Accounts payable is one half of that equation. If you can consistently pay suppliers on time — without too much hassle — you can then focus on bringing in new business. 

Efficient accounts payable processes ensure you receive stock or services on time, avoid late payment penalties, and maintain strong supplier relationships. And as with most repetitive processes, automation is the key to efficiency. 

This detailed guide explores everything SMB owners, finance teams, and accounting firms need to know about AP automation. Learn the most pressing points in the process to automate, what to look for in the ideal solution, and how to get started. 

What is accounts payable automation?

Accounts payable automation is a combination of policies, processes, and tools that automate and optimise accounts payable in your business. More simply, it’s a way to streamline and optimise your supplier payments. 

AP automation typically includes: 

• Invoice submission (and digitising documents)

• Approval flows to ensure that every payment is validated

• Ways to spot duplicates and avoid basic human errors

• Built-in steps payment terms and contractual arrangements

• Stored supplier details

The goal is to move faster, reduce errors, and avoid paying every supplier by hand. This in turn keeps costs down, and lets you scale exponentially without a large purchasing team. 

What is accounts payable (AP)?

Accounts payable is a term used primarily by accountants to gauge what your business owes to suppliers. This almost always means supplier invoices, where you’ve received goods or services on credit but have not yet paid. 

Accounts payable is considered a liability on your company’s balance sheet. It’s essentially a loan that hasn’t yet been repaid. 

AP is often contrasted (and confused) with accounts receivable (AR), which are the outstanding amounts owed to you by customers. While these two processes are typically handled separately in companies, they’re two sides of the same cash conversion coin. 

Automating the accounts payable process

AP is a repetitive, often predictable process. Which makes it ripe for automation. Any process that involves lots of human time and manual data manipulation should be top of your list to upgrade with modern technology. 

So what are the key issues with the status quo?

The challenges with traditional, manual invoice processing

Most companies still rely on human effort to process supplier invoices. The more invoices you have, the more people hours it takes to submit, review, and approve them. 

This invariably leads to the following issues:

• Wasted time. Manual invoice management doesn’t scale - the more invoices you have, the longer it takes to process them.
  
  

• Reduced profits. Time is money, after all. The more you invest in your own operations, the smaller your margins.
  
  

• Lots of errors. Manual data entry always leads to human error. Basic typos and duplicate invoices are a common occurrence. Human error can also lead to missed payments, which bring penalties or interest. And that ultimately eats into profits, too.
  
  

• Accountants become police. The errors and unclear approvals lead to lots of detective work for the people processing and paying invoices - usually accountants and financial controllers. These are highly qualified, often well-paid team members or outsourced services. They should be adding value, not chasing down basic information and disciplining repeat offenders.
  
  And it’s particularly frustrating for accounting firms dealing with dozens of clients. Simple errors and missing documents from one company can interrupt the work for all.
  
  

• Lack of real-time data. Most company finance processes have a monthly rhythm to them. You process and pay invoices towards the end of the month, then close the books and build reports in the coming weeks. This means you have no idea how much is committed or paid until the month is over. And when cash management is at a premium, it can be too late to make the decisions your business needs.
  
  

• Limited control over cash flow. Related to the previous point, companies with delays in their AP processes have much less control over their cash flow. You may not realise that you’ve overcommitted until it’s too late.
  
  

• No overview of the full cash conversion cycle. Money in and money out need to work hand in hand. With manual AP and AR processes, it’s very hard to connect one to the other to see the bigger cash picture. 

These issues are not unique to accounts payable. But because this is such a fundamental aspect to running a business, AP should be one of the first exercises to automate.

Benefits of automating accounts payable

Naturally, the benefits of AP automation respond directly to the key challenges above. Used well, accounts payable automation:

• Saves time. Simply by removing data entry from the equation, you cut down on the time taken. But you also save time on reviews, approvals, and the actual payment runs themselves. The difference is night and day.
  
  

• Scales easily. As you go from processing 10 supplier invoices per month to 100, you don’t need 10x the time and people power. Software can process huge swathes of invoices almost instantly.
  
  This is even more apparent for accountants working with a portfolio of companies. You can easily serve more clients and deliver a more strategic, tailored service when you’re not worrying about the small stuff.
  
  

• Reduces errors. Tedious processes inevitably lead to human error. But machines can repeat steps over and over again without fault.
  
  

• Helps you go digital. Digitisation is vital for companies that want to be more efficient and effective. By prioritising automation, you’re forced to modernise — which is a great thing.
  
  

• Keeps you on-policy. Team members struggle to remember and follow internal rules. Good software walks them through each step and makes sure that every invoice meets your internal rules and requirements.
  
