As we’ve just seen, AP teams do more than just process and pay invoices. Instead of doing it all manually, they can rely on AP automation software to do the heavy lifting. And, their accounts payable process will become more efficient, accurate, and secure at the same time.
19 Terms to Know When Automating Your Accounts Payable Process
There’s a lot to juggle in the accounts payable process: bills, bank accounts, payments, reports, and so on.
Real estate organizations know this particularly well, with high invoice volumes, vast supplier networks, and decentralized operations. This is why so many of them choose to automate their AP to stay on top of it all, electronically.
Below is a list of common terms associated with automating the accounts payable process – and how it works specifically for real estate companies.
- 2-way Matching
- 3-way Matching
- Accounts Payable Workflow
- Accounts Payable Automation Software
- AP Approval Process
- AP Reporting
- Centralized Procurement/Purchasing
- Electronic Purchase Order (e-PO)
- Invoice Automation
- Invoice Coding
- Invoice Exception
- General Ledger (GL)
- Cloud-based AP Automation
- Paperless AP
- Payment Automation
- Procure-to-Pay (P2P) Process
- Property Management System (PMS)
- Supplier Portal
This process compares a vendor invoice with the corresponding purchase order, and verifies that they match.
2-way matching is a type of internal control that reduces the chances of fraudulent invoices going undetected and being paid.
This process takes 2-way matching one step further, verifying that the purchase order, goods receipt, and invoice match.
AP automation software can help you automatically perform both 2-way and 3-way matching.
Accounts Payable Workflow
AP workflow describes the end-to-end process of procuring a good/service all the way through to paying for that good or service. It maps all the steps a transaction goes through.
Accounts Payable Automation Software
AP automation software is a technology that removes the manual, time-consuming steps from the accounts payable process and replaces them with digital workflows. This software improves visibility and control, provides time and cost savings, and frees up cash flow.
AP Approval Process
Invoices must be approved by certain individuals within an organization before they can be paid. The steps – or stakeholders – an invoice travels through make up the AP approval process.
Automated AP solutions route the right invoices to the right reviewer at the right time, helping eliminate bottlenecks, minimize errors, and reduce invoice processing costs.
Accounts payable reporting gives you visibility into your company’s financial performance and spend over time. Among other things, it tracks if payments are being made to suppliers correctly and on time. This reporting is essential for understanding your company’s working capital, optimizing cash flow, and maintaining strong supplier relationships.
With automated AP solutions, you can get AP reporting data in near real-time so you can make better financial decisions and easily comply with tax and auditing requirements.
The accounts payable workflow starts with a purchase or order. Some AP automation platforms offer customers a way to digitize and centralize these purchases.
One way to do so it to integrate online catalogs right into an AP automation software. From there, authorized users simply shop the catalogs, add items to a shopping cart, and generate purchase orders with a click. This not only makes it easy to purchase goods and services, but helps control costs since the catalogs pull in a customer’s pre-negotiated pricing and preferred SKUs.
See also Electronic Purchase Order.
An electronic invoice sent from a supplier to a buyer through an online or digital channel, using an application programming interface (API). E-invoices can be seamlessly ingested into a customer’s automated AP platform, eliminating paper copies of invoices and manual data entry. Note: Sending an invoice as a .pdf or .jpg attachment over email – or sending it to a dedicated AP email address – doesn’t count as eInvoicing. Nor does sending unstructured HTML invoices. In these scenarios, an AP employee still needs to extract data from the file and upload to their system before it can be processed.
Leading AP automation providers should provide customers with multiple invoice ingestion methods, e-invoice being one of them.
Electronic Purchase Order (e-PO)
Purchase order sent electronically to a vendor/supplier to request a product or service. Just like a paper PO, e-POs includes things like item, quantity, price, discounts, vendor information, and ship-to information.
If you’re looking to centralize and digitize your procurement, you should seek out an AP automation solution that lets you send e-POs directly to suppliers right from your AP automation tool.
Invoice automation is one component of AP automation, and involves capturing, validating, routing, approving, and storing invoices without any manual work. It speeds up invoice processing and increases accuracy, among other things.
When a business receives an invoice, a designated employee must enter the invoice into the financial system of record, coded or tagged with certain information. This information can vary by business but typically includes details like invoice number, invoice date, invoice total, property/entity, supplier, etc.
AP automation can eliminate manual invoice coding since it allows suppliers to send their buyers pre-coded invoices either through API (i.e. e-Invoice) or self-service supplier portal.
Invoice exceptions occur when errors are present that prevent an invoice from progressing through its approval workflow. Exceptions can be caused by missing receipts, mismatched quantities or prices, duplicate invoices, tax variances, etc.
Exceptions typically require manual effort to fix/address. And while automating the accounts payable process won’t eliminate every invoice exception, it can certainly help. For example, you could build a custom workflow to have any invoice exceptions route automatically to the most senior employee on the AP team.
General Ledger (GL)
The general ledger is essentially the record-keeping system for a business’s financial data, tracking all transactions that occur within it. GLs are typically a module within an Accounting/Property Management System. When automating your AP, your GL data will integrate with it so you can have all the context you need to approve invoices.
Cloud-based AP Automation
An AP automation software that can be accessed online – anytime, anywhere. This type of solution eliminates the need to perform maintenance and updates yourself, so you can focus on higher-value initiatives.
These are usually preferable to self-hosted AP automation tools that are installed on-premises.
Paperless AP is the result of automating your accounts payable. You can eliminate all your paper, spreadsheets, filing cabinets, etc., and “electronify” everything instead.
Leading AP automation providers also offer payment automation solutions, where they will electronically pay the invoices (on the client’s behalf) that have been approved in the AP automation software. The AP Payments software will often use an electronic payment method, like virtual card or ACH, instead of a paper check. And they will put these transactions online in a portal, for suppliers to track status.
NexusPayments is one such solution. It’s preferred by many real estate companies because it lets them slash payment processing time in half, and reduce the cost of processing payments by 40%.
Procure-to-Pay (P2P) Process
P2P refers to how a company procures good and services, all the way from requisitioning the item/service through to paying for it.
Some AP automation tools can help you digitize every step of this process with Centralized Procurement and e-PO modules.
Property Management System (PMS)
A PMS is software that facilitates a real estate company’s management and administrative tasks. It can include functions like property advertising, leasing, tenant information management, compliance, accounting and billing, and more.
It’s critical for a real estate company’s PMS to integrate seamlessly with any accounts payable automation software they’re considering – so they can maintain and augment their system of record.
A supplier portal is an online tool suppliers use to submit/track invoices, track electronic payments, and perform other actions critical to their business. Before creating an account, a supplier must pass certain security checks to ensure they are who they say they are. Once the supplier has created their account, they can self-serve instead of needing to call or email your AP team.
Lots to Juggle in the Accounts Payable Process – AP Automation Software Handles it All