March 17, 2021 | Accounts Payable
Not very long ago, the mere mention of the word audit was enough to terrify a business. Auditors would spend several weeks going through a huge volume of paper records to check financial transactions, establish their credibility and successfully complete the audit. The task was tedious and involved reviewing purchase orders, invoices, journal entries and other documents associated with a transaction. The process was also manual and time-consuming and often proved to be a nightmare for auditors as well as employees of the organization being audited.
Today, thanks to automation of the accounts payable (AP) process through artificial intelligence, machine learning and cloud computing, auditing has been simplified and, more importantly, can now be completed in a matter of days. Besides saving time, AP automation does away with the ordeal of checking a huge list of paper records and documents and leaves little room for errors and discrepancies.
By streamlining all the processes involving purchase orders, contracts and invoice processing and approvals, AI-powered AP automation software creates a win-win situation for auditors and internal staffers. It leads to fewer exceptions, better visibility into cashflows, less chances of error and better control over finances. Also, as employees do not need to maintain paper records, they can focus on day-to-day work and strategic tasks.
Automated AP software helps determine the authenticity of all purchases. It tracks the entire history of how and when an invoice is processed. This makes it easy for auditors to access real-time information and cross-examine the purchasing information. In addition, it automates the otherwise time-consuming approval process. Every invoice has an electronic record of all approvals made by a relevant authority. Automated approval workflow enhances visibility and transparency with audit trails. It can also be configured to achieve better optimization.
Today’s best-in-class AP automation software, being cloud-native, stores digital copies of invoices, purchase orders, contracts and other documents needed for the audit. These documents help understand what was purchased, prices agreed before purchase, discounts (if any) and the actual receipt of goods. All this information is required, particularly for examining unusual transactions that involve a large amount paid to a vendor or repeated payments made to a vendor in a short period. Besides, since all the information is stored at one place, the auditors do not have to look in multiple files or locations.
AP automation solutions streamline the entire invoice-to-pay process. The software enables advanced payment controls such as two-factor authentication and dual approvals. The former requires payment approvers to enter secure codes sent to their mobile devices to authorize a payment. Dual approvals add an extra layer of security to payments that are above a certain threshold. AP automation also enables segregation of duties, which in turn ensures that different people approve invoices and payments. This mechanism minimizes the possibility of fraud.
AP automation software can identify a duplicate payment with the help of the invoice number or vendor name. When a payment is made, it is posted and applied to a corresponding invoice within the system. Plus, the automated system closes out a transaction after it is completed, which further reduces the possibility of a duplicate payment. It can also send the remittance detail directly to the vendor to keep him informed about the payment date and reconciliation.
With accounts payable automation software, all transaction-related data is stored in an accessible format, making it easy for the auditors to look up information. There is also little chance of documents being lost or misplaced, which helps speed up the audit.
AP automation software ensures that an organization’s accounts payable team stays compliant with internal policies and with regulations in different geographical regions. These capabilities reduce the chances of audit risk that may spring up from invoice non-compliance.
AP automation saves time, improves audit accuracy and makes it easy for the auditors to spot inconsistencies. Accurate audits, in turn, provide valuable takeaways and suggestions for process improvement. These suggestions can then be discussed with the management and implemented to better streamline the accounts payable process.