  

• Shifts resources towards adding value. The manual steps described above bring nothing new to your business — they’re an administrative necessity. When you remove them from employees’ workloads, they can focus on higher-value tasks, and help drive growth.
  
  

• Maximises working capital. Your various supplier invoices have different payment terms. Some even have early payment discounts, while others have costly penalties for delays. Automation lets you schedule every payment for the perfect moment, so you get the most of your hard-won cash. 

Operational automation is fast becoming the norm in business, and with good reason. It’s hard to find a business that automated its core finance processes and regretted it. 

Key components of AP automation

Hopefully you’re now convinced. So when you build your automated AP process, what are the must haves? 

Invoice capture and data extraction

If AP automation gets you away from physical filing cabinets, that’s a good start. But beyond simply storing invoices digitally, it’s even more impactful to avoid the data entry step altogether. 

Look for AP tools with OCR software built in. This reads a PDF or JPG file and extracts all the data you need. This means instant invoice capture, and none of the basic errors that come with data entry. 

These are your best tools to get invoices through your automated system as quickly as possible, with minimal data entry. 

Dext Prepare is a good example, and has been relied on by accounting firms for years. It reads and digitally formats invoices and receipts in seconds. More AP tools now have this same capability — a total gamechanger. 

Approval workflows

While almost anyone in the business can request or receive an invoice, not everyone has the right to approve it. Good tools let you build an approval hierarchy to ensure that when a team member submits an invoice for payment, the budget manager (or an executive) validates it. 

Crucially, this process should be fast and native to the system. Rather than sending emails or walking down the hall for a “quick chat,” the manager should receive a notification and be able to approve without any conversation required. 

Direct electronic payments

The typical “bank run” adds days to the AP process, particularly once you factor in weekends and public holidays. When these cause you to miss payment due dates and incur fees, that’s a real issue.

The best accounts payable software lets you pay directly from the platform. There’s no need to open your banking app or even find the company credit card.

Instead, you have a “wallet” loaded with funds (reloading can be automated too) from which to pay. You can even hold wallets in different currencies to pay international suppliers.

Instant reconciliations

Because good tools let you pay directly, there’s also no need to reconcile payments against your bank account. The software has both the invoice (with the amount requested), and a log of the actual amount paid. 

This saves even more time at the end of the month. You simply export the information to your accounting tools, and the job’s done.

Integrations with your other tools

Whether you have a complex and comprehensive finance tool stack or just a few essentials, they must work well together. This could be through native integrations or well-built data exports. 

Thankfully most good AP tools are built with this in mind. They should easily communicate with your accounting software (or ERP), business intelligence and performance tools, budgeting software, and anything else you rely on to manage your finances. 

Real-time visibility & reporting

As touched on above, it’s nearly impossible to master your cash flow if you only get reports at the end of the month. Within a week or two, you have no idea how much more has been committed to suppliers, and when those payments are likely to come due. 

The beauty of automation software is that it stays up to date. As soon as an invoice is submitted for approval, you can update budgets and revise forecasts to then take real action. 

And at the very least, you can step in immediately if a particular invoice seems out of whack or likely to cause issues. 

This is also a great value add for accounting firms. You can be more responsive and reactive to your clients, without any additional work. 

What to look for in an AP automation solution

The previous section highlighted the things that most good AP tools have in common. In this chapter, we’ll look instead at some of the key differentiators to help you choose the right tool for your small business.

Not all software does all the following, and not all tools do them well. 

Tailored supplier records

You probably use the same suppliers over and over again. So it makes no sense to re-enter vendor details every time you work with them. 

At the very least, your AP software should remember past suppliers and save you the effort of inputting their address and bank account details. 

Even better if you can maintain a “hub” for each supplier, with a record of transactions, their preferred payment terms and discounts, and notes on what’s worked well (or not) in the past. And the more these can be customised to your specific supplier relationships, the better.

Built-in approval workflows

As noted above, approvals are vital for company purchasing. And having this built into your software not only speeds up the process immensely, it ensures you always have a clear trail after the fact. 

Again, customisation is key. You should be able to build workflows that match your own company’s hierarchy. Can you easily assign the right manager to their team or budget? And can you allow for substitute approvers if the first person is away or indisposed? 

Easy collaboration

The best tools make team collaboration easier. Invoice processing usually involves a handful of people: 

• One team member has a direct relationship with the supplier. They receive the invoice directly and upload it to the system. 

• Their manager (or the budget owner) quickly reviews the request and approves the invoice.

• A finance team member finalises the invoice and schedules it for payment.

• Your accountant (in house or outsourced) books the transaction alongside all your other spend. 

