Payment automation guide: Optimize your AP process

Are manual payment processes dragging down your AP team’s productivity and efficiency? 

One of the highest ROI moves your team can make is to adopt payment automation, a powerful tool that can transform your payable department. Payment automation uses advanced technology to streamline the accounts payable (AP) process, reducing time-consuming tasks and minimizing errors.

In this guide, we will explore the benefits of payment automation, how it works, the essential features to look for in an automation solution, and how Zip can empower your AP department to achieve its best work.

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What is payment automation?

Payment automation involves the use of automated systems to manage the entire payment process from invoice receipt to payment execution. In modern finance, accounts payable automation can reduce human error, increase efficiency, and ensure compliance with regulatory standards. 

By adopting AP automation software, organizations can save time, reduce late payments, and gain better control over their cash flow.

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How does payment automation work?

Payment automation can empower AP and finance teams to save incredible amounts of time and money, while also reducing or eliminating the errors that come from manual processes. Here is just a selection of the work payment automation can take off your plate.

Invoice receipt and capture

Payment automation begins with the electronic receipt and capture of invoices. Technologies such as the Optical Character Recognition (OCR) embedded in Zip AI can be used to extract data from paper invoices and electronic formats. 

This seemingly magic technology can help ensure that all invoice data is accurately entered into the system without manual data entry, reducing human error and processing costs.

Data validation

Automated systems perform checks to validate invoice data, ensuring accuracy and completeness. Matching invoices with purchase orders and receipts can be done with a single click, helping to prevent duplicate payments and other discrepancies.

Approval workflow automation

With invoice automation powering your procurement, invoices are automatically routed to the appropriate approvers based on predefined criteria. Ensuring key stakeholders—and AP staff—are notified of next actions can reduce bottlenecks, and keep everything visible in dashboards. 

These are incredible time and cost-saving workflows which can help in avoiding late fees, but also taking advantage of potential early payment discounts. Procurement orchestrated is procurement accelerated.

Payment scheduling

With automation, electronic payments can be scheduled according to criteria like due dates and discounts. Batch processing of vendor payments further increases efficiency, allowing the AP department to manage multiple transactions simultaneously.

Payment execution

Automated systems execute payments through various methods, such as ACH, wire transfers, and virtual cards. Real-time updates and confirmations of payment status are provided, giving finance teams better visibility of routing and control over the payment process—and the bottom line.

Integration with financial systems

Modern procurement orchestration platforms offer full integration with ERP and accounting systems, to ensure data synchronization and consistency across all financial records. Fully orchestrated integrations can eliminate manual data entry, and can save your IT team major headaches manually coordinating cloud-based tools.

Real-time payment tracking

Continuous monitoring of payment statuses allows for real-time tracking across the entire accounts payable process. Automation helps handle exceptions and discrepancies efficiently, ensuring smooth payment workflows for everyone involved.

Compliance and security

Automated payment systems ensure adherence to regulatory requirements and implement robust security measures to protect sensitive data. 

The move away from paper-based payment methods has been an incredible plus for IT and information security leaders, keeping all transactional activity in one place, and fully transparent. No more paper checks!

Reporting and analytics

Automated systems generate detailed reports on payment activities, providing insights into payment trends and performance. This data can be analyzed to optimize payment processes and help CFOs make better decisions.

Continuous improvement

Regular reviews and refinements of automation processes ensure ongoing optimization. By adapting to pioneering new procurement platforms like Zip, finance and procurement leaders can continuously improve their AP workflows.

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What features should a company look for in a payment automation solution?

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When selecting a payment automation solution, companies should consider the following essential and advanced features:

• Invoice Processing: Efficient capture and processing of invoices using OCR and AI technologies.
• Payment Tracking: Real-time tracking of payment statuses for better visibility and control.
• AI and Machine Learning Capabilities: Advanced technologies to enhance data validation, fraud detection, and process optimization.
• Integration with ERP Systems: Seamless integration with existing ERP and accounting systems to ensure data consistency and accuracy.

How to measure the ROI of payment automation

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To measure the ROI of payment automation, we suggest taking a look at these 10 steps.

1. Identify Key Performance Indicators (KPIs): Define metrics such as processing time, error rates, and cost savings.
2. Calculate pre-automation baselines: Measure current performance metrics to establish a baseline for comparison.
3. Track implementation costs: Include software, training, and integration expenses.
4. Monitor post-automation performance: Compare metrics such as processing speed, accuracy, and operational costs before and after automation.
5. Quantify financial savings: Calculate cost reductions in manual processing, error resolution, and improved cash flow management.
6. Evaluate efficiency gains: Assess time saved in payment processing and approval workflows.
7. Analyze compliance and risk management improvements: Measure enhancements in compliance adherence and reduced risk exposure.
8. Review vendor and stakeholder feedback: Collect qualitative data on improved vendor relationships and internal satisfaction.
9. Calculate Total ROI: Compare the total savings and efficiency gains against the implementation and operational costs.
10. Continuous improvement and reporting: Regularly review and adjust KPIs to ensure sustained ROI and process optimization.

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Primary benefits of payment automation

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Payment automation offers numerous benefits. 

• Cost savings: Reduced processing costs and fewer manual errors lead to significant financial savings.
• Efficiency: Streamlined processes and automated workflows save time and reduce bottlenecks.
• Improved accuracy: Automated systems ensure data accuracy and reduce the risk of human error.
• Enhanced vendor communication and collaboration: Timely payments and improved interactions with vendors enhance relationships.
• Better cash flow management: Early payment discounts and optimized payment schedules improve cash flow.

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Security considerations when using payment automation tools

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When implementing payment automation, companies should prioritize security to protect sensitive financial data and ensure compliance with regulatory requirements. Here’s what we recommend.

Data protection

1. Encryption: Ensure that all data, both in transit and at rest, is encrypted using robust encryption standards. This can help protect sensitive information from unauthorized access and potential breaches.
2. Data backup: Regularly backup data to secure locations to prevent loss due to hardware failures, cyber-attacks, or other disasters. Ensure backups are encrypted and stored in compliance with regulatory standards.

Compliance

1. Regulatory adherence: Payment automation tools must comply with relevant regulations such as the General Data Protection Regulation (GDPR), the Sarbanes-Oxley Act (SOX), and the Payment Card Industry Data Security Standard (PCI DSS).
2. Audit trails: Maintain detailed audit trails of all payment activities to facilitate regulatory compliance and internal audits.
3. Vendor compliance: Ensure that third-party vendors providing payment automation tools adhere to the same security and compliance standards. Perform regular audits and assessments to verify their compliance.

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Implement payment automation with Zip

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Zip offers a comprehensive AP automation solution as part of its pioneering Procurement Orchestration platform. Your team can take advantage of:

1. Automated Intake and invoice processing: Zip streamlines the Intake process, offering AI-powered process guidance so invoices always have everything you need.
2. Real-time payment tracking: Zip’s automated payments platform provides total control and visibility into payment statuses, making it easy for finance to manage cash flow.
3. Vendor management integration: Working from a single source of truth, you can manage all vendor interactions in one system to help source, assess risk, and collect information in a detailed vendor record.
4. Customizable approval workflows: Zip’s workflow engine provides stakeholders a custom-tailored approval process that makes sure everyone is on the same page.
5. Analytics and reporting: Rich spend insights provide detailed payment metrics and transparency into trends and performance, supercharging your data-driven decision-making.

By adopting Zip's AP automation, finance teams can optimize their AP process, achieve significant cost savings, and enhance overall efficiency.

For more information or to see how Zip can transform your AP process, request a demo today.