For many businesses, paying suppliers still means downloading PDF invoices from emails, typing them into the accounting system, chasing someone for approval and then setting up the payment. Accounts payable automation replaces most of those steps, so invoices are captured, checked, approved and ready to pay with far less manual work.
This guide explains how accounts payable automation works, what invoice processing software does, how it fits with Xero, QuickBooks and Sage, and how to get started.
What is accounts payable automation?
Accounts payable (AP) automation is the use of software to handle the steps between receiving a supplier invoice and paying it. A typical automated AP process:
- Capture. Invoices arriving by email, supplier portal or post are collected automatically from a dedicated inbox or upload point.
- Extract. Software reads each invoice and pulls out the supplier, invoice number, date, amounts, VAT and line items.
- Check. The data is validated: is the supplier known, does the VAT add up, is this a duplicate, does it match the purchase order or delivery note?
- Code. The invoice is assigned to the right nominal code, cost centre or project, usually based on previous invoices from the same supplier.
- Approve. It is sent to the right person for approval, based on amount, department or supplier, with reminders if it sits too long.
- Post and pay. Approved invoices are posted to the accounting system and added to a payment run.
Anything that fails a check, such as a price that doesn't match the order, is set aside for a person to review.
Invoice processing software: the main options
Built into your accounting software
Xero, QuickBooks and Sage all let you forward bills by email and include some automatic reading of invoices. For a small business with a modest number of invoices, this may be enough.
Dedicated invoice capture tools
Tools such as Dext, Hubdoc and AutoEntry specialise in reading receipts and invoices and publishing them to your accounting software, learning how each supplier should be coded. They are widely used by small businesses and their accountants.
Accounts payable automation software
Fuller AP platforms add approval workflows, purchase order matching, supplier management and payment runs. They suit businesses with higher volumes, several approvers or multiple entities.
Custom AP automation
Where invoices are unusual, approval rules are complicated, or data needs to flow between several systems, such as a job management tool, a CRM and the accounting software, a tailored workflow can join the pieces together. Modern AI can read invoices in almost any layout, including scanned ones, and explain why it flagged something.
Invoice automation with Xero
Xero is the most common accounting system for UK small businesses, so it's worth knowing what's possible:
- Forward supplier invoices to your Xero bills inbox, or use a capture tool that publishes to Xero, so bills are created without typing.
- Use supplier defaults and bank rules so coding is consistent.
- Add an approval step outside Xero, for example in Microsoft Teams or Slack, so approvers don't need a Xero login.
- Automate reminders for unapproved bills and a weekly summary of what's due.
- Connect Xero to your other systems so purchase orders, jobs or projects match up automatically. Our guide to CRM integration covers connecting Xero to other tools.
QuickBooks and Sage support similar approaches.
Benefits of automating accounts payable
- Less data entry. Invoices are read and posted without retyping.
- Fewer errors and duplicates. Automatic checks catch mistakes before payment.
- Faster approvals. Approvers get a simple request and reminders, wherever they are.
- Better supplier relationships. Invoices are paid on time, and you can take early payment discounts where suppliers offer them.
- A clear audit trail. Every invoice shows who approved it and when, which helps at year end and with VAT.
- Better cash flow visibility. You can see what you owe and when, without waiting for someone to update a spreadsheet.
Controls and fraud
Automation should make AP safer, not riskier. Make sure your process includes:
- Approval limits by amount and person.
- Separation of duties, so the same person can't add a supplier, approve an invoice and release the payment.
- Bank detail checks. Invoice fraud often starts with an email asking you to "update our bank details". Changes should always be verified by phone using a number you already hold, never one from the email.
- Duplicate detection on supplier, invoice number and amount.
How to get started
- Count your invoices. How many a month, from how many suppliers, and how many people approve them?
- Map the current process, including where invoices arrive and where they get stuck.
- Start with capture and extraction, which removes the most typing.
- Add approvals and checks, then connect payment runs.
- Measure the time per invoice before and after.
For more on processes worth automating, see our guide to small business automation. If you're an accountancy practice handling clients' bookkeeping, see AI for accountants.
How FDE Solutions can help
We automate invoice capture, extraction, approvals and reconciliation around the software you already use, including Xero, QuickBooks and Sage, with every posting reviewable and a clear audit trail. Where an off-the-shelf tool does the job, we'll say so and help you set it up properly.
Read about our intelligent automation service or book a discovery call.
