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June 26, 2024

Essentials of Accounting: 7 Ways Accounts Payable Automation Significantly Enhances Cash Flow

In today’s fast-paced business environment, managing cash flow efficiently is crucial for the success and stability of any organization. One of the most impactful ways to achieve this is through accounts payable (AP) automation. By streamlining the AP process, companies can not only save time and reduce errors but also significantly enhance their cash flow.

7 key ways that AP automation can dramatically improve Cash Flow:

Manage Payments and Balances

Owing money is an inevitable part of running a business. However, it’s crucial to prevent balances from escalating month after month. To improve cash flow, you need to take control of payment processing and ensure payments are made in full and on time.

Automating the AP department streamlines the entire payment process. This approach cuts costs and strategically times payments to your advantage, which we’ll explore further in the following sections. Automation also enhances insight and control over the payment process, enabling you to track carried-over balances, average payable periods, and your accounts payable aging schedule.

Cut Processing Fees and Costs

In a manual accounts payable department, employees often struggle just to process payments on time. Paper-based systems result in slow AP processing, preventing companies from taking advantage of early-payment discounts and often leading to late fees.

Accounts payable automation resolves these issues by significantly accelerating invoice processing. With automation, late fees become a thing of the past, and labor cost savings reduce the overall cost-per-invoice, particularly for companies that haven’t yet automated their AP.

Time Payments to Your Advantage

Once you have control over the AP process and ensure timely bill payments, you can negotiate payment terms with suppliers. Many suppliers are open to early payment discounts, contributing to positive cash flow.

Even if suppliers don’t offer early payment discounts, AP automation allows you to schedule payments precisely, controlling when cash leaves your company. You might negotiate longer payable terms and set up electronic payments, delaying cash outflow until the payment due date.

Evaluate and Serve Suppliers More Effectively

To manage cash flow effectively, closely evaluate both customers and suppliers. Assess the terms with long-standing partners to ensure they’re not negatively impacting your business, and address any issues that arise.

AP automation enhances oversight of supplier relationships by easily tracking supplier information. The system includes a vendor portal, allowing suppliers to access their invoices, check payment status, and upload missing invoices, improving your relationships with them.

Use Commercial Credit Cards Easily

Using commercial cards as part of a B2B payment system can enhance short-term cash flow with cash-back rebates and working capital extensions through their credit line.

Paying with commercial credit cards can be cumbersome due to separate login credentials and vendor acceptance. AP automation simplifies this process, allowing you to enjoy the benefits of commercial credit cards without the hassle.

Prevent Time-Consuming Errors

Poorly controlled accounts payable processes can waste significant time and money. Disorganized AP leads to lengthy payment processing and costly errors like duplicate payments. Resolving these errors further drains resources.

Accounts payable automation mitigates these issues. The system accurately captures information from both digital and paper invoices, processes them automatically, and cross-checks data to prevent duplicate payments.

Increase Overall Cash Flow Visibility

The AP department is central to your company’s cash flow management. Increased visibility into the AP process through automation also enhances overall cash flow visibility. A well-managed, automated AP system provides key insights into your business’s current cash flow status.

Automated AP systems maintain thorough records, tracking every change and event as invoices pass through. The system’s searchable database allows real-time access to information needed to monitor cash flow and plan future purchases.

By adopting accounts payable automation, businesses can achieve more efficient cash flow management, ultimately leading to improved financial stability and operational efficiency.

How Does Versa Cloud ERP Enable AP Automation and Improve Cash Flow:

Adopting accounts payable automation through systems like Versa Cloud ERP can significantly enhance your business’s cash flow management. Automation streamlines payment processes reduces costs, and ensures timely payments, all while providing increased visibility and control over financial operations. With Versa Cloud ERP, you can track balances, optimize payment timing, and improve supplier relationships, all of which contribute to a healthier cash flow. By leveraging the comprehensive features of Versa Cloud ERP, businesses can achieve greater financial stability and operational efficiency.

FAQs for Cash Flow Improvement and Accounts Payables Automation in an ERP

1. What is accounts payable automation?

Accounts payable automation refers to the use of software to streamline the processing of invoices and payments within an organization. It automates tasks such as invoice capture, approval workflows, and payment scheduling to reduce manual effort and errors.

2. How does automating accounts payable improve cash flow?

Automating accounts payable improves cash flow by speeding up invoice processing, enabling early payment discounts, and reducing processing costs associated with manual handling. It also enhances visibility into financial obligations, helping businesses manage cash more effectively.

3. What are the benefits of using an ERP system like Versa Cloud ERP for accounts payable automation?

Versa Cloud ERP provides robust features for accounts payable automation, including automated workflows, real-time reporting, and integration with financial systems. It helps streamline operations, minimize errors, and optimize cash flow management through efficient invoice handling and payment scheduling.

4. Can accounts payable automation help in reducing processing fees and costs?

Yes, accounts payable automation reduces costs by eliminating manual tasks such as data entry and paper-based processes. This results in lower processing fees, improved operational efficiency, and reduced overhead costs.

5. How does accounts payable automation facilitate advantageous payment timing?

Automation allows businesses to schedule payments strategically, taking advantage of early payment discounts and optimizing cash flow. It ensures that payments are made promptly and in line with supplier terms, thereby enhancing financial liquidity.

6. What insights can businesses gain from automating accounts payable?

Automating accounts payable provides insights into outstanding invoices, payment statuses, and financial obligations. These insights enable better cash flow forecasting, improved decision-making, and proactive management of working capital.

ERP systems are fundamental to the efficient management of a modern supply chain in the manufacturing sector. By integrating various business processes, ERP systems streamline operations, enhance visibility, and improve decision-making, making them indispensable tools for manufacturers aiming to stay competitive in today’s market.

Empower your business with the knowledge to navigate the realm of an Integrated ERP solution, specifically tailored to your business needs. Gain insights, streamline processes, and propel your financial management to new heights with this comprehensive guide