It’s impractical for growing businesses to rely on manual accounting practices. Static accounting methods prevent a business from adapting and take up valuable employee time. By automating accounts payable with the help of the right accounting software, a company can respond to economic changes while scaling operations.
Business owners should get ahead of the curve and transition their accounts payable to an automated digital system sooner than later. The change may be difficult for some, but the long-term benefits are too great to ignore.
Benefits of automating accounts payable
The COVID-19 pandemic proved why the future of accounts payable is automation. With the coronavirus keeping most people at home in 2020, 2021, and even into 2022, companies that still conducted accounts payable manually needed employees to go into the office and handle the financial tasks in person. Automating accounts payable eliminates that need, saving time (and keeping people safe during a pandemic).
Here are five other benefits your business stands to gain from automating accounts payable with the help of innovative accounting software.
1. Accuracy
Any time you type or write by hand, there is a possibility you will get a number wrong. One of the main job responsibilities of an accountant is to check and then double-check for simple math errors. Everyone knows that 1 + 1 = 2, but with a stack of hundreds of invoices, mistakes happen. Even a simple addition error can cost money and time as you untangle the mess. By automating accounts payable, you’ll know that the invoice you enter will be the same invoice others see and respond to. If there is an error in the initial invoice, your digital accounting system can be set up to easily recognize inconsistencies or mistakes.
Errors are just one common accounting challenge small businesses face. Others include regulating payroll and covering unexpected expenses.
2. Efficiency
By automating your accounts payable process, you relieve workers from monotonous tasks and free them to use their skills in more productive ways. In most cases, invoice processing primarily involves reading and entering figures, then checking them for accuracy. As this portion of the AP process is automated, accounts payable professionals can use their skills to maximum effect by shifting to a more analytics-focused role, looking for opportunities to improve cash flow and secure discounts from vendors, for example. [Read related article: 11 Accounting Tips All Small Businesses Should Know]
3. Oversight
Even though it might seem like automating accounts payable could make you less aware of your company’s day-to-day operations, the opposite is true. By pulling only relevant data and presenting it only to relevant parties, automated accounts payable gives you more oversight possibilities and can even help you prevent employee accounting fraud. By putting everything online in a transparent process, you can collate data into usable reports or drill down into specific clients and workers.
4. Streamlined processes
Even the best manual approval processes hit snags where some supplier invoices or payments fall through the cracks. Accounting software lets you automate the approval and entire workflow process, including ensuring billed amounts are correct and that all relevant parties are notified and approve expenses at appropriate intervals. By automating this process, there is no need to chase down missing information. If there’s a hitch at some point in the approval process, you’ll know exactly where that is and how to fix it. If everything’s going well and you simply want to check on the status of an invoice, you can do so with a few clicks.
5. Recordkeeping
By automating your accounts payable and using a transparent, digital process for this critical business function, you’re also creating an electronic trail that anyone can follow. In contrast, if you have stacks of paper forms in a file cabinet somewhere, you know that sometimes paper gets lost, along with critical signatures. Moving your accounts payable to an automated platform gives you the ability to track every step of your operations and then hold those records in keeping with a standardized retention schedule. If you ever need to present records to someone, such as a prospective partner, think how much simpler it would be for all involved to share digital versions complete with transaction histories, all automatically created as part of everyday business.
The best accounting software
Business software varies widely, and accounting software is no different. Business owners must consider their organization’s specific needs to ensure they choose the best accounting software for their company. Here are six industry-leading platforms to consider as you embark on automating accounts payable.
Zoho Books
If your company is looking for accounting software with automated processing, our Zoho Books review explains why this system is the best choice. Zoho Books allows users to automate tasks like issuing invoices, sending reminders, distributing payments, and tracking expenses. Its unique scripting language lets more advanced users customize the software based on company-specific needs.