Good tools have this process built in, and send notifications to each person in the chain. The last thing you want is added communication just to move from step to step.

Especially for outsourced accounting services, easy collaboration is critical. As much as they may love their clients and vice versa, the easiest relationships require the least back and forth.

Integrations with your accounting platform

Whether you have a complex ERP or a SMB-friendly accounting tool like Xero or QuickBooks, you likely rely on it for everything finance. So your AP automation system must talk to and work in harmony with it. 

But while most AP solutions have a few integrations, your accounting platform may not be on the list. So this is a clear differentiator. 

Saving time on data entry and verification for accounts payable is great, but not if you then need to update everything in your accounting tools.

And for firms, building a cohesive stack is such a valuable proposition. You may already be Xero or NetSuite specialists, and you can now add 1-2 key AP solutions to your service bundle.

Multi-currency and -entity support

Despite being an everyday occurrence in business, dealing with foreign currencies can add serious financial challenges. Using the correct exchange rate in your accounts seems simple, but small businesses have to dedicate real time and brainpower to getting it right. 

It’s worst at the end of the month, when the original exchange rate has probably changed.

The same is true for companies with offices in different countries. These usually need to be legally and administratively distinct, even if you handle all the finances from home base. A tool that can account for this and lets you switch between entities is a must in this case. 

As you shop around, make sure you find out how each tool deals with these two instances. 

Added insights

We noted above the advantage of having real-time data on your commitments and actuals. But the best tools actually guide you based on this information with clear and actionable insights. 

For example, you should know immediately when you’re spending more than normal with a particular supplier or on a certain inventory item. Or if the average time to pay invoices has gone up to a worrying degree. 

Simply having the data in real time is a great first step. And if your software can supplement that and suggest urgent actions, all the better. 

Both for in-house and outsourced accounting and finance experts, being able to share strategic insights and help guide companies is vital. Having added accounts payable analysis so easily is an exciting leg up.

How to build a modern, automated accounts payable process

Now we get to the crux of the conversation: how do you actually automate your AP process? 

This involves five (relatively) straightforward steps.

1. Assess your AP pain points

Any new software you acquire should solve a pain point or overcome clear inefficiencies. For accounts payable, the most obvious are: 

• No control. Employees are paying invoices without any approval from a budget owner. 

• Frequent errors. Whether caused by excessive data entry or a lack of understanding across the organisation, your team is constantly fixing basic issues. 

• Lack of scalability. You have a growing number of invoices and don’t want to hire just to keep up. Equally, if one approver becomes a bottleneck, or if the monthly close takes longer and longer. 

• Low or no visibility. Until the books are closed each month, you have no idea what’s committed and can’t make decisions. 

• Geographical factors. Hybrid offices and flexible work prevail, but they only work where your processes are fully digitised. If you rely on physical filing cabinets and in-person signatures, there’s a problem. 

If you’re not automating AP today, you likely have a mix of all of these points. But it still pays to identify the biggest and most painful, and emphasise these as you move to step 2. 

2. Choose an AP automation solution

In the previous section we identified some of the most important features of good accounts payable software. Keep these in mind as you shop around for a solution to tackle your key pain points. 

The tool you choose will ultimately depend on your own needs, the size of your team, the amount of invoices you process, and the rest of your tool stack. But as a starting point, we suggest you look into these five AP automation services: 

1. Mimo. Mimo is the ideal option for UK SMEs that want maximum automation and effortless payments. And with built-in credit lines that SMEs can tap into whenever you need, you never get caught or miss important supplier payments. 

2. Tipalti. Arguably the go-to solution for large multinationals, Tipalti is one of the most comprehensive AP automation options available. It requires more work to get up and running, but for large companies, the effort may be worth it. 

3. Spendesk. Spendesk is perfect for European and UK companies with a range of spending challenges, including (but not limited to) accounts payable. You also get prepaid cards for employee expenses and automated expense claims, in the same system you handle invoices. 

4. BILL AP/AR (Bill.com). Similar to Spendesk, BILL fuses AP, AR, and other company spending. It’s one of the most popular tools for growing businesses in the US, and a great choice for founders who want to centralise cash flow.

5. Dext. Dext has long been a favourite for UK accountants, as the tool of choice to digitise invoices, receipts, and the like. If you outsource bookkeeping and need to share documents, you’ve likely come across Dext. 

There are of course other good options on the market. You’ll need to shop around and ask peers for suggestions. 

But when you get to the demos and start negotiating prices and features, make sure you run through the list of important factors we saw above. 

