What is accounts payable (AP) automation?

AP automation leverages enterprise content management systems to transform how businesses handle their accounts payable. By digitizing invoices and automating the workflow, from data capture through payment, these systems ensure greater accuracy, compliance and efficiency.

How do you automate AP?

AP automation starts when invoices arrive, either digitally or as scanned documents. Optical character recognition (OCR) – a key feature of accounts payable software we’ll soon be exploring – reads these invoices and turns the information into digital data. This data is then neatly organized into fields like invoice number, date and amount, and stored in a digital file.

If it’s not a scanned document, like an invoice in the EN 16931 format, the ECM system can skip the OCR process and receive the data pre-structured. This means the AP automation software should be able to process the XML data. In simple terms, the Accounts Payable (AP) automation software processes XML data by extracting relevant information directly from the file. This is possible because XML files are structured in a way that allows the software to identify specific tags corresponding to invoice details such as vendor name, invoice number, date, amount and descriptions of goods or services. This direct extraction bypasses the need for OCR, enhancing efficiency and reducing errors associated with manual data entry or interpretation of scanned documents.

Once the XML data is extracted, the AP automation system uses it to update accounting records, perform data validation and facilitate the approval process. Automated workflows can then trigger notifications to the appropriate personnel for invoice verification and approval, seamlessly integrating with other financial systems for payment processing. This streamlined approach not only speeds up the processing cycle but also improves accuracy and reduces operational costs.

The AP automation system checks for accuracy, flagging any errors or missing details. Verified invoices move through automated workflows for approvals. Finally, the data is sent to the ERP or accounting system for payment. This whole process makes handling invoices faster, more accurate and efficient.

Why should you automate AP?

The main reason for automating accounts payable (AP) is to address the significant inefficiencies and error-prone processes inherent in manual, paper-based systems. Traditional AP tasks often involve mountains of paperwork and the need to navigate multiple disparate systems such as Excel, ERPs, banking and scanning systems daily. This fragmented approach not only increases the risk of errors—such as a single typo cascading through multiple entries and causing extensive issues—but also consumes valuable time and financial resources that could be better utilized elsewhere. By automating AP, companies can streamline their operations, drastically reduce the potential for mistakes and eliminate the excessive paper use that burdens staff and hampers productivity.

Benefits of automating accounts payable

Integrating AP automation software offers numerous advantages that can significantly improve financial operations. Here are the main benefits:

 

Save time and reduce costs

Automated systems process invoices much faster than manual methods, cutting down on processing time and reducing labor costs. With less manual entry, businesses also avoid late payment fees and capitalize on early payment discounts.

Improve accuracy and compliance

Automation minimizes human errors, ensuring that invoices are processed correctly. This leads to more accurate financial records and easier compliance with regulations, as automated systems maintain precise and accessible records.

Enhance supplier relationships and transparency

Faster, more accurate payments improve relationships with suppliers, ensuring timely payments and fewer disputes. Real-time visibility into invoice and payment statuses helps businesses manage their cash flow more effectively. 

Optimize workflows and prevent fraud 

By automating repetitive tasks, employees can focus on more strategic activities, boosting overall productivity. Automated systems can also detect unusual patterns and discrepancies, reducing the risk of fraudulent activities. 

Scalability

As your business grows, an automated AP system can handle an increased volume of invoices without needing additional staff, making it a scalable solution. 

Integration with ERP Systems 

Automating AP is even more powerful when integrated with your existing SAP, Microsoft Dynamics and/or ERP system. These integrations allow for seamless data transfer between your financial and operational systems, ensuring that all relevant information is synchronized and accessible. More on this soon.

Learn more how AP automation connects with your business systems. 

How AP automation fits into your existing ecosystem

Integrating accounts payable automation into your existing ERP systems, such as SAP or Microsoft Dynamics, enhances efficiency and data consistency across your financial operations. This integration allows for seamless data transfer between the AP automation software and your ERP system. Heres how it works: 

The AP automation software uses APIs (application programming interfaces) to link with your ERP system. When an invoice is processed, the relevant data—such as invoice number, date, amounts and supplier information—is automatically captured and transferred to the ERP system. This ensures that all financial data is synchronized and up-to-date in real-time. 

AP automation software also uses CMIS (Content Management Interoperability Services) to work better with different document management systems. CMIS provides a common way for these systems to talk to each other. This means the AP software can easily find and handle documents no matter where they are stored, making it simpler to manage invoices and other important paperwork. 

By integrating with ERP systems, you eliminate the need for manual data entry and reduce the risk of errors. All invoice data is automatically validated and matched with purchase orders stored in the ERP. This streamlines the entire accounts payable process, from invoice receipt to payment, providing greater accuracy and efficiency. Importantly, the integration unlocks workflow automation for approvals and exceptions, meaning that all steps are documented and traceable. It also enables real-time reporting and analytics, giving you a complete and accurate picture of your financial health.

