Automation is changing business operations, and finance teams are no exception. According to a McKinsey report, 98% of CFOs have invested in some form of automation. In accounting, where repetitive tasks consume valuable time, automation offers significant benefits. 

Despite this, over 55% of companies still rely on manual processes for their accounting operations, highlighting a gap that can be addressed with smarter solutions.

Rather than replacing your finance team, automation enhances their efficiency. Accounts payable management, which requires precision and consistency, can be greatly simplified with scalable software, reducing errors and saving time. 

In this article, we’ll explore how accounts payable automation works, its benefits, and how it can transform your AP workflow.

What is Accounts Payable Automation?

Accounts payable (AP) automation is the process of using technology to handle tasks related to managing a company’s accounts payable. This includes processing invoices, tracking payments, and handling financial records, all through automated systems instead of manual input. 

With the right software, you can significantly reduce the risk of human error, speed up the process, and ensure that your financial records are always accurate. This shift not only saves time but also allows your finance team to focus on higher-value tasks.

Up next, let’s focus on the core components involved in AP process automation.

Key Components of Accounts Payable Automation

Accounts payable automation fundamentally changes how organizations handle vendor payments and invoice processing. By replacing manual, paper-based workflows with intelligent digital systems, companies can significantly reduce processing costs while virtually eliminating payment errors. 

However, in order to smoothly transition from manual management to automated processes, you need to have a clear understanding of the building blocks of AP automation. Here are the five core elements that work together to create a seamless payment process:

1. Invoice Capture and Data Extraction

AP automation begins by digitising incoming invoices by scanning them or sending them electronically. Advanced OCR (Optical Character Recognition) technology then extracts key data points like invoice numbers, amounts, dates, and vendor information automatically, eliminating manual entry.

2. Validation and Matching with Purchase Orders

The system automatically validates invoice information against purchase orders and receiving documents. This three-way matching process flags discrepancies in quantities, prices, or terms before they become problems, ensuring you only pay for what was actually ordered and received.

3. Automated Approval Workflow

Invoices are automatically routed to the correct approvers based on your company's predefined rules. The system sends notifications, tracks approval status, and escalates when needed, eliminating bottlenecks and providing complete visibility into where each invoice stands.

4. Integration with ERP and Accounting Systems

AP automation connects directly with your existing finance systems, ensuring data flows seamlessly between platforms. This integration eliminates duplicate entries, maintains consistent records, and enables real-time financial reporting without manual reconciliation.

5. Payment Execution and Control

The final component handles the actual payment execution through various methods, such as bank transfers, virtual cards, or cheques. The system maintains payment schedules, captures early payment discounts, and provides audit trails for complete financial control and visibility.

Once set up, these components work together to transform your accounts payable from a paper-shuffling operation to a streamlined digital process.

Now that we’ve covered the components, let’s learn about the technologies that power accounts payable automation.

Technologies That Power Accounts Payable Automation

The most effective AP automation solutions rely on several advanced technologies working together to transform your payment processes:

• Artificial Intelligence and Machine Learning: These technologies enable systems to learn from each invoice processed, improving accuracy over time. They identify patterns, detect anomalies that might indicate fraud, and make intelligent suggestions about invoice categorization without human intervention.

• OCR: This technology converts scanned documents into machine-readable text. Modern OCR solutions can extract data from invoices regardless of format, recognizing necessary fields like invoice numbers, dates, and amounts with minimal human supervision.

• Robotic Process Automation (RPA): These digital robots handle repetitive tasks like data entry, validation, and reconciliation. They follow predefined rules to process invoices through your systems much faster than humans, working 24/7 without errors or breaks.

• Cloud Computing: Cloud-based AP solutions provide secure access from anywhere, enabling remote work and collaboration. They eliminate the need for on-premises infrastructure, reduce IT maintenance costs, and automatically update with new features.

• Blockchain Technology: Emerging in financial processes, blockchain creates tamper-proof transaction records. This provides unprecedented security and transparency in payment systems, reducing fraud risks while creating immutable audit trails.

• Natural Language Processing (NLP): This technology helps systems understand unstructured text in invoices and communications. It can interpret emails about invoices, extract meaning from comments, and facilitate better vendor communication without human intervention.

To maximise your output with modern technology, you should consider adopting a phased approach. This will both make the transition to automation easier and allow you to build a more straightforward process.

Practical Ways to Automate the Accounts Payable Process

The accounts payable process consists of several stages, from invoice capture to payment execution. With the right approach, you can automate any of these stages. Here are some practical ways to reduce paperwork and save time, making your AP process smoother and more efficient through automation.

• Automated Invoice Capture: Automatically capture invoices through email or document uploads. The system extracts key information, eliminating manual entry, reducing errors, and speeding up processing times.

• Automated Approval Workflows: Route invoices to the right approvers based on predefined rules with automated approval workflows. The system sends notifications, tracks approval status, and minimizes bottlenecks, improving efficiency.

