Streamlining Operations: The Role of AP Automation 

The pleasure of building something from scratch and seeing the tangible outcome is the reason you are in construction. However, maintaining a construction company can be a daunting task if not streamlined properly. The construction industry is extremely dynamic with multiple stakeholders, ever-growing change requests, and elastic timelines and before you know it, your construction company can be turned into a metaphorical firefighting station.

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We understand the unique challenges a small or medium-sized construction firm may face in the industry. With limited resources and restricted access to capital as well as the intense competitiveness in the industry, your company might be more vulnerable to industry and global disruptions. Aligning your financials and increasing the efficiency of your processes will definitely help you stay on top of your game amidst these challenges. We want to make this journey a little bit easier for you and your team. That’s why we’ve dedicated this article to walk you through the technicalities of Accounts Payable (AP) automation - automation of a core process in your business finances.

What is Accounts Payable (AP) automation?

Accounts Payable (AP) automation enables businesses to streamline and automate the processes associated with managing and paying supplier invoices within an organization. Imagine a typical day at the AP department, with dozens or hundreds of invoices waiting to be verified against purchase orders, budget, pending approvals, delayed payments, and disgruntled suppliers. Now imagine a walk in the park without a care in the world – ok, now I’m only exaggerating. Running a business is never going to be that easy, but AP automation can lessen the burden you carry greatly, and your team will be thanking you in no time. Read ahead to see how you can benefit.

Benefits of AP automation

Efficiency

Automation, like in any other field brings efficiency to the AP process. With repetitive tasks automated, the AP process will be much faster and will help to minimize errors and associated costs. Most AP automation software provides Optical Character Recognition (OCR) tools so that you can simply upload invoices in a variety of formats, which then will be converted to a digitized format. This will drastically reduce the need for manual data entry, freeing up your employees to engage in more productive work.

Improved transparency

With real-time insights, centralized data repositories, and digital audit trails, automation of the AP process will improve the transparency of the financial management of the company. This will help introduce strong internal controls to the system to prevent fraud as well as improve compliance with regulatory requirements.

Enhanced supplier relationships

The construction industry is heavily dependent on suppliers and contractors and we all know how important it is to keep them happy. With multiple vendors involved in even the smallest of construction projects, it can be a hectic task to streamline payments. Timely payments are a sure way to maintain strong vendor relationships and it may even lead to better work quality and preferential discounts.

Breakdown of the AP automation process

Let’s try to understand the process in more detail. We’ve broken down the process into several steps to highlight the value addition created by AP automation.

Invoice Capture‍

The first step of the AP process is extracting data from the invoices which may come in different formats. Paper invoices will be digitized using OCR tools while electronic invoices will be directly captured in the system.

Invoice Validation‍

Extracted data will then be validated against the purchase order to ensure accuracy and completeness. Discrepancies across quantity, price, etc will be flagged and raised for further investigations.

Approval Workflow

‍An automated approval workflow will route the invoice to designated approvers based on predefined rules. Here you can set up thresholds for automatic approval or escalation for higher-value invoices. This step is highly valuable for maintaining clear audit trails.

Payment Processing

Integrating automated payments into the process will ensure a smoother AP process and allow you to optimize your company cash flow. By defining rules to schedule payments based on due dates, early payment discounts, or any such criteria, vendor relationships can be better maintained.

Reconciliation and Reporting

‍The system initiates an automatic reconciliation procedure, cross-referencing payment transactions with bank statements to validate the alignment of payment amounts and beneficiaries. AP automation tools additionally produce comprehensive reports, highlighting metrics such as expenditure trends, vendor performance, and potential areas for cost-saving.

Choosing the Right AP Automation Solution

If you are a small business owner, you are probably wondering whether AP automation is right for your company. Regardless of the business size, automated AP solutions can be customized to fit your unique needs. While there are many solutions out there, it’s crucial to spend some time analysing the options available and selecting the best fit for your company. We’ve listed some top tips to consider when deciding on the most suitable AP automation solution.  

Define Your Objectives

It’s imperative you analyze your existing AP workflow and identify pain points. This process will expose specific weaknesses in your system, such as delayed approvals, process errors, or opportunities for fraudulent activities. Once equipped with this information, you could outline your goals for AP automation. This could be reducing processing time, minimizing errors, improving visibility, or cutting costs. Be conscious about the unique features of your company such as your existing processes, ERP systems, and the needs and capabilities of your team so that you can accurately determine your requirements.

‍Automation Features

Depending on your objectives, evaluate the features offered and the level of automation the solution offers. Don’t get carried away with cool new features if they don’t align with your objectives. We propose you adopt a basic version of the software first, run a pilot project, and slowly start adding additional features that can improve your overall process.

‍User-Friendly Interface

This probably is the single most important criterion when it comes to selecting any digital solution. You can invest in the latest technology on the planet, but if your team finds it difficult to navigate, you’ll have a hard time convincing them. Don’t forget that the reason you are switching to AP automation is to reduce the burden on your team, not to compound it. So, opt for a solution with an intuitive and user-friendly interface.

‍Scalability

Choose a solution that can scale with your business growth. Ensure it can handle increased transaction volumes, additional users, and evolving business requirements.

‍Integration Capabilities

Integration and interoperability across platforms are vital to maintain data consistency. So don’t forget to check for seamless, bi-directional integration with your existing accounting software (e.g. QuickBooks) and other systems.

Training and Support

Assess the level of training and support provided by the solution provider. A comprehensive training program and responsive customer support are essential for a smooth transition and ongoing success.

Future Trends in AP Automation for Construction

With the rate of advancement of technology, AP automation solutions can be expected to expand and offer more convenience to users. Some of the technologies we are keeping an eye on are:

• Integration of AI and machine learning (ML) for predictive analytics - AI and ML will play a significant role in improving the accuracy and efficiency of invoice processing.
• Self-service supplier portals - Such portals can enable suppliers to access real-time information, submit electronic invoices, and track payment status among other things.

• Advanced Data Analytics - The integration of advanced analytics and business intelligence tools into AP automation systems will provide construction companies with valuable insights. Data analytics can help optimize spending, identify cost-saving opportunities, and improve overall financial management.

Conclusion

We hope we built a strong enough case to convince you why moving to AP automation can be one of the best decisions you can make for the growth of your business.

The adoption of AP automation is a pivotal strategy for businesses seeking efficiency, accuracy, and transparency. By automating tasks such as invoice processing, payment approvals, and reconciliation, you can redirect your valued employees toward more productive engagements, minimize errors, and improve visibility across your financial operations. Software like Adaptive provides a myriad of options and support to transition your business to the world of automation.

Admitting automation in your business isn't just about staying ahead of the curve; it's about positioning your company for sustained success in a dynamic and competitive world. Are you ready?

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