How and why AP automation is totally compliant

AP automation software is designed to be compliant with various regulatory standards, crucial for ensuring that financial transactions are processed within the legal frameworks. The compliance of AP automation primarily stems from its ability to maintain detailed, accurate records and its adherence to data security standards. It features: 

Audit-proof archiving:

The system stores all invoices and related documents securely, adhering to legal standards for data retention and accessibility. This feature is crucial during audits, providing easy access to historical invoice data and ensuring that every transaction is transparent and traceable. 

Integrated compliance features:

The software integrates essential compliance features such as encryption, user authentication, and access controls. This integration safeguards sensitive financial information and ensures that all access and changes to financial records are fully documented and secure. 

Automated compliance checks

AP automation systems continuously monitor transactions for compliance with financial regulations. This proactive approach helps prevent compliance breaches, reducing the risk of penalties and fines. By automating these checks, the system ensures that all financial activities adhere to the latest regulatory standards. 

Compliance reporting:

The system generates detailed reports that document compliance efforts and outcomes. These reports provide audit trails, show compliance with payment terms, and help businesses prepare for external audits and reviews. 

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The role of optical character recognition (OCR) in automating AP

OCR is a technology that converts different types of documents, such as scanned paper documents, PDF files or images captured by a digital camera, into editable and searchable data known as a digital file. For AP departments, OCR is pivotal as it automates the entry of invoice data into systems. Here's how it works in AP automation:

  • Scanning:
    OCR technology scans the text on a digitized invoice.

  • Text recognition and conversion:
    The tech then identifies the characters and words on that document, creating a text layer on the image.

  • Data extraction:
    Now that we have converted an image format to a PDF with a text layer, the system is able to read, extract and structure the data in the AP system.

  • Integration:
    This data is integrated into the AP system where it can be further processed for payment and record-keeping and approval processes.

  • Error checking:
    Modern OCR systems use AI and machine learning to improve data accuracy and quality, meaning the system can create the right text layer even if the scan quality is poor.

When it comes to AP operations, automation is critical, especially as the world’s head-first dive into all things digital means the sheer volume of financial documents, chiefly eInvoices, is only going to increase. This technology significantly speeds up the processing of this content, reduces labor costs and improves accuracy by minimizing human error.

AI’s role in AP automation

Both AI and machine learning (ML) are transforming the way businesses handle their accounts payable systems. These technologies have the capability to automatically recognize and process information on invoices, for instance, such as payment amounts, due dates and supplier details. Here’s a closer look at the process:

  • Data extraction:
    This involves the AI recognizing and categorizing invoice information accurately. For example, the AI understands that an "invoice number" should be a numerical identifier. This capability allows the AI to structure data more effectively than traditional systems, which might rely on less sophisticated rule-based approaches. As a result, AI-enhanced systems achieve higher accuracy in processing invoice data.

  • Data verification:
    Machine learning algorithms compare the extracted data against previous entries and external databases to verify accuracy, ensuring all information matches expected patterns and flagging any anomalies. This ensures that all the required information of an invoice is checked, meaning this critical first step is automated by the system.
  • Continuous learning:
    As more invoices are processed
    (and other documents) the system learns from each transaction, improving its ability to identify and correct errors, streamline data entry, and predict future payment needs.
  • Predictive analytics:
    By
    analyzing trends and patterns from past data, AI can forecast future financial obligations and offer insights that help businesses manage their cash flow more effectively.

The integration of AI and ML speeds up the processing of financial documents and enhances the accuracy of financial records, reduces the likelihood of payment errors and helps businesses manage their capital with greater precision. 

Make sure to check out our work on invoice processing if you want to go deeper.

How AP automation impacts and is related to supplier management 

Supplier management organizes all details about a companys suppliers, including contracts and orders, while accounts payable automation simplifies how these suppliers are paid by managing invoices and payments automatically. When you integrate supplier management with AP automation, the system uses the detailed supplier information to process payments more accurately and efficiently. This helps ensure that payments are made correctly and on time, based on the most current supplier data. Integrating these systems streamlines the payment process, reduces errors and improves relationships with suppliers. 

What do we mean by “integrate”?

Integrating supplier management with accounts payable (AP) automation involves linking two separate systems or software functionalities to operate as one coordinated unit. Here’s how it works in simpler terms: 

Supplier management system:  
A system for supplier management, known as an electronic supplier file system, is a digital platform that consolidates all crucial supplier-related information—such as contracts, communication history, orders, and delivery details—into one centralized location. This system enables organizations to efficiently access and manage comprehensive data about their suppliers, facilitating streamlined procurement and supplier management processes. Also, it helps organizations remain compliant with legal changes, such as the EU Supply Chain Act. 