• E-Invoicing: Send and receive invoices digitally with e-invoicing. This reduces paper waste, speeds up processing, and enhances accuracy by eliminating manual input, providing real-time updates.

• Reconciliation Automation: Match invoices with payments and purchase orders automatically. This reduces errors, improves financial visibility, and allows you to spot discrepancies while maintaining accurate records quickly.

• Centralise Vendor Payment: Centralize vendor payments through a secure portal where suppliers can directly check invoice and payment status. This reduces vendor inquiries, boosts transparency, and allows your AP team to focus on addressing exceptions that require attention.

With Kodo, you can automate invoice capture, approval workflows, payment scheduling, and reconciliation all in one platform. Our platform makes spend management a breeze for organizations and startups of all sizes.

Why Should Businesses Automate Accounts Payable?

Automating AP offers businesses a wealth of advantages that go beyond just reducing administrative burdens. With increasing demands for efficiency, accuracy, and compliance, automating the AP process helps organisations meet these challenges while improving overall performance.

Here are some of the key reasons why businesses should consider automating their accounts payable:

• Cost Reduction: Companies can significantly reduce processing costs per invoice by eliminating manual data entry and paper handling. You'll also save on labour costs, paper, printing, storage, and postage.

• Time Efficiency: Tasks that once took days now complete in hours or minutes. Your team can process more invoices in the same timeframe, allowing staff to focus on higher-value activities like vendor relationships and cash flow optimisation.

• Enhanced Accuracy: Human error in manual processing is inevitable. Automation reduces this to near-zero levels, eliminating costly mistakes like duplicate payments or missed early payment discounts.

• Better Visibility: Access real-time dashboards showing invoice status, pending payments, and cash flow projections. This visibility enables better financial planning and gives you complete audit trails for every transaction.

• Improved Vendor Relationships: Timely, predictable payments strengthen your supplier relationships. Long-standing, reliable partnerships with vendors lead to better terms and mutual growth.

• Stronger Financial Controls: Automated approval workflows enforce compliance with your payment policies. The system creates detailed audit trails that simplify regulatory compliance and fraud prevention.

• Strategic Cash Management: With greater visibility into payment timing, you can strategically hold or release payments to optimise cash flow and capture early payment discounts when advantageous.

Still unsure of whether it’s the right call to switch to automation? To speed up your decision-making process, we have laid out the shortcomings and challenges of manual AP process.

Challenges with the Manual Accounts Payable Process

Companies can lose up to $1.3 million a year simply due to inefficient processes. Manual invoice management tasks like data entry, verification, and payment tracking are repetitive grunt work that capable software can efficiently handle. Organisations that refuse to adopt automation can face the following roadblocks:

1. Delayed Payments and Late Fees

Manual invoice processing creates bottlenecks at every step, from receipt to approval. Papers sit on desks waiting for signatures, and invoices get lost in transit. These delays result in missed payment deadlines, late fees, and damaged supplier relationships that can affect your business operations.

2. Error-Prone Data Entry

Human operators make mistakes when transferring data from paper invoices to accounting systems. These errors compound over time, creating discrepancies in financial records that require hours to track down and correct. The consequences include incorrect payments and financial reporting inaccuracies.

3. Limited Visibility and Control

With paper-based systems, finding the status of any invoice means physically tracking down documents. This creates blind spots in your financial processes, making it nearly impossible to forecast cash flow accurately or respond quickly to vendor inquiries about payment status.

4. Fraud Vulnerability

Paper-based AP systems lack robust security measures and audit trails. Without automated controls, your business becomes more susceptible to various forms of payment fraud. 

Malicious activities like duplicate invoices or unauthorised payments may go undetected for months when the entire process is either paper-based or relies solely on legacy systems. 

5. Higher Processing Costs

While the initial cost of automation may be higher, over time, it leads to substantial savings. Let us explain how. 

Processing a single invoice manually involves multiple steps that require significant resources: 

• More staff time for data entry and approval workflows

• Physical office supplies like paper, printers, and filing cabinets

• Storage space for keeping physical records

All of these factors contribute to the overall cost of manual processing, which can quickly add up.

Accounts payable automation offers a powerful remedy. But with so many software options available, it’s important to select the right one to suit your business needs.

Top 5 Accounts Payable Automation Software in 2025

A smooth and error-free accounts payable automation process starts with the right tool. With so many promising options in the market, it's only normal to struggle with finding the right solution that fits your specific requirements. 

After comparing the features, reliability, and price-to-performance ratio of several popular accounts payable automation solutions, we narrowed down your options to the following five:

1. Kodo

Kodo is an all-in-one spend management solution specifically designed for startups and mid-market companies in India. With Kodo’s sophisticated AP management solution, you can effortlessly receive, verify, approve, and clear your invoices from suppliers.

