Accounts Payable (AP) is a term used to represent the department of a company that takes care of the money owed by the company to suppliers or its creditors. It is also the debt owed by the company. This debt is a short-term payment owed to another company. If the accounts payable increase, the company performance decreases. It is an integral part of a company’s finance.
How is Account Payable recorded?
Accountants record the Accounts Payable. They increase the Account Payable when the company receives a bill. When the company pays the bill, the accountant decreases the Account Payable. While changing the accounts payable, the accountant records the invoice as an expense. The bill payment gets recorded in a cash account; this decreases the cash balance of a company.
Is Automation Necessary?
A company may buy and sell many services or products in huge quantities. Keeping track of all the accounts payable for numerous transactions is a manpower-intensive task. Your company will be inefficient if you do not have an automated Accounts Payable process.
Problems caused by poor Automation of AP:
- Incomplete invoices create unnecessary back and forth communications
- Your relationship with the vendors will be poor
- Waste of time and money
- Your market credibility will decline
What are the Benefits of AP Automation?
Benefits of an AP automation software include:
- Minimize cost
Automation will reduce the labor engaged in the AP process. Further, it will reduce the cost. - Reduce process time
Automating the AP process will increase the process’ speed because of the few human interventions. - Reduce the chance of fraud
A code will replace the humans in each step of the Accounts Payable process. Reduced human intervention will reduce the risk of fraudulent transactions. - Make your business scalable
By automation, you can scale your business without hiring and training more power. It will save time; automation will improve the scalability of your company. - Get valuable insights in real-time
You can analyze the whole AP process from a single window in real-time. That is essential to understand the faults and rectify them.
Accounts Payable Automation Market in 2022
According to marketwatch.com, the AP automation market in 2020 was USD 1809.3 million. It may rise to USD 3079.3 million in 2027. This rise suggests lots of opportunities in the AP automation market in 2022. Further, according to tipalti.com, more than forty percent of companies will fully automate their AP process within the next twelve months.
What will drive the market?
Many industries are behind the drive, such as Consumer Goods and Retail, Banking, Financial Services, and Insurance (BFSI), Information Technology (IT) and Telecom, Manufacturing, Healthcare, Energy and Utilities. These industries are going to use AP automation in the coming years.
Things that will compel AP automation:
- Companies are shifting their workflows to remote. That will need a Remote Account Payable process.
- The time and energy required for AP automation were a problem. AI and Machine Learning will make it easy.
- Cloud-based solutions will increase, increasing the demand for AP automation. That is because cloud management is better with automated tasks.
- An increase in the need to analyze data better will drive the AP automation market.
- Need for better cybersecurity, as AP automation provides better monitoring.
Conclusion
Account payable automation is necessary for a business. It makes it efficient and offers easy scalability. Additionally, it reduces the labor power used in the process. This reduced labor reduces cost and the chance of fraud or errors. The accounts payable automation market is growing. The market may grow twice the size in 2027 that it was in 2020. Further, many companies may automate their AP process within twelve months. The industries such as finance, Healthcare, IT, and Energy will be the primary cause for the market growth.
Are you also looking to make the switch? At Mynd, we are equipped with a wide range of offerings that help clients manage their end-to-end accounts payable function.