Understanding AP Automation
Accounts payable automation refers to the use of technology and software solutions to streamline and optimize the accounts payable process within an organization. This is especially useful for the companies operating in the construction industry. It involves automating various tasks and workflows associated with managing and processing invoices, vendor payments, and related financial transactions. The goal of accounts payable automation is to improve efficiency, accuracy, and control while reducing manual effort and costs.
Of course, technology is only as useful as those who operate it. This lesson was learned firsthand by Rishi Srivastava, Being Humans co-founder. Rishi spent years working in multiple settings as an embedded systems engineer, commodities risk analyst, and AI engineer, etc. Through his career, spanning more than a decade, and various nerve-racking experiences dealing with sensitive information, he realized the deep-seated need to handle complex accounting and data entry procedures via automation.
He gathered force with co-founder Luke Nelson – a construction industry expert, CFO, and CFMA member – well-versed in the complex nature of data in the construction sector. Together they teamed up to create a product that is a dream come true for contractors, construction companies, and bookkeepers.
Keeping all the challenges organizations face in mind, they built the Being Humans AP Automation software that cuts vendor invoice, receipts, and pay app processing times by 80%. Furthermore, the software’s advanced AI technology reads with a resounding 99.9% accuracy.
Not only does this slash the increasing labor costs, but it also optimizes operational efficiency while saving valuable time – some top construction industry trends to watch out for.
A benchmarking study by the American Productivity and Quality Center on invoice processing found that “Companies that rely on manual workflows only process 6,082 invoices per FTE/year, less than half the average for all organizations. While enterprises that automate and optimize their AP processes average 23,333 invoices per FTE/year.”
In this article we will discuss some prominent features of AP automation, as well as its benefits to construction companies and its exploding popularity in the industry.
Key Components of AP Automation
Invoice capture and data extraction
Automation systems capture invoices in various formats, such as scanned documents, electronic files, or emails. Optical character recognition (OCR) technology is often used to extract relevant data from invoices, including vendor details, invoice numbers, dates, line items, and amounts. This eliminates the need for manual data entry and speeds up the invoice processing cycle.
Invoice validation and matching
Automated systems validate the extracted invoice data by comparing it against relevant information from purchase orders, contracts, or other supporting documents. This ensures accuracy and helps identify any discrepancies or exceptions. The system automatically matches invoices with corresponding purchase orders and receipts to verify the received goods or services.
Approval workflows and routing
Accounts payable automation allows for the setup of predefined approval workflows. Invoices are automatically routed to the appropriate approvers based on predefined rules, such as invoice amount, vendor, or department. Approvers review invoices electronically, add comments, request adjustments, or approve/reject invoices within the system. This streamlines the approval process and reduces delays.
Automated accounts payable systems facilitate electronic payment methods, such as electronic funds transfer (EFT), virtual credit cards, or automated clearing house (ACH) payments. This eliminates the need for manual check writing, reduces paper-based processes, and facilitates faster and more secure payments to vendors and suppliers. Electronic payments also offer benefits such as cash flow optimization and improved visibility into payment statuses.
Reporting and analytics
Automation systems generate real-time reports and analytics on accounts payable metrics, such as invoice processing times, approval cycle times, payment statuses, and aging reports. These insights help identify bottlenecks, track performance, monitor key performance indicators (KPIs), and make data-driven decisions for process improvements. Advanced analytics may include predictive insights and trend analysis to identify potential cost savings or opportunities for process optimization.
Integration with financial systems
Accounts payable automation solutions integrate with enterprise resource planning (ERP) systems or financial management software. For efficient performance selecting the perfect construction ERP is crucial. This integration ensures seamless data transfer, eliminates manual data entry, and provides a centralized view of financial data across the organization. Integration with other systems, such as procurement or inventory management, allows for more efficient end-to-end processes.
Compliance and audit readiness
Automated accounts payable processes enhance compliance with internal policies, industry regulations, and auditing requirements. The system enforces approval limits, maintains an audit trail of invoice processing activities, and provides access controls to ensure data security and confidentiality. This helps organizations meet regulatory obligations and simplifies the audit process.
The Benefits of AP Automation for the Construction Industry
Some general benefits of AP automation, prevalent across all industries, include – improved accuracy, reduced processing time, increased efficiency, enhanced visibility and control, cost savings, and better vendor relationships. It also enables organizations to streamline their accounts payable functions, minimize errors, and focus on strategic financial management.
For the construction industry in particular, accounts payable automation has brought exceptional benefits. In the economic turmoil the world is facing today, automation empowers construction firms amid inflation
Some major advantages AP automation for the construction sector include:
Streamlined invoice processing
Automating accounts payable in construction eliminates the need for manual data entry and paper-based processes. Invoices are scanned or electronically received, and relevant information is extracted automatically using optical character recognition (OCR) technology. This streamlines the invoice processing workflow, reduces the time spent on manual tasks, and minimizes the risk of errors.
Faster approvals and payments
Automated accounts payable systems enable electronic routing and approval workflows. Construction companies are able to set up predefined approval hierarchies and rules, ensuring that invoices are sent to the appropriate stakeholders for review and approval. This accelerates the approval process, reduces bottlenecks, and speeds up payments to vendors and subcontractors. Timely payments help maintain good relationships with suppliers and subcontractors, improving overall project performance.
