AP automation offers numerous benefits for the consumer packaged goods (CPG) industry. By automating the accounts payable process, CPG companies can streamline their operations, improve payment accuracy and vendor relationships, and by doing so, maybe even negotiate for vendor discounts.
Additionally, AP automation provides better visibility and control over financial processes. CPG companies can easily track and monitor invoices, payments, and expenses in real time to help make informed decisions about spend and cash flow.
To learn more about how AP automation can transform your business and allow you more time to focus on more strategic tasks and improve overall productivity, continue reading the rest of the article.
Centralizing your CPG brand's AP Workflows
AP automation allows businesses to create an automated vendor database, which centralizes vendor management and facilitates payment recording. It enables easy identification of the contact person for each vendor and provides visibility into the amount paid to each vendor within a specific time frame. Meanwhile, digitizing invoice processing eliminates the need for sorting, organizing, and filing paper documents or sorting through drives for files and invoices, making it easier to locate and track invoices. Having all your vendor invoices and payments organized and tracked in one place also allows your team to avoid missing payments and duplicating payments. AP automation also streamlines routing and approval processes by automatically routing invoices to relevant approvers, reducing delays and improving efficiency.
Achieving cost and time savings with AP Automation in CPG
AP automation brings significant time and cost savings for CPG companies by reducing manual processes, avoiding late payment fees, and improving cash flow management. By automating invoice capture, errors caused by manual data entry can be eliminated, improving efficiency and accuracy. This also saves your team's time, allowing them to focus on activities that require human interaction. Per a report by Kofax, companies using digital payables platforms can 73% faster processing cycle times and 81% lower processing costs.
Eliminating manual work
No one wants to spend more time manually typing in invoice data, which is where the "automation" in "AP automation" really comes in. By leveraging advanced technologies such as optical character recognition (OCR) and intelligent data extraction, AP automation tools can eliminate the time-consuming and error-prone task of manual entry.
By reducing the risk of human error, teams can also ensure data integrity and improve overall data quality. This is particularly crucial so you're not accidentally paying the wrong vendor or overpaying invoices.
Reducing fraudulent payments and overspend
If you're also expanding your AP automation strategy to include purchase orders, then another benefit is 3-way matching. With automation software, businesses can easily match invoices with purchase orders and receipts, reducing errors and discrepancies. This not only improves accuracy and prevents overspend and fraudulent invoices but also speeds up the payment process (since you don't need to manually compare three documents), ensuring that suppliers are paid on time.
Enhanced Visibility and Improved Collaboration
AP automation also improves cross-functional visibility and data transparency by centralizing vendor, invoice, and payment data and integrating with accounting systems like Quickbooks and NetSuite to automatically import and export relevant information. Teams can know the status of every invoice and payment and get real-time reporting of key financial metrics, enabling accountants and business leaders to easily see the financial picture of their company.
AP automation tools can also facilitate real-time collaboration of the different team members of the AP cycle. With automated workflows and routing capabilities, invoices can be directed to the appropriate individuals for authorization based on various criteria such as invoice amount, department, etc. Team members can also check to see where the bottlenecks are in the approval chain to help unblock approvals and payments.
Strengthening CPG Vendor Relationships with AP Automation
It's no secret that CPG brands can't exist without the inventory and services that their vendors provide, which makes paying them how they want and on time even more crucial. AP automation provides flexible payment options such as ACH, paper checks, and domestic and international wires so you can pay multiple vendors with different payment needs and allows them to track payments within the system.
Plus, with faster invoice processing comes timely vendor payments. Timely payments not only foster trust and strengthen connections with suppliers, which in turn can lead to better service and on-time deliveries but also allow businesses to take advantage of early payment discounts or negotiate pricing down the road.
How to start automating AP for your CPG brand
To embark on the AP automation journey, it is crucial to understand the key steps involved. By following these simple steps, you can take a proactive approach to embrace technology and start reaping all the benefits of AP automation previously mentioned.
- Assess your current AP workflow: Before diving into automation, it's essential to understand your current AP workflow. Identify pain points, bottlenecks, and areas prone to errors. Do you need faster ACH payments? Tailored user permissions for different team members? More granular payment approval rules? Assessing your existing processes will help you find and tailor automation solutions to address specific needs and challenges.
- Choose the right AP automation software: There are various AP automation tools available in the market, ranging from invoice processing software to integrated ERP systems. Consider your budget, the size of your CPG brand, and the complexity of your AP processes when selecting the right tools. Look for features that fit your CPG brand's AP needs (see #1: Assess your current AP workflow) such as invoice scanning (OCR), workflow automation, purchase orders, and integration capabilities.
- Integrate with accounting systems: For a seamless AP automation experience, integrate your chosen tools with your existing accounting systems (Quickbooks, NetSuite, etc). Integration facilitates real-time data synchronization, allowing for accurate financial reporting and analysis. It also eliminates the need for manual data entry across multiple systems.
- Provide training and support: Once you've implemented AP automation tools, ensure that your team is adequately trained to use them. Offer ongoing support to address any issues or questions that may arise. A well-trained team is essential for maximizing the benefits of automation and ensuring a smooth transition.
- Monitor and optimize: Continuous improvement is key to the success of any automation initiative. Regularly monitor your automated AP processes and gather feedback from users. Identify areas for optimization and updates (for example, maybe you need to start paying foreign vendors involving different currencies or need to defer payments due to inventory and cash flow gaps) to keep your automation strategy aligned with the evolving needs of your CPG brand.
Get AP Automation tailor-made for CPG with Settle
Settle's AP Automation was purposely built for CPG brands - with an all-in-one platform designed for all things payments, you can easily pay vendors, and manage purchase orders and invoices. You can also customize Settle's AP workflows to your needs with custom roles and approvals and get a bird's eye view of your cash flow with our cash outflow and AP Aging graphs. For businesses that qualify, you can also defer vendor payments with Settle Working Capital’s founder-friendly, non-dilutive financing for inventory, marketing, and so much more. Get started for free at settle.com.