Key Features:

• Advanced OCR Technology: Automatically captures and extracts invoice data, eliminating manual data entry and reducing errors.

• Two-Way and Three-Way Matching: Kodo automates both two-way and three-way matching, validating invoices against purchase orders and receipts to ensure accurate payments and prevent discrepancies.

• Flexible Payment Methods: Supports NEFT, RTGS, IMPS, and UPI, allowing you to choose the most efficient payment method for each transaction.

• ERP and Bank Integration: Integrates with popular ERPs and banking systems, creating a unified financial ecosystem that eliminates data silos and duplicate entries.

2. Tipalti

Tipalti is an end-to-end accounts payable automation solution that simplifies the payment process for global businesses. It’s designed to handle everything from supplier onboarding to tax compliance, providing a unified system for international transactions.

Key Features:

• Global Payments Management: Supports multi-currency payments and international transactions, making it ideal for global businesses.

• Supplier Onboarding Automation: Automates the process of onboarding new suppliers, saving time and reducing errors.

• Tax Compliance: Ensures tax compliance by handling complex forms, such as W-9 and W-8, for global vendors.

• Real-Time Analytics: Provides insights into payment performance, allowing for better cash flow management and decision-making.

3. Zoho Books

Zoho Books is an intuitive AP automation software solution that integrates accounting, invoicing, and payment processes into one platform. It's ideal for small to mid-sized businesses looking to streamline their financial workflows.

Key Features:

• Automatic Bill Payment: Schedule bill payments automatically, ensuring you never miss a due date.

• GST Compliance: Handles GST calculations and ensures compliance with tax regulations.

• Accurate Expense Tracking: Tracks expenses in real-time, providing instant insight into company spending.

• Cloud-Based Access: Being cloud-based, it ensures you can access your data from anywhere with secure, real-time updates.

4. Coupa

Coupa is a spend management platform that automates accounts payable and procurement processes. It’s designed for enterprises looking for advanced analytics and supplier collaboration.

Key Features:

• Spend Visibility: Tracks and analyses spending to help identify savings opportunities and improve budget management.

• Supplier Collaboration: Offers a self-service portal for suppliers, making invoicing and communication more efficient.

• Invoice Automation: Automates invoice capture and matching, reducing processing time and errors.

• Advanced Analytics: Provides insights into AP performance, helping businesses make data-driven decisions for cost savings.

5. AvidXchange

AvidXchange specifically focuses on B2B mid-market organisations. The platform smooths out your workflows, reduces errors, and accelerates the invoice approval process.

Key Features:

• Invoice Capture and Coding: Automatically captures invoices and applies coding for faster approval and payment.

• Workflow Automation: Streamlines approval workflows, ensuring timely payments and reducing bottlenecks.

• Cloud-Based Solution: A cloud-native platform that ensures access from anywhere with real-time data synchronisation.

• Vendor Self-Service Portal: Enables vendors to track payments and submit invoices, reducing administrative work for your team.

Seriously considering upgrading your AP process, but not sure what to look for in an accounts payable software? Refer to our checklist below:

How to Choose the Right AP Automation Software

Finding the perfect AP automation solution requires careful consideration of several key factors that align with your specific business needs:

• Ease of Implementation: Look for solutions with simple setup processes and minimal disruption to your current operations. Prioritize vendors offering comprehensive onboarding support and training programs for your team.

• Integration Capabilities: Ensure the software connects smoothly with your existing ERP, accounting systems, and banking platforms. 

• Scalability: Choose solutions that can grow with your business, handling increasing invoice volumes without performance issues. The right system adapts to your changing needs without requiring replacement.

• Mobile Functionality: Prioritize solutions offering mobile approval capabilities for executives on the move. Your approvers should be able to review and authorize payments from anywhere to prevent process bottlenecks.

• Security Features: Verify the software has robust security measures, including role-based access controls, encryption, and fraud detection capabilities. Your financial data demands the highest level of protection.

• Reporting Capabilities: Select systems with comprehensive analytics and customizable reporting options. You need clear visibility into processing times, cost savings, and other key performance indicators.

• Vendor Support Quality: Evaluate the support services offered, including implementation assistance, ongoing technical help, and regular system updates. 

Conclusion

One of the most critical steps in automating your accounts payable is making sure your business can handle growth while staying accurate and on top of payments. With the right tools, you can eliminate repetitive tasks, reduce errors, and gain better control over your cash flow. 

The result is a faster, more reliable payment process that supports your business at every stage. 

At Kodo, we take the hassle out of invoice processing and management. Our platform uses OCR technology to scan invoices and extract key information automatically. It can even flag important details such as due dates and vendor risks, making approvals quicker and smarter. 

With automated two-way and three-way matching, we ensure smooth reconciliation, saving you time and reducing mistakes.

Ready to upgrade your accounts payable strategy? Book a demo with Kodo today and discover how much time and money you could be saving tomorrow.