Enhanced accuracy and error reduction
Manual data entry is prone to errors, such as typos, incorrect coding, or duplication. Accounts payable automation minimizes these errors by extracting and validating invoice data automatically. The system performs checks for data accuracy, matches invoices against purchase orders or contracts, and flags any discrepancies or anomalies for further review. This reduces the risk of payment errors, duplicate payments, or fraudulent activities.
Improved visibility and control
Automation provides real-time visibility into the accounts payable process. Construction companies track the status of invoices, monitor approval workflows, and generate reports to gain insights into their payables. This visibility enhances control over cash flow, enables better forecasting, and allows for proactive management of outstanding invoices, disputes, or vendor inquiries.
Better compliance and audit readiness
Construction projects often involve complex contracts, regulations, and compliance requirements. Accounts payable automation helps ensure compliance with internal policies, industry regulations, and legal obligations.
The system enforces approval limits, flags potential compliance issues, and maintains an audit trail of invoice processing activities. This facilitates easier audits, reduces the risk of non-compliance penalties, and improves overall financial governance.
Cost savings and efficiency
Automating accounts payable processes reduces the need for manual labor, paper-based documents, and physical storage. This leads to cost savings in terms of reduced administrative overhead, paper supplies, and document retrieval efforts. Additionally, the streamlined and efficient invoice processing cycle enables early payment discounts, avoids late payment penalties, and optimizes cash flow management.
Integration with other systems
Accounts payable automation integrates with other construction management systems, such as enterprise resource planning (ERP) software or project management tools. This integration allows for seamless data exchange, enhances data accuracy, and eliminates the need for manual data entry in multiple systems. It also provides a holistic view of financial data, project costs, and vendor performance, enabling better decision-making and project control.
The Rise of AP Automation in The Construction Sector
In recent years, the construction industry has witnessed a significant rise in the adoption of accounts payable automation. This trend is driven by the industry’s growing recognition of the numerous benefits that automation can bring to the table. Traditionally, construction companies have relied on manual processes to manage their accounts payable tasks, which often proved to be time-consuming, error-prone, and inefficient. However, with the advent of advanced automation technologies, the industry is experiencing a transformation in the way it handles its financial operations.
One of the key advantages of accounts payable automation is streamlined invoice processing. Construction companies typically deal with a high volume of invoices from various sources, including suppliers, subcontractors, and vendors. The manual processing of these invoices is a daunting task, prone to human errors and delays. By leveraging automation, the construction industry is able to automate the entire invoice processing workflow, starting from the receipt of invoices to their validation and matching with purchase orders. This automation significantly reduces processing time, minimizes errors, and improves overall operational efficiency.
Another area where automation proves invaluable is electronic document management. Construction projects involve extensive paperwork, including invoices, purchase orders, and receipts. Manually managing and organizing these documents is a cumbersome and time-consuming process. Accounts payable automation allows construction companies to digitize and store these documents electronically, providing a centralized repository for easy access, retrieval, and sharing of information. This shift to electronic document management not only reduces the risk of lost or misplaced paperwork but also facilitates collaboration and enhances data security.
Furthermore, automation enables the automation of workflow processes and approvals. Construction companies often have complex approval hierarchies and processes in place. Manual routing of invoices for approvals can lead to bottlenecks and delays. With accounts payable automation, predefined rules and criteria are established to automate the routing of invoices to the appropriate approvers. This streamlines the approval process, eliminates manual intervention, and accelerates invoice processing.
Integration with existing accounting systems is another crucial aspect of accounts payable automation. Construction companies commonly use enterprise resource planning (ERP) software or other accounting systems to manage their financial operations. Accounts payable automation solutions seamlessly integrate with these systems, ensuring a smooth flow of data between platforms. This integration eliminates the need for manual data entry, reduces the chances of errors, and provides real-time visibility into financial information. It empowers construction companies with accurate and up-to-date data, enabling better decision-making and financial management.
Overall, the rise of accounts payable automation in the construction industry represents a shift towards increased efficiency, cost savings, and improved accuracy. By embracing automation technologies, construction companies can streamline their financial processes, reduce manual errors, enhance collaboration, and gain better control over their accounts payable operations. As the industry continues to embrace automation, we can expect further advancements and innovations in this space, leading to greater productivity and competitiveness in the construction sector.
Optimize Operations with Being Humans
Accounts payable automation in the construction industry brings efficiency, accuracy, control, compliance, and cost savings. It streamlines invoice processing, accelerates approvals and payments, reduces errors, and provides real-time visibility into payables. These benefits contribute to improved financial management, stronger vendor relationships, and better project outcomes.
At Being Humans, our seasoned team of financial, operational, and technology specialists, project managers, and thought leadership place utmost value on innovation and becoming the trendsetter of the industry.
We recognize that every organization is unique, and we strive to develop solutions that are not only efficient, but also successful and long-lasting. Our team is comprised of experienced C-suite executives that understand how to move the economic levers of your business in a positive direction, can provide transaction advice and assistance, and develop strategic and economic value from technology.
By following a proven methodology, we’ve made a significant impact on our client’s bottom line and have earned ourselves a reputation as a game-changer in the industry. Our Intelligent Document Processing solutions are designed to drive financial success and increase profitability for our clients, and our ultimate goal is to help them achieve long-term value and a positive ROI.