Everything You Need to Know About Accounts Payable Automation in 2025

A recent survey by the Institute of Financial Operations and Leadership (IOFL) says that only 5.7% of the respondents have fully automated accounts payable operations. IOFL data also reveals that more than 30% of businesses say AP automation is not a priority for them.

This is alarming as manual processes cause constant errors, increase invoicing cost, and strain vendor relationships due to various reasons, like too many invoices to pay, fewer staff, failed compliance, drawn-out approvals, and more.

These manual tasks also make it hard to keep track of payments and schedules, leading to missed payments.

With AP automation, businesses can eliminate all these issues and gain in many areas:

• Speed up the entire purchase process with automation
• Increase visibility across invoice payment process
• Enhance payment controls and reduce risks
• Handle fluctuating invoice volumes

That’s just a few of the benefits that strategically implementing AP automation can bring to your business. 

Let’s dive deeper into AP automation and explore what it is, how it benefits your business, and how you can implement it in your business.

What Is AP Automation?

Accounts payable automation means the use of automating routine AP tasks, such as capturing invoice data, routing invoices for approvals, scheduling payments, and conducting reconciliation. Often referred to as touchless processing, AP automation eliminates the human role from the accounts payable processes as much as possible.

Modern AP automation systems, like PathQuest AP, offer real-time reporting options, cash flow insights, payment forecasts, and more to help businesses plan for upcoming payments.

The biggest advantage of AP automation is reduced time and errors in AP processes. 

Benefits of AP Automation: How Your Accounting Team Can Save Time

The Institute of Finance and Management states that businesses with end-to-end AP automation can process twice as many invoices as their peers who do not have automated workflows.

Let’s explore the key benefits AP automation brings to your organization here.

1. Better cash flow management

55% of all B2B invoiced sales in the US are overdue, reports the 2023 Payment Practices Barometer survey. The trend is the same in many parts of the world, as well.

One of the key reasons for late payments is a lack of insight into cash flow, which can lead to delaying invoices to protect capital.

AP automation can solve these issues considerably by offering more details on:

• Invoice status in real time, such as received, matched, approved, or paid
• Custom approval workflows and delays for better follow-up, and to keep the process moving
• Payment terms and due dates with automated reminders and dashboards
• Cash flow and forecast visibility to understand upcoming payments and plan

AP automation software centralizes all upcoming payments and the amounts you need to pay, often with dashboards. This helps ensure short-term liquidity and better cash flow for immediate expenses.

2. Improved supplier relationships

In its Supplier Survey 2024-25, the working capital solutions provider Taulia reports that more than 51% of the companies it surveyed were paid late by their buyers.

 

AP automation ensures invoices are processed quickly and payments are made on time, which helps strengthen vendor relationships and supplier confidence.

For example, when a payment is approved, the AP software schedules the payment and releases it on the due date automatically. Vendors can check the status of payments on the vendor platform and keep track of the payments, which helps improve vendor relations. 

There are several advantages to paying vendors on time:

• Timely payments build trust and lead to better pricing or volume discounts
• Avoid the risk of delays as vendors prioritize businesses that pay on time
• Consistent payments lead to better payment terms or higher credit limits
• Reputation as a dependable payer boosts your credibility in the industry

3. Complying with the US payment regulations is easier

As a business in the US, you need to comply with various federal, state, and local laws. When importing goods and raw materials from global vendors, you may need to make provisions to pay the universal import tariffs, sector-specific tariffs, customs duties, anti-dumping duties, and other taxes. Understanding these regulations is paramount to ensure you comply with them to avoid any legal troubles or penalties.

For example, a company operating in both the US and Europe can use AP automation to automatically apply region-specific tax rules, such as sales tax in the US and VAT in the EU.

Most AP automation software offers diverse features, like automated tax calculations, e-invoicing, local sales tax code auto-coding, etc., and ensures that: 

1. Every invoice is processed using standardized procedures, such as invoice validation, three-way or two-way matching, and general ledger coding
2. Payments maintain proper audit trails to make audits easier and more efficient
3. Only invoices that comply with the local tax regulations are paid

This ensures compliance with the US tax and tariff regulations and avoids penalties during audits.

4. Increased invoice accuracy

The report The State of ePayables 2024: Money Never Sleeps by Ardent Partners states that the average cost of processing an invoice is $ 9.40. Inaccurate invoice capture is the primary reason for this.

In addition, manual data entry often leads to errors, such as incorrect amounts, duplicate payments, incorrect vendors, and missed invoices, which can drive the cost even higher.

However, AP automation eliminates these issues. By using OCR and validation rules, it can extract and verify invoice data accurately and without errors. 

This leads to accurate and timely payment to vendors, reduces costly mistakes, and avoids payment delays. It also allows you to maintain clean, audit-ready financial records.

5. Helps scale your AP operations with business growth

As your business grows, the complexity of your accounts payable operations also increases. This means more manual data entry, higher chances of error, and even slower invoice payment processing.

Moving away from manual AP processes with AP automation can instantly set you up for faster growth.

