Payment Automation: The Definitive Guide for AP Managers
Published on:31 October 2024
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Are manual payment processes slowing you down?
As an AP manager, you know the pressure of keeping everything running smoothly—processing invoices, meeting payment deadlines, and managing vendor relationships.
But when manual processes dominate your workflow, it often feels like you’re spending more time fixing mistakes and chasing approvals.
Duplicate payments, lost invoices, and delayed approvals are more than just frustrations—they’re risks to your cash flow and relationships with suppliers.
What if you could eliminate those headaches?
Payment automation offers a way to automatically send your invoices for payment once the invoice is approved, automatically reconcile your invoices to your payments, and automatically push the method of payment to your ERP and mark your invoice as paid
In this guide, we’ll dive into the pain points you deal with daily and show you how automation can solve these challenges, helping you turn your AP department into a streamlined operation.
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What is Payment Automation?
Payment automation simplifies and automates your entire payment process, from receiving invoices to approving and executing payments.
Instead of manually processing checks, wire transfers, or other payment methods, you can rely on payment automation software to handle these tasks automatically, ensuring payments are made on time and with accuracy.
This is especially helpful if you’re managing high invoice volumes (i.e. more than 20,000 invoices per year), multiple locations, or complex approval workflows, where manual processes often lead to delays, errors, and inefficiencies.
Why Do You Need to Automate Your Payments?
For mid-market companies like yours, managing payments manually is not sustainable.
Manual processes create bottlenecks, increase errors, and limit your growth potential.
Payment automation offers a streamlined solution that improves financial accuracy and allows you to scale effectively.
Here’s why you should consider payment automation:
1. Operational Efficiency
Manual tasks—like entering invoices, approving payments, and reconciling payments—are time-consuming and prone to human error.
If you’re managing thousands of invoices, these inefficiencies lead to delays, missed discounts, and a lack of transparency.
Payment automation simplifies these workflows, speeding up approvals and giving you more time to focus on strategic initiatives, such as improving cash flow or strengthening supplier relationships.
In industries with multi-step approval processes—like healthcare’s compliance checks or manufacturing’s 3-way PO matching—automation eliminates delays and ensures more accurate financial operations.
2. Scalability for Growing Businesses
As your company grows—whether expanding into new regions or handling more vendor payments—manual processes can become overwhelming.
Healthcare networks, for example, often struggle to process high volumes of invoices across multiple departments. Payment automation manages this complexity seamlessly, allowing you to scale your operations without adding more strain to your AP team.
The good news is that payment automation is expected to result in a 20% reduction of operational costs for businesses, allowing growing companies to maintain efficiency while keeping costs under control as they scale.
→ With Rillion, you have a system that adapts to your growth, handling higher volumes and more intricate workflows without sacrificing efficiency.
3. Compliance and Security
Industries like healthcare, manufacturing, and hospitality operate under strict regulatory requirements, such as HIPAA, GDPR, and tax laws.
Relying on manual processes puts you at risk for data breaches and non-compliance penalties. Payment automation simplifies compliance by automating audit trails and enforcing role-based access controls, ensuring that your processes stay secure and compliant.
Built-in security features like encryption and real-time monitoring greatly reduce the risks of fraud and financial errors, giving you peace of mind as your business expands.
How Does Payment Automation Work?
Payment automation integrates with your accounting or ERP system to streamline the entire payment process, from receiving invoices to executing payments.
By automating repetitive tasks, it removes the manual steps that often lead to delays and errors. Here’s how payment automation works in detail:
Invoice Capture: The process starts with electronically capturing invoices. Whether invoices come through email, online portals, or directly from vendors, the system digitizes and extracts key details like invoice numbers, amounts, and vendor information. OCR (Optical Character Recognition) technology is typically used to ensure accuracy, eliminating the need for manual data entry and speeding up the process.
If you’re a mid-sized company receiving hundreds of invoices daily, payment automation captures and extracts all the necessary details, drastically reducing the time your AP team spends on manual input.
Approval Workflow: Once invoices are captured, they move through a predefined approval workflow. With automation, you can customize workflows based on invoice amounts, departments, or vendor types. Invoices are routed to the appropriate approvers, who can review and authorize them from any device, whether they’re in the office or working remotely. This removes bottlenecks and ensures payments are approved on time.
Fun fact: 40% of AP leaders believe that automation provides more control over approval flows, giving teams greater visibility and reducing delays caused by manual routing processes.
Payment Execution: After approval, the system schedules and executes payments using the type of payment automation you have selected—ACH, virtual cards, wire transfers, or checks. You can batch payments or process them individually. The system ensures that payments are made on time and provides flexibility to prioritize payments based on due dates or early payment discounts.
For example, a hospitality business can use automation to schedule weekly payments, processing ACH transfers and virtual cards at the same time to ensure on-time payments and take advantage of early payment discounts.