AP automation system:  
As explored, this system manages the financial transactions related to your suppliers, specifically handling the processing of invoices and executing payments. It automates these tasks to reduce manual effort and minimize errors. 

When these two systems are integrated: 
The supplier information stored in the supplier management system is automatically used by the AP automation system. For example, when an invoice arrives, the AP system can immediately verify details like supplier name, order numbers and contract terms against the information stored in the supplier management system. It can also check the invoice against the order confirmation of the supplier and flags issues such as incorrect pricing or missing invoice items. 

This integration ensures that payments are processed based on accurate and current supplier data, reducing the risk of payment errors and helping maintain good relationships with suppliers by ensuring timely and correct payments. Any changes or updates in the supplier management system (like new contract terms or updated supplier details) are immediately available to the AP system, keeping all payment-related processes up to date. 

Is it possible to get both supplier details and automate payment processes on a single platform? 

Yep! It’s possible to manage both supplier details and automate payment processes using an intelligent content automation platform (ICA), which is designed to connect and streamline content from different parts of your business, giving you a complete, 360° view of your operations. It uses advanced AI to understand and organize data from various sources, automating all document processes from start to finish. 
 
An ICA platform also works well with popular business applications like SAP, Salesforce and Microsoft, which helps in managing documents, storing information securely, automating workflows and processing invoices efficiently. This integration ensures that all data is synchronized, providing a single, reliable source of truth that enhances decision-making and operational transparency.

Doxis Intelligent Invoice Automation

How to automate inbound invoice workflows, expedite invoice processing and save costs — with Doxis InvoiceMaster.

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What should you look for in a system to manage your P2P process documents?

A high-performing, modern document management solution will be able to handle both your AP automation and supplier related documents. When shopping around, it’s important to look for specific, impactful features that will substantially improve your P2P process. Key features to consider include: 

  • Scalable invoice processing:  
    The ability to process thousands of invoices on the same day they are received is crucial for maintaining workflow momentum and reducing backlogs. 

  • Significant time savings:  
    Opt for a system that offers a time saving of around 50% per invoice, which can dramatically increase the efficiency of your accounts payable department. 

  • Automation of manual tasks:  
    A robust AP system should reduce the need for manual intervention by automating tasks such as data entry and invoice matching, which not only speeds up processes but also reduces the likelihood of human error. 

  • Comprehensive transparency:  
    Ensure that the system provides complete visibility across all invoice processes. This helps in tracking every invoice’s status, from receipt through to payment, which is critical for effective management and audit purposes. 

  • Guaranteed compliance:  
    Compliance with regulatory standards is non-negotiable. The ideal system should ensure that all processes, from data handling to document retention, meet legal requirements, protecting your organization from potential legal challenges. 

  • Efficient data extraction and filing:  
    The system should automatically file inbound invoices in the appropriate digital supplier file and accurately extract invoice data with minimal need for human oversight, which streamlines the verification and approval process. 
     

Any case studies or real world examples?

We've gathered some case studies from our very own selection of customers who have transformed their operations with AP Automation.  

Bernard Krone Holding SE & Co. KG 

Overview: Bernard Krone Holding, a prominent player in the commercial vehicles and agricultural machinery industry, implemented SER’s enterprise content management system to address challenges such as scattered documents across the system landscape and manual, time-consuming invoice processing. By integrating automated invoice processing with SAP and introducing electronic records management, the company achieved greater transparency and efficiency across its operations. 

bofrost* 

Overview: bofrost*, a leading direct sales company for ice cream and frozen food specialties, sought to enhance efficiency and audit compliance in their invoice processing. Faced with the challenges of manual handling and excessive paper use, bofrost* implemented automated invoice management with deep SAP integration. This transition has notably shortened invoice processing times, reduced paper usage, and streamlined their approval processes. 

August Storck KG 

Overview: August Storck KG, a major player in the confectionery industry, established a multimedia "HistoryCenter" to preserve a vast array of historical documents and media, such as photographs, videos, and packaging materials. Utilizing SER's ECM platform, Storck has digitized over a century's worth of materials, ensuring their preservation for future generations while maintaining flexibility in document reproduction and access. 

What are my next steps for achieving AP automation?

When considering AP automation, it’s crucial to choose a vendor that aligns with your specific needs. Using the checklist we previously explored can help ensure that the vendor you choose can deliver the functionalities required to enhance your operations effectively. Look for capabilities like rapid invoice processing, comprehensive transparency, and guaranteed compliance—features that are essential for a successful implementation.

If you’re ready to see how these features work in practice and to determine if our solutions are the right fit for your business, book a demo using the form below.

Schedule a demo

Our team at SER is ready to demonstrate our AP automation software and discuss how they can be tailored
to your specific requirements. During the demo, we'll cover the key functionalities and address any questions you might have. 

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