1. You can cut down the time taken to process invoices
2. You can accelerate approval routing and payments
3. You can improve cash flow insights and vendor management
4. You can improve your reporting capability and decision-making

As a result, you can eliminate AP inefficiencies, such as invoice errors, unhappy vendors, and missed payments and keep growing your business.

6. Manage non-PO invoices and invoices for services

Non-PO invoices and service bills often lack matching purchase orders, making them more difficult to verify and approve. With AP automation, this is never the case as it can route these invoices through customizable workflows for quick review and approval.

The streamlined process ensures timely approvals from concerned teams and accurate payments to vendors on time.

This allows you to keep vendors happy while ensuring accurate records and audit trails for non-PO invoices and service invoices.

What Is Accounts Payable Process Automation?

Accounts payable process automation is a methodology that minimizes the role of humans in carrying out AP activities by leveraging software and digital solutions. The AP process automation lets businesses avoid human errors and make timely payments while leaving clear transaction trails for faster audits.

How does accounts payable process automation work?

Although businesses have been using AP automation for years, it was limited in its scope to do nothing more than what it was set up for, with little room for flexibility and variations.

However, modern AP automation processes are entirely different. Using advanced technologies like AI tools, cloud systems, and OCR, they turn the entire AP process into streamlined, manageable workflows.

AI-enabled AP automation systems learn and become better as they go with different data trends and patterns, and let you create custom AP workflows, on-demand reporting, insightful dashboards.

Here are the key technologies that make modern AP automation processes faster, accurate, customizable, efficient, and reliable:

• Artificial intelligence (AI) and machine learning (ML): AI and ML enhance AP automation by learning from past invoice data to improve accuracy and decision-making over time by flagging unusual charges or auto-approve recurring payments. This reduces manual review and speeds up processing while helping catch errors or fraud quickly.
• Optical character recognition: OCR is a key technology in AP automation to read and extract text from scanned or digital invoices. The system captures data like vendor name, amount, and due date automatically, avoiding the need for manual input. OCR turns paper-based or PDF invoices into usable, searchable digital records and helps ensure fewer errors and faster invoice processing.

• Robotic process automation (RPA): AP processes almost always involve repeating tasks, and RPA leverages software solutions to automate repetitive manual tasks. Over the years, RPA has evolved, and with the help of AI and ML, it can manage highly complex and unpredictable tasks with accuracy and speed.
• Digital workflow automation: Digital workflow automation allows finance teams to create custom workflows for invoice approvals. These automations identify vendor name, due date, invoice amount, and more, to create automated workflows and route the invoices to the right person for timely approval without human interventions and errors.
• Electronic data interchange (EDI): EDI allows business partners to exchange documents like invoices, purchase orders, electronically between computers in a common standard. This helps businesses ensure faster and more accurate document transfers while complying with privacy and security requirements.

What Accounts Payable Tasks Can Be Automated?

Every company is unique with its own AP automation challenges and opportunities, leading to highly specific workflows. 

Here is a quick list of the most commonly automated AP tasks:

1. Data entry and invoice capture

This is the first step of any AP automation process. Here, your team receives the invoice from your vendor, either in digital form, like a PDF, or on paper. If the invoice is in paper form, you need to scan and upload it into your system.

2. Invoice matching and validation

Once the invoice has been captured and entered into your system, it is then matched for validation by the AP automation system with OCR. Often, businesses use a three-way matching system that verifies supporting documents, such as receiving documents and purchase orders, to validate invoices. .

3. Approval routing and workflows

After invoice matching and validation, the system follows the approval routing and workflows to present the invoice to the right approver(s) for approval.

4. Payment scheduling and execution

After the invoice is approved by the concerned person(s), the AP automation system schedules the payment. When the due date arrives, the payment is released to the vendor automatically.

5. Reconciliation and reporting

After the payment has been made, the AP automation system verifies the bank statements to ensure that the amount approved matches the amount paid to the vendor. This helps ensure there are no discrepancies in payments and that the books are always accurate.

How to Automate Accounts Payable Process?

Implementing AP automation may not automatically resolve all your AP woes, as it is not the process that gets the job done, but the strategy and planning behind it.

Without a thorough planning and implementation strategy, most AP automation processes can fail. For the AP automation to work, you need to define your goals, like improving time, reducing errors, or map the processes that need to be automated. You may also need to plan integrations with other ERP systems for the automation to work.

Here are a few strategies to avoid such pitfalls and ensure efficient AP automation in your organization.

1. Assess current AP processes and identify gaps

Before you implement AP automation, assess the current state of AP processes and identify the gaps.

This initial assessment is vital as different businesses may have different issues to tackle. For example, the AP automation needs of a local manufacturer are different from a global manufacturer.

Understanding these unique needs and challenges can help you create a tailored AP automation solution that is best for your organization.

2. Set up digital invoice capture (OCR and e-invoicing)

One of the most central processes of AP automation is digital invoice capture. Along with your initiatives to automate AP, efforts to transition from paper-based invoices to digital formats must also begin.

Hence, you need to set up OCR technologies and implement e-invoicing protocols as early as possible.

