NetSuite AP Automation Explained

Accounts payable mightn’t be the most exciting department in your company, but it is one of the most important. With improvements in AP Automation technology in recent years, many business owners are starting to realise the genuine opportunity that investing in improving and automating AP processes can have on the long term stability of their business.  These improvements include impacts on the quality of relationships with key vendors as well as the risk mitigating effects of having technology play its part in what has traditionally been a process that is highly prone to human error.

A Dated Approach to AP Management

The Accounts Payable team in general are responsible for ensuring that your bills are entered into your accounting system in a timely and accurate manner, that the business is planning it’s cash flow to ensure payments are made on time, and where possible, payment discounts are being taken advantage of. They will also be ensuring that the risk in managing vendor details, such as bank account changes are done in a way that prevents fraud or other mistakes that lead to payment errors. 

In reality, most AP departments are so busy keying and coding invoices, managing both paper and electronic copies of invoices, matching invoices to purchase orders and ensuring delivery dockets are aligned with PO’s and invoices, that there is little time in the day for anything else. 

The Opportunity Cost of AP Teams Surviving, Not Thriving

Most businesses view AP as an administrative function, rather than a department that can significantly contribute to the overall minimisation of expenditure and therefore, increase profit.

In 2021, many vendors and suppliers have embraced ‘on time’ or ‘early payment’ discounts in an effort to improve and streamline their own cash flow. However, for most AP teams, the level of administration and manual intervention that is required to receipt, scan, code, classify and categorise a single invoice is immense. When dealing with hundreds or thousands of invoices a month, this often means data entry is significantly behind schedule and the ability to plan ahead in order to make the most out of payment discounts is a low priority. Similarly, with a process that is so reliant on human effort, any absences in the AP team whether planned or unexpected leads to the ‘pile’ getting bigger, and the team getting further and further behind. 

AP Automation technology, such as Webexpenses seeks to remove this reliance on human effort by using modern scanning and interpretation technology such as Optical or Intelligent Character Recognition in order to read, interpret, create and code AP transactions in real time, without the need for manual administration.

Why Cloud Technology has Taken AP by Storm

In the last 5 years, there has been a major trend in companies pivoting to cloud technology as the main focus for their IT strategy across most systems. This can largely be attributed to the fact most modern software is built in the cloud and that almost all legacy system vendors are also scrambling to move their offerings to be accessible by browser. 

The increase in average internet speeds coupled with the plummeting costs of cloud server space has meant that cloud technology is almost the default choice for both software vendors and buyers. 

In addition to this, in 2021 the level risk of cyber attack and fraud has increased exponentially and is now well beyond what most businesses have the capacity to handle when hosting software on their own in house servers. 

These factors have each contributed to cloud technology becoming the standard in AP, not the exception.

So What AP Tasks can be Automated?

Cloud technology such as NetSuite has enabled companies to streamline, optimise and integrate their AP processes in a way that simply isn’t achievable with legacy accounting systems. Because NetSuite is a single platform technology that simplifies your business software ecosystem into one database, automating cross departmental transactions, approvals and workflows becomes a much simpler process.

Companies who have embraced AP Automation are seeing the benefits immediately simply by embracing technology to streamline the following tasks;

1. Invoice Data Entry & Coding

For most accounting teams, one of the most repetitive, manual and mind numbing tasks is the process of invoice entry. AP specialists are required to receive and file invoices, code these invoices into an accounting solution and then manually process the invoice through various levels of approvals until finally a payment is made, and the vendor is notified by way of manual or electronic remittance. 

For most AP team members, these tasks make up more than 80% of their workload leaving very little time to manage AP strategy, plan cash flow and nurture vendor relationships. 

This is also a process that is prone to human error, which at best causes additional workload in identifying and correcting mistakes and at worst can be a cost to the business of thousands of dollars, if not more. 

Solution: Webexpenses AP Automation uses OCR and ICR technology to scan and interpret the data contained within both electronic and paper invoices, creates these bill transactions in NetSuite and codes any information contained within the invoice, eliminating the need for manual administration. 

2. Invoice Approvals / Matching

Once an invoice has been entered, usually it will need to go through at least one if not many levels of approval before it can be paid. This approval process is vital to ensuring that before any payment is made, multiple points of review have been completed and that all information contained in the bill transaction is matched to the purchase order, delivery docket, inventory receipts, vendor payment terms and price agreements. With so many checks and balances, the process to take a single invoice from entry to payment can be weeks and weeks. 

When using manual AP processes, there is little that can be done to avoid this complexity. 

Solution: Webexpenses and NetSuite work together to automatically match PO’s, Invoices, and delivery dockets and can automatically approve these for review when all three transactions match, or fall within the thresholds you have set. NetSuite and/or Webexpenses workflow engines can then streamline the process of approvals and ensure that invoices are ready for payment as soon as possible. This enables the AP team to manage the function by exception as the system is telling them when they have a problem to investigate, rather than the onus being on them to ensure there isn’t a problem to begin with. 

3. Payment Execution & Reconciliation

Once an invoice has been approved for payment, the timing in which it is paid has a huge impact on both a businesses cash-flow as well as whether or not the opportunity to take advantage of on time or early payment discounts is taken up. With so much of the AP process now being automated, the AP team can pivot from being administrators to being strategists. 

Most discounts of this nature are between 2.5% and 7.5% of the total invoice value and should be looked at as an opportunity to decrease expenses and increase profit. In addition to this, by  improving payment performance in conjunction with now having time to focus on improving supplier relationships, the AP function has a much greater impact on the overall business.

Interested in Learning More?

If you are interested in learning more about AP Automation for NetSuite, or how TeamBlueSky can provide a complete NetSuite BPO service including accounting, payroll, NetSuite administration and more then feel free to reach out to one of our team of NetSuite experts.