API Advantages — Automating AP and AR
Accounts payable and accounts receivable, or AP and AR, are among the most important aspects of any business. Given the advancement of technology and the increased competitiveness of the modern business world, many companies are seeking to automate their AP and AR processes. Learn about the advantages of application programming interfaces and how they can help with this automation.
Accounts Payable Automation
Put simply, accounts payable is any money owed by a business to its suppliers or creditors. Depending on the size and activity of the company, keeping track of these payments often requires an entire department, but new automation abilities make the process easier than ever before. No longer will you have to worry about human errors, lost papers, or invoice duplicates.
The streamlined solution to accounts payable efforts involves processing all the paperwork electronically. Even then, however, the process can still take quite a while. That’s why it’s important to not only automate certain entry and sending systems, but also to take advantage of technology that allows numerous systems and apps to communicate with each other.
Accounts Receivable Automation
Accounts receivable references the money owed to a company for goods or services provided to other people, companies, or entities. They’re typically represented by invoices and are considered part of a business’s assets because they’re legally enforceable. It’s important to note, however, that accounts receivable can require just as much paperwork as accounts payable.
Automating accounts receivable is important for many of the same reasons as accounts payable. When you automate the AR process, invoices are created automatically, as technology examines company data to register purchases made that have a payment pending. Typically, this type of automation also involves technology that allows for multiple forms of payment to be processed to fulfill the demands of any given invoice.
Application Programming Interface
Whether you’re automating accounts payable or accounts receivable, you’ll likely be making use of an application programming interface, or API. At its core, an API is a type of software that allows two or more applications to communicate. An API acts as a messenger that carries communication from one application to another, whether it be two applications of yours or an application of yours and an application of a client or supplier.
Making and receiving payments often involves quite a bit of information being traded. An API is able to communicate the necessary information across multiple apps to make the process easier. For example, an API could access multiple bank accounts, payment information, and invoice information to automate a payment without any human interaction at all. Of course, an API and the platforms it interacts with would have to be encrypted to protect sensitive information.
APIs and Efficiency Gains
Automating AP and AR is just the first step to maximizing your efficiency. Among small businesses, these efforts are often represented by a portal from which you can access the automation platform. While this does speed up the process quite a bit, you’ll still find yourself switching back and forth between portals to complete key functions like payments.
When you utilize an API, you can combine the different portals, allowing a secure exchange of information that can all occur automatically. From the user’s perspective, that means being able to handle all your AR and AP processes from a single portal. That alone is enough to increase accounting efficiency significantly. With this consolidation of labor and information, transparency is also much easier to achieve for the benefit of the business, its suppliers, and its customers/clients.
How AP and AR Are Connected
While AP and AR are clearly separate aspects of a business’s financing, they’re more connected than you might think. This is most clearly demonstrated by the trend of late AR leading to late AP. Every business has to deal with late payments at times from customers or clients. The problem is that these late payments almost always coincide with late AP payments on the business’s behalf due to reduced cash flow.
Considering how closely AP and AR are connected, automating just one or the other won’t be able to solve the efficiency problems they can present. When you use an API to optimize both, you’ll be able to keep a closer eye on your cash flow and operate with the necessary transparency that makes expectations for payment clear for any clients and customers.
API advantages are numerous, but automating AP and AR are among the best features they can offer. With this in mind, it’s time to consider augmenting your business with AP and AR automation through the use of an API. Start maximizing your efficiency today!