This accounting software is best for small organizations trying to do more with fewer employees. Zoho Books will feel like another team member, and thanks to the automated processes, your team can reduce errors and increase productivity. Zoho Books has various pricing models so business owners can choose the plan that best fits their needs. There is even a free option for businesses with revenue of less than $50,000 a year. The Standard package is $15 per month for three users.
Intuit QuickBooks Online
A small business that wants one-size-fits-all accounting software should consider choosing Intuit QuickBooks Online. This platform is filled with features that integrate with more than 650 business applications. Since this is the industry-leading accounting software, most accountants are familiar with the product, and built-in familiarity significantly reduces the learning curve for your team.
Like Zoho Books, Intuit QuickBooks Online also has a plan costing $15 per month, but as our QuickBooks Online review indicates, many businesses prefer to sign up for the Plus plan, which costs $80 per month for five users. Before making such an investment, we like that companies can test out the system with a 30-day free trial.
Intuit QuickBooks Online offers easily accessible video tutorials and has an active virtual community for finding answers to specific questions.
Melio
A company primarily concerned with accounts payable features should seriously consider using Melio. This cloud-based software doesn’t charge bank transfer fees and allows users to pay vendors directly. Melio also integrates with Intuit QuickBooks Online so users can customize their experience and get the best of both platforms.
One of the other big selling points for Melio is that it is primarily free. Instead of paying for the system, as you do with other accounting software solutions, this vendor merely collects a 2.9% fee for credit card and debit card payments. The setup is very basic, which is why Melio is best for small businesses, but it has all you need to focus on accounts payable and accounts receivable. The beauty is in Melio’s simplicity.
Oracle NetSuite
Complex global businesses partner with Oracle NetSuite for its industry-leading enterprise resource planning (ERP) platform. This accounting software can perform all of your business’s back-office operations, such as supply chain logistics and marketing. As it handles multiple areas of business, some users may be overwhelmed by the platform. The steep learning curve and high price make Oracle NetSuite a niche product for companies that plan to scale rapidly.
Businesses need to contact the vendor directly to get a quote. Pricing varies widely based on industry and company needs. There is no free trial, but Oracle’s sales team will likely offer a complimentary tour of the software. Learn more in our detailed Oracle NetSuite review.
FreshBooks
A business with extensive invoicing needs should select FreshBooks. All businesses rely on prompt and frequent payments to stay afloat, and FreshBooks’ professional formatting, past-due invoice tracking and online payment options can ensure a company’s invoicing success. FreshBooks also allows users to track billable hours and expenses, making it the perfect software for self-employed individuals. [Learn how to handle non-paying clients.]
Though this system excels at invoicing, as our full FreshBooks review makes clear, it’s not a one-trick pony. It offers a robust array of project management features too. Use FreshBooks to generate reports, reconcile bank accounts, and track hours. One downside to Freshbooks, however, is that it doesn’t have the ability to track inventory. FreshBooks’ cost depends on how many billable clients you have, though custom pricing is available for businesses with complex needs, and there is also a free trial.
According to a survey by Sage, another accounting platform provider, more than 95% of those polled say automation can help with their accounting tasks. Learn more about this vendor in our full review of Sage’s accounting services.
Xero
Businesses with plans to scale should look into Xero for help automating payments and more. This software allows users to add additional features so your platform will grow as your business does. Sticking with one accounting software through various business stages reduces costly transitions. That said, unlike the other accounting software options on this list, Xero customers pay by the feature, not by company size.
Business owners can choose from three plans. The Early plan allows users to send quotes, enter five bills, input bills and track cash flow for $12 per month. The Growing plan expands the system by letting users send invoices, enter all bills and reconcile accounts for $34 per month. The Established plan gives customers access to all Xero features, including in-depth analytics and project tracking, for $65 per month. Customers requiring payroll features can add them through Gusto for $40 per month. Find out more in our Xero review and our review of Gusto’s payroll software.
Steven Johansson contributed to the writing and reporting in this article.