Payment Reconciliation: Payment automation automatically reconciles payments by matching them with corresponding invoices, purchase orders, and receipts. If there are discrepancies, the system flags them for review. It also updates your financial records in real-time within your ERP system, ensuring everything stays accurate.
Real-Time Reporting and Analytics: Throughout the entire process, you get real-time reporting and analytics. You can track payment statuses, monitor cash flow, and analyze payment trends. This gives you the visibility to optimize payment schedules, identify savings opportunities, and ensure compliance.
Reporting and analytics is so important to AP teams that improving it is the most important priority.
Vendor Management and Self-Service Portals: Many automation platforms provide vendor self-service portals, allowing suppliers to track payment statuses, and resolve discrepancies on their own, reducing the workload for your AP team and improving supplier relationships with more transparency.
For example, your company can offer a self-service portal where vendors can check the status of their payments, reducing the need for constant communication with your AP team.
What Problems Does Payment Automation Solve?
Payment automation solves several challenges that you often face when managing payments. Here’s how automation can address the key pain points you’re dealing with:
Manual Errors and Inefficiencies
Manually processing payments can easily lead to human errors, like incorrect data entry, or missed deadlines. When you’re managing thousands of invoices every month, mistakes disrupt operations and damage vendor relationships.
Payment automation eliminates these issues by automating data capture, invoice matching, and payment approvals, making your processes more accurate and efficient.
According to APQC, manual invoicing processes typically lead to a 2% invoice error rate annually. But with automation, that percentage can be reduced to just 0.8% per year.
This reduction in errors significantly minimizes disruptions and ensures smoother, more reliable financial operations.
Delayed Payments
Late payments can strain vendor relationships, result in penalties, and cause missed opportunities for early payment discounts. In high-transaction industries like manufacturing, payment delays can even halt production.
Automation ensures timely payments, helping you strengthen vendor relationships and capture early payment discounts to improve cash flow.
Lack of Visibility and Control
Manually managing payments gives you limited visibility into payment statuses and cash flow, making it tough to make informed decisions.
Payment automation provides real-time tracking and reporting, giving you full transparency into payment workflows and greater control over outgoing payments and overall cash flow.
Security and Compliance Risks
Manual payment processes are more vulnerable to fraud, data breaches, and regulatory non-compliance. If you work in healthcare or hospitality, where sensitive financial and personal data is involved, the risks are even higher.
Payment automation integrates advanced security features, like encryption and multi-factor authentication, to safeguard your financial data and ensure compliance with industry regulations.
Time-Consuming Processes
Handling invoice approvals, payment scheduling, and reconciliation manually drains time and energy from your finance team. If you’re in hospitality, with vendors spread across multiple locations, this can be even more tedious.
Think about how much is spent on responding to invoices.
A lot.
More than 40% of AP teams spend more than 6 hours responding to invoices each month.
Payment automation streamlines these workflows, speeding up approvals and freeing your team to focus on more strategic tasks.
Resource Drain
Manual payment processing consumes valuable time and resources. In industries like manufacturing, where the volume of vendor payments is high, this can quickly become a resource-intensive process.
Automation reduces the need for manual input, freeing up your team to focus on more value-adding tasks, like financial planning or process optimization.
Now you know how payment automation works and the problems it solves.
Let’s take a look at the steps you can take to automate your payment process.
5 Tips to Get Started with Payment Automation
As an AP manager, you’re dealing with high invoice volumes, multi-location operations, and increasing compliance requirements.
If you’re ready to begin your payment automation journey, here are five essential tips to help you get started to help you streamline processes, reduce errors, and improve cash flow.
1. Assess Your Current Payment Processes
Before diving into automation, you need a clear understanding of how your current payment processes work. Take a close look at the areas where you’re experiencing bottlenecks or frequent errors.
Ask yourself:
- How long does it take to approve and process an invoice?
- How many invoices are processed manually?
- Where do delays or errors occur most often?
By pinpointing the pain points in your workflow, you can identify which parts of your payment process will benefit most from automation. Whether it’s reducing manual data entry or speeding up approvals, these insights will help you choose the right payment automation solution.
Example: If you’re handling a high volume of invoices across multiple departments, you might find that manual approval workflows are causing late payments and incurring fees. Automating this process can help you digitize approvals and ensure timely payments.
2. Choose the Right Payment Automation Platform
Selecting the right platform is key to a successful automation journey. You need a solution that seamlessly integrates with your existing ERP system (like Sage Intacct, Microsoft Dynamics, or SAP) and aligns with your specific business needs.
When evaluating platforms, focus on the following:
- Integration Capabilities: Ensure the platform integrates with your ERP and other financial tools to avoid duplicating efforts.
