automation


The primary benefits of AP automation are that it help to optimize your business’ cash flow management, saves time, and enhances the overall security of your invoicing and billing processes. In parallel, visibility across your accounts payable processes makes it possible to receive, process, and pay invoices more quickly with minimal human intervention.


This leads to greater accuracy in AP processes, improved supplier management and relationships, and a quick return on your software investment. To illustrate this last point, consider the reduction in labor costs that comes from cutting 10 hours or more from accounts payable workflows each week.


Many small and midsize businesses ask their financial services partner to choose the AP automation solution that best fits their needs. Here are four ways in which this approach helps companies cut time and cost from their accounts payable processes:

  • Managed payments: Simply select which invoices to pay and your financial services partner will automatically send the correct payment to the appropriate supplier electronically.
  • Simple and accurate bill repayments: AP automation software delivers an up-to-date view of every invoice and bill you need to pay, helping to meet your lender’s payment terms on time and maintain cash flow flexibility.
  • Secure payments: Leading AP automation solutions allow you to send payments using a unique virtual card number. This in turn helps to protect your business from payment fraud while ensuring you maintain accurate records of your bills.
  • Earn payment rewards: Just as lenders offer rewards for payments made with your business credit card, they may also offer rewards for supplier payments made via your AP software.

AP Automation Features


The key features of AP automation software help businesses to reduce invoice backlogs, make AP processes more efficient, and free up their teams to focus on strategic initiatives like growth. These are the features that make AP automation attractive for small companies and startups – they reduce the administrative burden and cost of AP processes so teams can focus on value-driving activities.


Here are some of the main features that attract businesses to AP automation:

  • Simplified data entry: Automatically upload supplier and billing data in a consistent digital format, which saves time and reduces the risk of human error associated with manual data transcription.
  • Automated invoice matching: Match purchase orders, goods received notes, and supplier invoices (what AP professionals call “three-way matching”) more quickly and accurately than you could manually.
  • Consistent invoice coding: Set rules that automatically attribute the correct ledger codes for every supplier invoice, bringing consistency to your invoice coding while saving time for finance teams.
  • Efficient approvals: Automatically route invoice and billing approvals to the right stakeholders, who can review and sign electronically. With this comes faster approvals and greater transparency in the accounts payment workflow.
  • Simplified data governance: Audit all your accounts payable data using a single software interface rather than paper records. This reduces audit time, and rapid audits are integral to data governance and compliance operations.

Getting Started with AP Automation


There are many AP automation solutions out there, each with its unique selling points and limitations. For instance, some businesses might prefer a simple, user-friendly solution from their bank or lender while others need a more feature-rich solution. Note that even in the latter case, your lender is likely to have partnerships with these AP automation vendors so you can get the capabilities you need while still managing supplier billing via your bank.


The key to choosing the right solution is to review your existing processes, build a solid plan and business case for using AP automation software, and secure buy-in from the necessary stakeholders to ensure a smooth implementation. With clear requirements and the right people on-board, you can then explore solutions from different vendors and choose one that meets your needs for performance, scope, and cost.


It’s a good idea to test your AP automation solution before going live to iron out any bugs, and train employees to take full advantage of the new software. After all, the success of any new technology comes from the skills and receptiveness of the people who use it.

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The Takeaway

Accounts Payable (AP) automation is an accessible way for businesses to cut cost, time, and human error from their invoicing and billing. AP automation has many use cases, from data entry, to invoice matching, to governance, and by choosing a solution via their banking lender companies stand to benefit even further. But first, they must understand how AP automation works and make sure to choose the best AP automation software for their needs.

Daniel Argintaru

Daniel Argintaru

A content strategist and editor who specializes in business technology and finance topics, with a focus on sharing practical advice for business leaders.

This content was written by a freelance author and commissioned and paid for by American Express. 

The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.