What is AP Automation and How does it Work?

For any organisation that hasn't automated their AP process, the following scenario will be all too relatable: An invoice shows up, gets forwarded, and gets buried under a bunch of emails. After a few days or a week, someone realises that no action has been taken on it, and the follow-ups begin. The consequences of these delays hurt the business further down the line.

AP automation is the simple fix to the problem. This post will explain to you what it actually is, how it works day to day, why teams are switching to it, what tends to go wrong along the way, and how to pick a solution that works best for your business.  

What actually happens when software takes over your AP

AP automation, simply put, is software that automates all the manual, repetitive steps that are a part of the AP (Accounts Payable) process. Contrary to popular belief, the automation is not limited to scanning physical invoices and digitising them only to proceed further manually. 

True AP automation reads the invoice itself and three-way matches it against the purchase order and the goods receipt note, and sends it to the right approver to release the payment. 

Here is everything that gets automated with AP automation software: 

• Capturing invoices and extracting from them: Invoice capture: Data from invoices received either via email or directly on the system can be extracted automatically using OCR technology. 
• Invoice matching and validation: The critical three-way matching process where invoices are compared against purchase orders and goods receipt notes. Discrepancies, if any, get flagged for further review. 
• Approvals: Invoices can be automatically routed to the right person based on pre-defined approval rules, departments or spend thresholds .
• Payment scheduling and processing: Once approvals are complete, approved invoices can be scheduled for payment and automatically synced to the accounting system.
• Creating audit trails for VAT compliance: Every invoice, approval, payment and supporting document is stored in one place to make audits and VAT record retention significantly easier. 

Here is how the process go about once implimented. 

1. Invoices are actioned immediately: Any invoice that comes into the system via email, EDI, or a digitised capture of a physical invoice is captured by the AP automation software. It then extracts key information like the vendor's name, amount, VAT, and due date automatically using OCR. 
2. They three way matched: This is where a lot of the errors or fraud get weeded out of the process. The system then runs a three-way match the moment the data from the invoice is captured. If all the information matches and is within the allowed variation, the invoice gets cleared. If any values fall outside the variance limit, it gets flagged immediately with a reason attached. 
3. Approvals if within parameters get approved immediately: The invoice routes to the right approver based on pre-defined rules. Alternative routing rules can also be set up for scenarios like the primary approver being on vacation to prevent delays. 
4. Payments go out automatically: Once approved, payment gets scheduled, and the transaction syncs to the accounting system with the correct VAT treatment and cost centre already attached.

What pushes finance teams to switch to AP automation

Most finance teams don't wake up one morning and decide they need to automate their AP. The decision comes after specific problems become a monthly occurrence. 

When approval bottlenecks start delaying supplier payments

Approving invoices isn't inherently a difficult task, but when each approval needs to be chased down due to the approvers being busy or on vacation, delays start to hamper business and business relationships. 

With AP automation in place, invoices are routed to the right approver based on rules your teams set beforehand. If an approver is unavailable, it can be set to move to the next person automatically: a big plus for businesses with multiple legal entities or approval hierarchies.

Al-Barari, a real estate developer in the UAE, used automated approval rules and entity-level controls to manage spending across different teams while keeping its existing accounting workflows intact. Their finance team saved around 200 hours every month and closed its books with far fewer manual steps.

When finance spends more time collecting documents than reviewing spending

Invoice processing doesn't end the moment payments are made. Finance teams still need to file receipts, check VAT compliance, and update the accounting system: a time-consuming process when done manually. 

With automated invoice processing, invoices, approvals, and supporting documents are connected throughout the process. As a result, your finance teams have all the information they need in one place to reconcile accounts. 

A multi-store retail business solved this exact challenge of having to collect financial documents from all their branches and move them to their HQ to reconcile. After moving to automated receipt capture and real-time spend controls, manual work at head office fell by more than 80%

When the business grows, but the finance team doesn't

As invoice volumes increase, finance teams often end up spending their day entering invoice details and checking payment statuses instead of their core tasks.

AP Automation handles all of this routine work in the background so that the team only needs to step in if an invoice needs additional review. In tandem with the Alaan Super Card, business payments can also be automated and categorised as they happen.

A UAE vacation homes company called Silkhaus automated and centralised its AP, which allowed them to save 650 hours every month. This, while gaining much clearer insight into where operational spending was happening in real time.

What automation won't fix for you?

If we are being honest, AP automation can only fix problems related to the processing of invoices themselves.  You will still have to address the following fundamentals to get the most out of the switch. 

• Messy data: Tools can only speed up what you give them. If your vendor list is full of duplicates and inconsistent names, automation will just process bad data faster. Clean up your records first.
• Broken approval hierarchies: Make sure your approval rules match how your business actually operates; otherwise, you will just speed up the rate at which unverified expenses get greenlit.
• Team resistance: Old habits die hard. Build in time for training so your team can adapt comfortably to the new workflow.
• Record retention rules: Article 71 of the UAE VAT Executive Regulations requires records to be kept for at least five years, while corporate tax rules extend that to seven. Make sure your migration plan keeps these records accessible by managing business payments as one connected process.

What to look for in AP automation software

Most AP automation software sounds identical on a sales call. The following capabilities are what really make the switch to the software worth it. 

• A live connection to your accounting software so that manual file exports are no longer required. 
• Matching tolerances that you can set yourself. 
• Approval routing that supports a proper delegation matrix across sites and departments.
• A full audit trail showing who approved what and when.
• VAT checks built in against Article 59 requirements before payment goes out. 
• Spends, be it an invoice or card payment, get tracked and categorised the moment it happens.

For a clearer picture of what good AP looks like day to day, check out our Accounts Payable Contact page.

Pro Tip: Once you decide on an invoice and AP automation software, roll out its implementation in stages rather than all at once.

Where this actually leaves your AP team

Most finance teams aren't behind on this because AP automation is hard to understand. It's genuinely not. They're behind because nobody's laid out what it actually looks like in practice, along with knowing the parts that can go wrong.

AP automation, in short, eliminates the need for waiting on someone to act to capture, match, approve, and pay out the invoice. It creates a finance team that can actually keep up as invoice volume grows.

If your team's already set up with Alaan, this is running closer than you'd think. Log in and see how much of this is already sitting there waiting to be turned on.

FAQs

What is the difference between AP automation and accounts payable software?

Accounts payable software often just digitises the paperwork; invoices get stored online instead of in a folder. AP automation goes further, capturing data, running three-way matching, routing approvals, and syncing to your accounting system without manual entry anywhere in between.

Is AP automation only useful for large companies?

Not really. It comes down to invoice volume more than company size. A handful of invoices a month is manageable by hand. Dozens of recurring vendor bills a month usually isn't, regardless of how big the company is.

Does AP automation help with VAT compliance in the UAE?

Good software checks invoices against Article 59 requirements, sequential numbering, TRN, correct VAT treatment, and flags anything missing before payment goes out. It also supports the Article 71 record-keeping rules by keeping everything synced and searchable instead of scattered across inboxes.

How long does implementation actually take?

Depends on how messy things are to start with, but most delays come from cleaning up vendor data and approval rules, not the software itself. Teams that roll it out in stages tend to be running within weeks rather than months.

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