4 Benefits of Accounts Payable Automation for Nonprofits

Nonprofits face a challenge when it comes to internal enhancements and transformation. At the heart of their business structure is the fact that any dollar spent on administrative costs are dollars not spent on the mission. This puts spending under a microscope, especially in the finance office or accounting department. 

Although it can be difficult to secure spending approvals for technology enhancements, nonprofits have seen significant gains in updating systems for streamlining processes and creating automation. One area where this is particularly true is the accounts payable function. All nonprofits have to pay bills in one way or another, and using accounts payable automation tools is an easy way to gain efficiencies and insight for a relatively low investment compared to some other function areas. 

We’ve seen nonprofits that have shifted from data entry to analysis of numbers and reviewing details realize four major benefits in using accounts payable automation. 

1. Enhanced Efficiency and Time Savings

At most nonprofits, invoices come into accounting in many different forms and methods. This can cause problems both in processing and forecasting. From the moment an invoice is received to payment execution, automation can bring accuracy and speed typically unattainable through manual methods. This leap in efficiency frees valuable staff hours, redirecting focus from the repetitive tasks of data entry and invoice-tracking to more strategic, mission-centric activities. When organizations are looking into platforms to improve their efficiency, there are a few areas of improvement they should consider. 

• Streamlined invoice processing. Automation of data entry not only speeds up the process but also reduces or eliminates the bottlenecks associated with manual sorting, filing and data transcription.
• Centralized document management. By maintaining invoices and related documents in a centralized digital repository, accounts payable automation provides easier access to financial data.
• Scalability. Accounts payable automation systems can process varying amounts of invoices without increasing processing time or resource allocation.  

2. Improved Accuracy and Reduced Errors

The precision of accounts payable automation systems significantly lowers the incidence of human errors, which are common in manual data entry and invoice processing. Automated systems can automatically detect and correct discrepancies, such as duplicate or mismatched purchase orders and invoices. Here’s how accounts payable automation significantly improves accuracy and reduces errors.

Automated Data Capture

Accounts payable automation systems mitigate the risks associated with manual data entry. By accurately capturing invoice details such as vendor names, amounts and dates, these systems help ensure that the foundational data entering the financial system is correct, reducing the potential for errors at the source.

Predefined Processing Rules

Automation allows for establishing predefined rules that standardize the handling of invoices and payments, including automatically matching invoices to purchase orders and delivery receipts, ensuring that payments are made only when verification criteria are met. 

3. Reduced Costs

In nonprofits, every dollar saved is a dollar that can be redirected toward fulfilling their missions. Accounts payable automation is an effective lever in achieving significant cost reductions by introducing a systematic approach to lowering expenses associated with accounts payable processes. Accounts payable automation streamlines transactions and uncovers and eliminates hidden costs that often go unnoticed in manual operations. The right automation platform can significantly lower operational costs in several areas.

• Labor. Manual processing of accounts payable is labor-intensive, requiring considerable staff time for data entry, invoice matching, and payment processing. 
• Processing. Automated systems streamline processes digitally, eliminating tangible costs by reducing the physical footprint needed for storing financial documents.
• Opportunity. Beyond direct financial savings, the efficiency gained through accounts payable automation frees up organizational resources that can be redirected toward mission-driven initiatives.

4. Improved Compliance and Financial Control

Nonprofits must adhere to stringent financial regulations and standards. Accounts payable automation supports compliance by maintaining an auditable trail of transactions and ensuring adherence to internal controls and external regulations. Automated workflows can be configured to enforce approval hierarchies and spending limits, adding an essential layer of security and control over financial transactions. Accounts payable automation significantly enhances an organization's ability to achieve both objectives through several important mechanisms.

Enforced Approval Workflows

One of the most vital features of accounts payable automation is its ability to enforce strict approval workflows. By setting predefined approval hierarchies and limits, nonprofits can confirm that the appropriate personnel review and approve expenditures before payments are processed, strengthening internal controls and adding a layer of accountability to financial transactions.

Audit Trail Transparency

Accounts payable automation creates a thorough and immutable audit trail for invoices and payments, documenting who approved what and when. 

In the nonprofit world, accounts payable process systems and automations can lead to efficiencies that may result in major time and cost savings for the organization. The time that is freed from data entry alone allows employees to be put to their highest and best use. 

Additionally, the scalability of accounts payable automation helps ensure that, as nonprofits grow and evolve, their financial management systems can adapt, supporting increased transaction volumes, new programs and geographic expansion without compromising efficiency or accuracy. This scalability is crucial for nonprofits aiming to increase their impact, allowing them to focus on their core mission rather than administrative tasks.

The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.