- Scalability: Pick a solution that grows with your business. Whether you’re processing more invoices or expanding to new locations, your payment automation platform should handle it without adding complexity.
- User-Friendliness: The platform should be easy to use for your AP team and stakeholders, offering features like customizable workflows and clear dashboards.
Rillion’s platform integrates payment automation with AP processes and offers user-friendly features such as drag-and-drop workflows and real-time reporting, making it easy to streamline payments without extensive training.
3. Define Your Approval Workflows
One of the biggest advantages of payment automation is the ability to customize approval workflows. However, to take full advantage of this feature, you’ll need to define how these workflows should operate.
This is particularly important for businesses with multiple locations or specialized departmental needs.
Here’s how to get started:
- Set approval thresholds for invoices over a certain amount that require additional approvals.
- Create workflows that automatically route invoices to the right person based on department, location, or vendor.
- Make sure approvers can access invoices remotely via mobile devices to prevent delays.
For example, a manufacturing company might set up automation rules where invoices exceeding $20,000 require approvals from both the finance director and procurement manager. Automation ensures the right people are involved, speeding up the process while ensuring compliance.
4. Ensure Compliance and Security
Security and compliance are non-negotiable, especially in highly regulated industries like healthcare, where financial and personal data must be protected. When you’re getting started with payment automation, make sure your chosen platform includes these essential security features:
- Encryption: Protect sensitive data from unauthorized access.
- Multi-factor Authentication (MFA): Secure logins to make sure only authorized personnel have access.
- Audit Trails: Keep a clear record of all transactions to easily access during compliance audits.
In addition to security, automation helps you stay compliant with industry regulations such as HIPAA or GDPR by providing detailed audit trails and role-based access control.
5. Train Your Team and Monitor Performance
While automation reduces manual workloads, it’s important that your team is comfortable with the new system. Provide thorough training for your AP team, making sure they fully understand the platform’s features, workflows, and reporting tools.
Encourage your team to embrace automation so they don’t revert to manual processes.
Once your payment automation is live, monitor performance regularly. Platforms like Rillion provide real-time reporting and analytics, allowing you to track how quickly invoices are processed, spot bottlenecks, and measure efficiency improvements (as shown in the screenshot below).
Conclusion
It’s impossible to keep up with the demands of managing high transaction volumes, multiple locations, and complex compliance requirements with manual payment processes.
By automating payments, you’ll give your AP team more time to focus on higher-value tasks and build stronger relationships with vendors by making sure payments are always on time and accurate.
As your business grows, payment automation helps you scale, giving you more control and flexibility. Automation is about more than just saving time—it’s about setting your company up for long-term success.
Automate Payments with Rillion
Hi 👋 we’re Rillion.
Rillion simplifies payment automation with our accounts payable (AP) automation platform.
Rillion integrates seamlessly with popular ERP systems like SAP, Microsoft Dynamics, and Sage (Intacct, X3), improving efficiency, visibility, and control over your financial processes.
Book a demo to explore how Rillion can benefit your organization.
AP Teams Also Ask
What is the typical timeline for implementing payment automation, and what are the common challenges during the transition?
The typical timeline for implementing payment automation can vary depending on the complexity of your existing systems and the scale of automation you’re aiming for.
On average, you can expect the implementation to take anywhere from a few weeks to a couple of months.
The process usually involves system integration, data migration, configuring approval workflows, and training your team.
Common challenges during the transition include managing the change across different departments, ensuring seamless integration with your current ERP or accounting system, and addressing any initial resistance from team members who may be used to manual processes.
Proper planning, clear communication, and working closely with your automation provider can help smooth out these challenges.
What are the security risks involved with payment automation, and how do these platforms mitigate them?
When it comes to security risks, payment automation platforms face potential threats like data breaches, unauthorized access, and fraud.
However, these platforms are designed with robust security measures to protect your financial data. Encryption ensures that your sensitive information is secure, both when stored and when being transmitted.
Multi-factor authentication (MFA) adds an extra layer of security by requiring multiple verification steps before anyone can access the system or approve payments.
Additionally, role-based access control restricts user permissions, ensuring only authorized personnel can perform specific tasks. Platforms also maintain detailed audit trails, allowing you to track every step of the payment process and quickly identify any unusual activity.
How does payment automation integrate with other business systems like procurement or inventory management?
Payment automation integrates smoothly with other business systems like procurement or inventory management by creating a unified, end-to-end workflow.
For instance, when an order is placed through your procurement system, the payment automation platform can automatically match the purchase order with the invoice and receipt, ensuring accuracy in payments.
If you’re using an inventory management system, it syncs with payment automation to keep your inventory levels and payment records in harmony. This integration eliminates the need for manual data entry, speeds up the procure-to-pay process, and provides better visibility into both your financials and operations.
By connecting these systems, you can streamline processes, reduce errors, and make more informed business decisions.
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