3. Prepare for implementation

Even the simplest and most user-friendly software requires some implementation and time to adjust. The key steps here are: 

• Identify key stakeholders. Who needs admin access, and who will ultimately “own” the tool? 

• [For accountants] Get the access you need. Do you have the permissions and access to company systems you need to install new software? And more broadly, will everyone listen to your policies and advice?

• Set up integrations. Connect the new software to your existing stack. 

• Prepare training materials. Hopefully your new system is user-friendly. Even so, you’ll need at least some information and talking points to get staff up and running. 

The level of complexity and energy required to implement a new AP software are also key differentiators. There are enough smart, simple systems available today that this shouldn’t be a huge lift. 

4. Formalise your process & onboard staff

Once the software is up and running, you need to ensure that everyone knows how and when to use it properly. There’s the practical step of creating user profiles and letting team members log in. 

There’s also the job of setting policies. When well implemented, the tool itself should set boundaries and keep your team within the rules. Make sure that each person has the right permissions, team structure, and approver assigned, and that they don’t have access to the things they shouldn’t — like bank accounts. 

5. Monitor & optimise moving forward

In the months after adding this new software, you of course need to know that it’s working. You should immediately have more visibility and control over invoice processing — if the opposite is true, you have a real issue. 

The best source of feedback are the people using it day to day: accountants, finance people, and your procurement team (if you have one).

You’ll know it’s working well when people report spending less time on data entry and admin, and more time on their core work. 

How new technology improves accounts payable

Technology on its own is almost never a panacea. You always need a good strategy and smart people to get the most from your processes. 

But we can thank new technologies for overhauling some of the more manual aspects of accounts payable. And given the current rate of innovation, we’re only going to see more and faster improvements in the years to come. 

Automation tools we already have

Here’s a quick refresher of what you can already automate, and the features that help. 

• OCR. Reads a scanned document and extracts all the key information. Which practically eliminates data entry (and the countless errors that come with it). 

• Mobile scanning. Along with OCR to read documents, many AP solutions let you take a photo of an invoice through a mobile app. This is faster and more flexible than heading to the scanner, and suits employees who are away from the office. 

• Approval workflows. Built into modern AP tools, these ensure that the right person has approved an invoice before the payment is made. Previously, this would have required email chains and in-person conversations, which were unnecessary bottlenecks. 

• Mobile and cloud-based solutions. Any business relying on paper processes today is wasting time and risks getting left behind. And governments will soon force e-invoicing (see below), so companies really have no choice but to become digital natives. 

Technological changes coming in the (very) near future

As noted above, we’re far from finished innovating in this space. In the very near future, expect to see and hear much more of the following:

• Artificial intelligence and machine learning. Truthfully, AI is already overhauling corporate processes. AI tools can already check documents for authenticity, identify the kind of spend, and essentially “sanity check” invoices before payment. Soon, they’ll also be able to manage budgets and send alerts where spend increases unexpectedly, create real-time reports based on paid and outstanding AP, and give insights into your cash conversion cycle. And those are just the beginning. 

• Instant payments by default. Payment processing delays will soon become much shorter. The Faster Payments System in the UK (or Instant Payments in the EU) forces providers to ensure immediate transactions between businesses at all times. No more delays caused by weekends and public holidays, and fewer discrepancies between what’s committed and what’s left in your account. 

• e-Invoicing across the board. Slowly but surely, countries are launching their own e-invoicing rules. These require every invoice transaction to match a certain format and be reported directly to the authorities. While this is mainly to aid in tax collection, it means that companies and their suppliers will have to be digital-first.

• Predictive analytics forecast cash flow and optimise working capital. As above, AP systems will soon be capable of maintaining forecasts and sending suggestions to improve working capital usage.  

• 360-degree working capital services. For accountants, moving beyond end-of-month close and core bookkeeping will be critical. These tasks, while vital, are becoming faster and easier for companies to manage themselves. Accountants need to become known as cash flow experts, consulting and guiding portfolio companies towards better and smart working capital management. 

That’s a relatively short list. Truthfully, finance operations innovations are only limited by our imagination at this point. The technology we already have can automate and optimise almost any business process. We just need to keep finding new ways to deploy it. 

Automate your AP processes, easily

Accounts payable automation should bring you two key wins: more efficiency (with less admin) and greater visibility over supplier spending. Together, these keep you focused on the ultimate goal of building and running a successful small business. 

And it shouldn’t be hard. Great tools exist, many of which are easy to use and cost effective. In fact, by reducing your administrative burden (and the human resources required) and avoiding costly payment penalties, AP automation typically pays for itself. 

If you want to spend less time thinking about supplier invoices and more on growing your business, Mimo can help.