How an Automated AP System Can Help With Your Cash Flow

The world of Accounts Payable (AP) has been revolutionized over the last few years with sophisticated systems becoming affordable, even for the smallest companies.

If you are still running your AP and credit control systems manually then it might be time to look at an automated solution as these can really improve your cashflow.

What is an automated AP system?

If you think about how you manage the admin for your customers, then much of it will fall into the orbit of your AP system.

From setting up your customer account, doing credit checks, assigning credit limits, producing invoices, managing payments to credit control – all fall within the purview of an AP function.

The problem is of course that all of this looks like it doesn’t add value to the company and so reducing the amount of time it takes to manage your customers has to be a good thing.

In fact, a slick AP automation system will increase your cash flow and reduce your bad debts.

An automated AP system will take customer information from a source, perhaps your CRM system, and produce the customer account.

It will then run through the account set up procedure, either carrying out tasks itself, like doing credit and address checks or prompting staff members to do them.

Reducing staff hours on routine tasks.

Often, AP staff will spend hours receiving payments and allocating them to customer accounts.

An Automated system will be able to monitor bank accounts and spot payments that can be auto-allocated and need no staff input.

Very often they can spot split payments and payments on account and the latest versions even include Artificial Intelligence (AI) which helps the system learn how to manage difficult payments.

This means that less staff are needed and those that work in AP can do the more complex tasks such as dealing with incorrect and failed payments.

Being organised reduces bad debts

In a manual system, a member of the AP team will need to identify accounts that need to be chased, then make calls or send letters as per the company policy.

In an automated system, a call list or letters/emails will automatically be produced.

The system does this whatever the weather, whatever the day, whereas staff members may get called away to work on other jobs or may have a vacation booked.

Experienced credit controllers will say that being organised in your approach and chasing debts quickly result in a much better payment ratio and ends up with more cash in your account and not that of the debtor.

Some systems will allow customers to carry on placing orders whether the account is in order or not.

An automated system will automatically block new orders if a customer is over limit or has payments outstanding. This means that debtors won’t get even further in trouble before they have been contacted by credit control.

An automated system can give customers an easy way to pay.

Some customers don’t pay their bills not because they are unable or unwilling but just because they are habitual procrastinators.

Unbelievable as it is, people sit on invoices simply because they can’t be bothered to set up a payment in their bank!

Giving customers an easy way to pay, often at the click of a button will improve your cash flow immediately.

Online payment solutions are often available with AP software and if they aren’t available directly from within the software there are often add-on apps that can achieve the same result.

The UTP group has an excellent range of payment solutions that can be linked up to automated AP systems and have a significant advantage; the money can be available to the company within hours, unlike many other Merchant Service providers that might take days. Another great boost for cashflow. Always make sure that you have enough card machine paper for your payment solution.

Data is important

Understanding what cash will be available is incredibly powerful when the business owner or CEO are looking at budgets and forecasts.

Having up to the minute data regarding aged debtors and cash in the bank makes forecasting so much easier.

A good automated AP system will have excellent reporting functions which, combined with cash receipt reporting from your bank and the UTP group will give business owners a clear sight of what has been received and what is due to come in.

It also helps when looking at extending credit to customers.

Is it worth accepting that big order when the customer is a habitual late-payer and servicing the order would cause a big drain on your cash resources?

With a great AP system, you’ll be able to see instantly.

Automated AP systems – the way to go?

Some companies are small, some never have any trade debtors and some never raise invoices and for these types of businesses, an automated AP system would provide no benefits whatsoever.

However, for others that find themselves with an ever-increasing aged debtors listing and a matching accounts payable balance, an automated solution may well save them costs in terms of staff time and increase their information availability, providing a welcome boost to their cash flow.