Processing vendor payments has always been a time-consuming process. On average, it can take anywhere from a week to up to 20 days to process a payment to a vendor, especially in a manual setup. Add high volume of payments, and you get a disconnected system that slows down your AP team’s efficiency.
When payments get slower or delayed, it becomes harder to manage cash flow. Delayed payments can also become a source of frustration for a lot of vendors and damage your relationship with them, even leading to stricter payment terms or supply disruptions.
Automated vendor payments for accounts payable solve these issues and help create a more reliable payment process by automating the entire payment workflow.
What is vendor payment automation?
At its core, vendor payment automation is the process of automating the payment process, from onboarding to invoice intake, approvals, payment scheduling, and payout within a single workflow.
Instead of manually handling approvals, payment methods, and payment tracking across different tools and workflows, the entire process is streamlined.
A typical automated workflow looks like this-
- Starts with invoice intake from different sources. These invoices are then matched with the correct vendor records and shared for approval.
- Once the payment is approved, it is scheduled based on the due dates and payment method.
- Finally, the payment is released via the preferred payment method. This could be ACH, check, or a digital payment method.
- Most vendor payment automation platforms also offer status tracking and automated updates of accounting records.
Key benefits of vendor payment automation
Vendor payment automation improves the entire AP workflow by reducing manual effort and delays in payment. It also makes reconciliation easier and improves scalability.
Let’s breakdown the benefits of vendor payment automation:
1. Lower manual effort for AP teams
When vendor payments are processed manually, your team spends more time chasing approvers, updating spreadsheets, etc., than actually making and tracking payments. In vendor payment workflow automation, AP teams can reduce manual processes by using OCR for automatic data entry and focus more on exceptions and payment planning by automating routine tasks like payment scheduling.
2. Fewer payment delays and approval bottlenecks
A faster payment approval cycle is one of the major benefits of vendor payment automation. Since vendors expect on-time payments, if an invoice gets delayed because it was not approved on time, the relationship between you and your vendor can get strained. By automating the approval cycle, invoices are routed to the right stakeholders. This helps your organization shorten approval cycles and reduce missed or late approvals. It also makes vendor payment more predictable and efficient since payments can be scheduled in advance.
3. Improved visibility into payment status
When you use manual vendor payment workflows, there is a lack of visibility as you cannot see exactly where approvals stand in real time. Automated vendor payments for accounts payable improve visibility by giving teams a consolidated place to make payments and track their status. Teams can monitor which invoices are pending and which ones require approval, along with payment statuses. Payments can be scheduled and payouts completed with full visibility into the timeline. Any failed or returned payments can also be tracked, flagged, and resolved in real time.
4. Better control over approval workflows
Having more control over vendor payment approvals is another major benefit of vendor payment automation. When you use an automated payment platform, you can apply role-based approval rules to help ensure that vendor payments follow company payment policy where payments are approved only by the authorized personnel. This creates a clear separation of duty among your team without any overlap. Automation also provides documented payment history which is useful for finance leaders and during audits.
5. Reduced risk of payment and data entry errors
Using outdated vendor bank details increases the chance of duplicate payments and can create extra work for your team and reduce the vendor’s confidence in you. Automation reduces this risk by standardizing invoice and payment workflows, which prevents the use of incomplete or incorrectly processed invoices. Only approved and pre-validated vendors are paid. Data entry is also automated via OCR, which reduces the chances of error in your vendor data.
6. Easier reconciliation and cleaner accounting records
Matching payments to invoices manually requires a lot of time and effort and can cause delays or additional cleanup during reconciliation. By automating your vendor payment processes, your organization can automatically match payments to invoices. When a payment is initiated or completed, the system automatically updates the accounting records. This results in cleaner payment records and better sync with accounting tools.
7. More consistent vendor payment experience
Using automated vendor payments for accounts payable makes the vendor payment experience more consistent, which has a positive impact on your relationship with your vendor. Since automated vendor payment allows payments to be scheduled, payment timings and approval status are predictable and reliable. There are also clearer remittance visibility and fewer vendor status inquiries since payment becomes easier to track.
8. Better scalability as payment volume grows
As vendor counts and invoice volume grows, your payment processes should be able to handle the growth seamlessly. When you automate vendor payments, it becomes easier to support and manage large vendor databases and invoices without needing to reinvent the payment workflow, all while staying in control as operations expand.
What are the steps involved in implementing vendor payment automation?
In order to successfully implement vendor payment automation, you need to start by reviewing your current vendor payment process. Understand where the data enters the workflow, who approves the payments, how payments are released, and the appropriate process to fix any errors. Skipping this step can cause poor adoption and lapses in the automated workflow.
A strong automated vendor payment rollout usually involves:
- Mapping and identifying the current invoice-to-payment workflow
- Identifying any approval bottlenecks and cleaning up the database
- Standardizing vendor data collection and onboarding
- Setting up clear roles, approvals, and payment rules as per company policy
- Training AP and finance users to trust and use the automated payment workflow
Real-Time Scenarios: When Do You Need Vendor Payment Automation?
| The Manual Problem | How Automation Solves The Issue |
|---|---|
| Weekly ACH run done manually is time-consuming and prone to missed or duplicate payments | Approved invoices are automatically grouped into a single ACH payment batch and released from a single dashboard. |
| Multi-entity payments with separate AP processes causes inconsistency in data | Each entity follows the same workflow with separate approvers and accounts from a single platform. |
| Bank detail updates being sent via informal channels without proper verification | Vendor bank changes are reviewed through a secure process, and approval rules are applied before payment. |
| Shifting from paper checks to ACH payment method is slow and difficult to track | Vendors are onboarded into using ACH through a standardized process. Payment preferences are stored and applied automatically. |
| Reconciling payments and invoices with data stored across different systems | Payment records are automatically synced with each payment linked to its corresponding approval and invoice record. |
Conclusion
Automation can transform your vendor payment workflow. By shifting from manual to an automated process, you get more control over your vendor payments. On-time vendor payments and shorter payment cycles mean that suppliers get paid faster. This helps strengthen your relationship with vendors.
Zenwork Payments makes vendor payments easier and simpler by connecting onboarding, approvals, payments, and reporting in one workflow. We offer unlimited ACH and check payments with full tracking. You can also connect to QuickBooks Online for 2-way sync vendors, bills, and payments in real time for a secure, audit-ready process.
FAQs
1. How does vendor payment automation improve AP efficiency?
Vendor payment automation improves AP efficiency by making invoice processing faster, reducing manual data entry and approval chasing, and tracking payments from a single workflow.
2. Can vendor payment automation help reduce payment errors?
Yes, once you automate your vendor payment process, and implement a standardized workflow, you can reduce duplicate payments, incorrect details, and avoidable processing mistakes.
3. Why is approval control important in payment automation?
Having approval rules in your vendor payment process helps ensure that vendor payments follow internal policy. It gives your finance teams better oversight and reduces the likelihood of unauthorized payouts.
4. Does vendor payment automation support better vendor relationships?
Yes, the more consistent your vendor payment is, the better vendor relationship you’ll have. Clearer payment status updates are also helpful since they reduce vendor confusion and improve the overall payment experience.
Transform your AP workflow and help your team process payments error-free with automated vendor payments.