How to choose the best AP and AR software for your business

1. Saving time and money

The old way of managing accounts payable and receivable relied on bringing stacks of papers (such as invoices) to the proper desks. You would then have to wait days or even weeks for the right people to sign off on these papers. It was tedious and highly inefficient.

AP and AR software offers intuitive dashboards telling you where invoices are in the approval process. The software makes it possible to streamline the entire approval process. Keeping the approval process seamless helps speed up payment processing and forge better business relationships.

If you’re asking: is accounts payable an expense? While AP tracks what you owe, it represents liabilities—not direct expenses—until payments are made.

Managing AP and AR through software saves your employees from having to spend hours poring over numbers and invoicing the right people.

Reducing finance-related responsibilities held by your employees frees them up to focus on other tasks. As a small business, this means more people helping out in marketing, sales, and other business-critical areas. More hands on deck will make growing your business easier than ever.

Some businesses even outsource accounts payable services to save internal resources while still keeping vendor payments on track.

Finally, digitally managing AP and AR  benefits your employees on another level. Utilizing tech is one of the best ways to avoid burnout while growing your business—simply because it makes work more efficient. It can hardly be overstated how much a small business needs healthy, rested employees.

2. Organizing data

The traditional way of organizing accounts payable and receivable has always been prone to human error. Inevitably, physical invoices sometimes go missing, so you might charge the wrong people and compute the wrong amount.

One of the best accounts payable tips is to use software that eliminates paperwork headaches, making processes more accurate and easier to track.

Managing cash flow becomes much more organized when technology is introduced into the equation. Accounts payable and receivable software can keep track of a customer’s details and take notes of the order, previous deals, and any agreed-upon terms. Having your data organized this way will come in handy if your business needs to pursue any payments.

Organized data goes a long way in crafting a solid internal process. It’s what allows you to improve your bookkeeping and payment processes.  Some AP and AR software, including Melio, will even allow you to schedule payments in advance, sync with your accounting software, and get a complete overview of all your payments, without losing track of your data or having to input it again into various systems. These things are essential to your business because they allow you to know exactly how much money is flowing in and out of your business at any given time.

Using accounts payable and receivable software takes the guesswork out of organizing critical financial data. For small businesses, this could mean the difference between a record profit and a record loss.

3. Protecting sensitive account information

Dealing with accounts payable and receivable means you can’t help but deal with sensitive info. You’ll be exposed, for example, to payment details as well as bank account and credit card numbers, addresses, transaction histories, and contact information. It will reflect poorly on your small business if it’s unable to safeguard this data properly.

Becoming a victim of a business data breach is easier than many think. A 2022 survey found that 71% of organizations were victims of payment fraud hacks or attempts.

The good news is that accounts payable and receivable software always comes with measures to protect data. For instance, you can use the software’s dashboard to grant specific employees access to invoice and payment approval. So, if any leaks occur, it will be easier to trace them back to the source. This type of system also helps ensure no single employee is responsible for payment approval alone. This security measure has two benefits: it reduces the potential for fraud while making it easier to double-check data.

Yet accounts payable and receivable software offers more protection than just restricting access. Financial software providers are legally bound to employ basic security protocols like password protection, data encryption, and security protocols such as SSL. These features are your business’s first line of defense in case of a data breach.

4. Getting better insights

Accounts payable and receivable software comes with dashboards telling you how productive your payment process is. These dashboards also carry other data, such as when payments were made and their current status.

These nuggets of data can be insightful. By looking at them, you get a bird’s-eye view of how things are going with your small business at just a glance. Accounts payable and receivable software is also capable of forming analyses and reports. Your business can use these insights to recalibrate your strategy as necessary. In other words, it gathers data to let you know what works and what doesn’t.

It’s also possible to increase the productivity of accounts payable and receivable software by integrating it with other software. For example, QuickBooks Online reviews will show that it can track invoices and fix cash flow statements. The intelligent accounting system in its software is designed specifically to be easy to use and support smart, data-based decisions. It’s also worth noting that the system was specifically geared toward small businesses.

Many modern tools even use AI in accounts payable and receivable processes to analyze data patterns, predict cash flow issues, and automate routine tasks.

5. Improving communication with customers

AR has a lot to do with charging clients and customers, so communication is key. An example of good communication with your clients is staying on top of your invoices. Using accounts receivable software means you get automatically notified of the status of an invoice.

You’ll know immediately if the recipient received it or if there were any errors in the charges. Your business can preemptively address any problems before they become a major client concern. Your clients will view your small business favorably if you can communicate you’re on top of things.

6. Creating customized solutions

Every small business has different needs. Accounts payable and receivable software providers understand this and include customization in their platforms.

These platforms carry options allowing you to design workflow to best suit your needs. You can set payment approval workflows, assign different roles and permissions to teammates, and get instant notifications to keep you (or your bookkeeper) informed.

Customization is important because nobody knows how your small business works better than you. By taking advantage of customizable features, you make accounts payable and receivable software as efficient as possible.

1. Map your current AP process

Before you do your research and look for the differences between different AP software on the market, start by mapping out your process of bill pay. Think about when you send payments—is it always at the same time? Who’s in charge of keeping track of everything? When do you put the info into the accounting software?

2. Find your dependencies

Now that your process is mapped out, try to locate the issues. Are you facing late payments often? Are you paying more than cash that you actually have? Are your books a mess?

3. Look for a tool that solves your problems

Now that you know what your process is lacking, you can start looking for a tool that fits your needs.

Flexibility for you and your vendors

Some bill pay tools, like Melio, let you pay however you want while your vendors choose how they get paid. If you’ve ever wondered what are online payments, they’re simply digital methods—like ACH transfers or card payments—that give both you and your vendors flexible options. Let’s say you have one vendor who insists on receiving paper checks and another one that prefers a bank transfer. You, on the other hand, want to pay with your credit card, in order to extend your float. Look for an AP software that gives both you and your vendors what you want.

Easy to use

Updating your process and using new tools can be hard, especially the part where you have to learn how to use this new system. Choose an AP software that’s easy to use and intuitive so you can get the hang of it quickly.

Trackability

One of the most important things when running a business is keeping the books in check at all times. One easy way to do so is by using online tools. Choose an accounts payable software that syncs with your accounting software so that every time you make a payment, it’s updated in both systems.

Cost-effectiveness

AP software can save you money in two different ways. There are subscription fees and transaction fees. Melio, for example, has no subscription fees and ACH to ACH bank transfers are also free. Check what your most common transactions are and compare the fees in different software.

Approval workflows

If you’re not the only one handling the bills for your business, a lack of communication or a simple misunderstanding could mean a bill is paid too early, draining your account. Some digital accounts payable tools can prevent such scenarios if you implement payment approval workflows. You can assign roles to different people in your operation and set thresholds for payments requiring your authorization.