• OCR technology helps scan, read, and convert paper-based invoices into digital data. It plays a crucial role in eliminating errors and improving the speed of AP processes
• E-invoicing systems empower vendors to submit their invoices electronically to the platform without the need to submit paper invoices. These e-invoices, submitted in PDF or other preferred formats, make data extraction faster and more accurate.

3. Configure automated workflows and approval hierarchies

Automated workflows and approval hierarchies play an important role in making the AP processes work as intended.

These workflows determine how the invoices are routed from the first point of contact to the next and to the person authorized to approve the invoice. Without clear workflow and approval hierarchy, the entire process can take a lot of time and cause ambiguity.

For example, let’s say you have received an invoice from your vendor for servers purchased and the authorized approver is the CTO. The automated workflow ensures that the invoice matches the PO from the IT department and is sent to the CTO for approval. Once it is approved, the payment is scheduled and released on due date automatically.

Clear workflow configurations are vital to avoid confusion and streamline processes while ensuring faster approvals.

While setting up these workflows and approval routes, ensure they also meet your organization’s compliance requirements, such as audit trail visibility, payment limits, US taxation, local currency payments, and more.

4. Build a strong communication, feedback, and training strategy

Setting up the AP automation processes is just one part of the solution. To make it work efficiently as you expect, you also need to work on it to figure out areas that need improvement.

Often, employees often view AP invoice automation with concern or resistance. As such, you must communicate thoroughly why the organization is implementing AP automation, how it will improve efficiency, and how employees will further develop in-demand, marketable skills thanks to AP automation.

Redefine roles and responsibilities to avoid confusion and build a smart training strategy that will bring everyone onboard with the AP automation process.

5. Choose the right AP automation software

Select an AP automation software solution that suits your business needs. You will find many such solutions, like Pathquest AP.

Keep the following in mind while looking for an AP automation solution:

• Check for factors like ease of integration with current IT systems, scalability, ease of use, and ability to support multi-currency
• Check for your business’s specific needs, like multi-currency payment, split invoice payments
• Assess the subscription fees and choose a suitable plan that suits your business’s AP processes

Ready to Automate Your AP Process with PathQuest?

Whether you are a growing company or an established business, strategic AP automation processes help you save time, reduce errors, and improve cash flow.

As one of the best AP automation software solutions, PathQuest AP offers you streamlined, automated accounts payable management that reduces manual work, eliminates errors, and accelerates the payment cycle.

PathQuest AP makes this possible with its advanced features that stand out from the rest of the similar solutions offering AP automation services:

• Smart OCR to import your bills from the cloud, FTP, and email, and scan them automatically for accurate invoice capture.
• Insightful dashboards for real-time tracking of invoices, approvals, payment statuses, and more.
• Build custom bill approval workflows tailored to your business’s unique approval requirements, ensuring clarity and avoiding confusion.
• PathQuest AP platform to generate tickets for each query and resolve the issues right there, without endless email loops.
• Process payments to any payment method preferred by your vendor, such as ACH, virtual cards, credit cards, and high security checks.
• Extensive integration capabilities with leading accounting and ERP solutions, such as QuickBooks, Sage Intacct, and Xero.

With PathQuest AP, you can ensure smart, intuitive, and swift invoice management and approval workflows with greater efficiency and accuracy.

Take your first step towards saving 50% of your AP team’s time with PathQuest AP. Book a live demo today.

Frequently Asked Questions

1. Can you do accounts payable remotely?

Yes, you can manage accounts payable remotely using automated AP solutions, like Pathquest AP. It allows you to access your AP from anywhere, anytime  with an internet connection to handle approvals, auditing, and other tasks.

2. What does AP automation solve?

AP automation primarily solves inefficiencies inherent with traditional accounts payable, such as invoice errors, payment delays, strained vendor relationships, and lack of audit trails. 

3. What should I consider for an AP automation software solution?

For AP automation, the first thing to consider is the integration capabilities with your current IT infrastructure. Ensure the software is scalable to accommodate your business growth. It is also vital to consider the ease of use and availability of advanced features, like analytical dashboards, automated workflows, quick escalations, and smart data capture.

4. Can AP automation handle multi-currency and international payments?

Yes, most accounts payable automation solutions can handle multi-currency and international payments, supporting businesses operating in the global market.

5. Is AP automation suitable for businesses that handle non-PO invoices or services?

Yes, AP automation is suitable for businesses handling non-PO and services, as well. In fact, AP automation is better suited for these scenarios, as manual invoicing is more challenging, as these invoices often lack predefined purchase orders.

6. How do I choose the right AP automation software for my company?

Consider your business’s unique positioning before you start scouting for an AP automation software solution. For this, you can assess factors such as your invoice volume, integrations with your current system, advanced and AI features offered by the solution, user-friendliness, and scalability. Also consider the price and its long-term value for your business. After you have decided on a few top solutions, request product demonstrations from the provider before finalizing the solution for invoice processing automation.

7. Can AP automation integrate with my existing accounting or ERP system?

Yes, most invoice automation solutions can integrate with your existing accounting or ERP system. Pathquest AP, for example, can integrate with ERP systems like Sage Intacct.