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Do You Need AP Automation Software for a Small Business?

If you're a small business owner, you probably wonder if you need AP automation software for a small business. Quick answer: It varies. Learn more here.

Adopting accounts payable (AP) automation software for a small business might seem unnecessary or reserved for larger enterprises. However, one may overlook the benefits that automation can offer, even for smaller-scale operations. In this blog, we figure out whether or not your small business really needs AP automation software and what the software can do for you.

What Is the Role of AP Automation for a Small Business?

AP automation helps small businesses make invoice processing more efficient. When your small business implements AP automation, you also get to improve cash flow and automate legacy accounting systems.

How to Manage Small Business Finances

Knowing how to manage small business finances ensures its stability. By managing finances well, you can identify growth opportunities and enable strategic decision-making.

1. Bookkeep regularly

Small businesses often operate with limited resources. Regular bookkeeping helps you maintain control over your finances by tracking income, expenses and cash flow. Keeping a close eye on the numbers allows you to manage day-to-day operations, avoid overspending and ensure that funds are allocated effectively.

2. Measure expenses and return on investment (ROI)

Learning how to keep track of finances for a small business allows you to make data-driven decisions on investments. By tracking expenses, your small business can also identify areas where costs can be reduced or optimised. This could mean negotiating better prices with suppliers, eliminating unnecessary expenses or finding more cost-effective alternatives for certain processes or services.

3. Establish strong business credit

Lenders look at credit scores to evaluate the risk of their applicants, so be sure to build strong business credit if you plan to go for external funding or loans. A good credit score can increase the likelihood of approval and may also result in more favourable loan terms, such as lower interest rates and higher borrowing limits.

4. Streamline tax payments

It’s understandable if a small business has a hard time pulling up a lot of cash during tax time. If you’re having a hard time paying your quarterly estimated tax payments, we suggest changing to monthly tax payments to ease the burden. Think of the tax payments as any other monthly expense.

5. Have a proper budget in place

A budget helps you control expenses by setting spending limits and identifying areas where costs can be reduced. Be sure to track expenses against budgeted amounts to identify overspending or inefficiencies and take corrective actions as needed.

How Automation Helps Small Businesses Grow and Scale

1. Better visibility

Your automation software gives the whole company visibility on payables. It promotes accountability as it allows the team to track where the invoice is and reach out to the person causing any bottlenecks.

2. Accuracy

We can’t stress enough how automation reduces human errors. The data that you enter into the system can be checked against the data indicated in the enterprise resource planning (ERP) system to make sure there are no discrepancies. Simply put, automated systems perform repetitive tasks consistently and accurately, minimising the risk of typos, miscalculations or other mistakes that can occur with manual data entry.

3. Fraud prevention

Just because it’s a small business doesn’t mean fraud can’t take place. Automated systems can enforce strict access controls, limiting the number of employees who can view or modify sensitive financial information. This helps prevent fraud resulting from data manipulation or entry errors.

4. Integration

You can integrate AP automation into your business’s financial system. You won’t have to log in and log out from one app to another as they’re all integrated into one platform.

5. Prevention of late fees

Automation helps you set the date for recurring payments. It can send reminders to employees or customers before payment deadlines, ensuring that stakeholders are aware of upcoming deadlines and can take action to submit payments on time.

Questions to Ask About Automation for Small Businesses

1. Does it address the challenges of my current process?

Yes. Small businesses often face the challenge of spending excessive time on manual tasks and having to master how to manage expenses for a small business. Automation can streamline these processes by automating repetitive tasks, freeing up time for employees to focus on more value-added activities. Automation can also provide visibility into business processes and analytics.

2. Is it easy to use?

Definitely! Many automation software have user-friendly software and intuitive interfaces. Automation tools are designed to scale with the needs of small businesses as they grow and evolve.

3. Does it automate the whole invoicing process?

It depends on the automation software that you choose. There is software that ranges only from document management to invoice workflows to payment execution. On the other hand, there’s software that covers invoice capture, invoice approval, payment authorisation and payment execution. You can do your research to see which software works best for your small business.

4. Does this solution offer cost savings?

Yes. AP automation offers significant cost savings for small businesses by reducing processing costs, accelerating operation times and facilitating compliance and audit processes. With automation, small businesses can achieve financial savings, enabling them to focus on growth and success.

5. How do we implement this?

Start by outlining your finance processes. From there, you can evaluate your current setup, list down your business goals, look for an automation solution and test workflows.

So Do I Need AP Automation Software for My Small Business?

The decision to invest in AP automation or expense management software for your small business relies on the volume of invoices your company processes monthly. If your small business handles fewer than a hundred invoices each month, the ROI may not be immediately apparent. The manual processing of invoices might suffice without significantly impacting operational efficiency or cost savings.

However, if the volume of invoices goes beyond a hundred, the need for AP automation becomes increasingly critical. With higher invoice volumes, manual processing becomes time-consuming and error-prone. AP automation software streamlines the entire invoicing process. Therefore, if your business deals with more than a hundred invoices monthly, investing in AP automation software is definitely a strategic choice.

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