Traditional payment systems are time-consuming, labour-intensive, and prone to human error. Payment automation platforms offer businesses a faster, more effective, and more secure alternative. They include convenient automation solutions for processes such as invoicing, employee payroll, and recurring billing. Businesses using them can improve financial operations, gain access to customer insight, and free up resources for strategic tasks.

The need for efficient, simple payment processes across various industries is increasing. The global accounts payable automation market was valued at nearly $5.4 billion USD in 2023 and is projected to reach $17 billion USD by 2032. Below, we’ll explain how payment automation platforms work, their benefits and challenges, and how to choose the best one for your business.

What’s in this article?

• What is a payment automation platform?
  
• How payment automation platforms work
  
• Benefits of payment automation platforms
  
• Challenges of payment automation platforms
  
• How to choose a payment automation platform
  

What is a payment automation platform?

A payment automation platform facilitates automated payment processes such as invoice processing, approval workflows, and financial transactions. It reduces manual entry and manual oversight. It also typically integrates with accounting and banking systems to keep payments accurate, timely, and compliant.

Here are some of the features often included in payment automation platforms.

• Automated invoice processing: This includes the ability to automatically capture and process invoices using optical character recognition (OCR) technology.

• Approval workflows: Configurable workflows establish rules for invoice approvals based on criteria such as amounts and vendors.

• Electronic payments: These support multiple payment methods such as electronic transfers, credit cards, and digital wallets.

• Fraud detection: Advanced security features such as two-factor authentication, encryption, and anomaly detection algorithms help prevent fraudulent activities and maintain data integrity.

• Financial integration: This includes integration and data synchronisation with existing financial systems such as enterprise resource planning (ERP) and accounting software.

• Customisable reporting and analytics: Comprehensive reporting tools and dashboards track payments, analyse spending patterns, and manage cash flow.

• Vendor management: This involves management of vendor data, including payment terms, contact information, and tax IDs.

• Tax and compliance management: This involves automated tax calculations and detailed audit trails for all transactions.

• Global capabilities: This includes support for multi-currency transactions and international payments.

How payment automation platforms work

Payment automation platforms automate invoice processing, payment approvals, payment execution, and payment fraud detection using multiple technologies. Here’s how payment automation works.

• Invoice data extraction: The platform receives invoices from various sources such as email, vendor portals, and physical mail. It can use OCR and machine learning to extract key data from them, including vendor details, invoice numbers, dates, line items, and amounts.

• Data validation and invoice matching: To ensure accuracy, the platform validates the extracted data against predefined rules and formats. It matches the data with corresponding purchase orders or contracts, and flags any discrepancies for review. Artificial intelligence (AI) can help detect signs of fraudulent behaviour during this process.

• Approval workflows: Based on pre-defined rules (e.g. amount, vendor, department), the platform uses workflow automation to route invoices to the appropriate approvers and track their approval status. Approvers then receive notifications and reminders. This speeds up payments and reduces manual labour. The platform can also identify potential early payment discounts.

• Payment execution: Once the payment is approved, the platform initiates the payment process based on the chosen payment method (e.g., ACH, wire transfer and vendor preferences. It adheres to industry standards and regulations for secure payment processing. Users then receive confirmation of payment execution and transaction details.

• Reconciliation and reporting: The platform matches payments to invoices and bank statements, and it identifies any discrepancies. During this process, application programming interfaces (APIs) facilitate communication between the platform and other systems such as ERP, accounting systems, and banking systems. The platform then generates reports on key metrics such as payment status, cash flow, and vendor performance.

Benefits of payment automation platforms

Businesses using payment automation platforms can see the following benefits:

• Improved processes: Payment automation platforms can reduce manual tasks such as data entry, invoice matching, and approval routing. This speeds up payment cycles and refines workflows. Ongoing data analysis supports continuous improvement in payment processes.

• Fewer errors: Automated data extraction and validation can improve accuracy and save costs by reducing manual processing errors.

• Lower costs: Payment automation platforms lower costs by reducing manual labour, avoiding late payment fees, and identifying opportunities for early payment discounts.

• More available resources: As automation handles routine tasks, staff can focus on more strategic, value-adding activities.

• Data visibility: Integration with existing ERP and accounting systems provides a unified view of financial data.

• Real-time insight: Payment automation platforms provide immediate insight into payment statuses, outstanding invoices, and cash flow forecasts. This helps businesses make informed decisions about cash management, investments, and resource allocation.

• Compliance: Automated workflows and audit trails help with adherence to internal policies, compliance with regulatory requirements, and audit processes.

• Fraud prevention: Advanced platforms use AI and machine learning to detect anomalies, potential risks, and suspicious activities.

• Improved supplier relations: Payment automation platforms strengthen supplier relationships by delivering consistent, immediate payments. They might also offer supplier-friendly features such as supplier portals, which give self-service access to invoice and payment information, and early payment schemes.

Challenges of payment automation platforms

Although payment automation platforms can offer many benefits, they also present these challenges and risks.

Technology

• Integration: Integrating payment automation platforms with existing financial systems and ERP software can be complex and time-consuming, especially if the existing infrastructure is outdated or uses custom solutions.

• Data migration: Migrating financial data to a new automation platform poses risks such as data loss and corruption. Businesses must secure data integrity during the migration process.

• System downtimes: Like any digital platform, payment automation systems can experience downtimes or outages, which can disrupt payment processes and affect cash flow management.

Security and compliance

• Data security: Handling sensitive financial data requires strong security measures. Any vulnerabilities in the platform can expose the business to data breaches and financial fraud.

• Compliance: Non-compliance with financial regulations and standards can lead to legal penalties. Automation platforms must stay up-to-date with changes in compliance requirements.

• Dependence on vendors: Businesses often rely on the security protocols of the platform provider, which might not always align with their own security standards or needs.

Operations

• User adoption and training: Resistance to change among employees or inadequate training can hinder the successful adoption of new automation technologies.

• Over-reliance on automation: Excessive dependence on automated processes can degrade the skills of staff, who might find it challenging to handle tasks manually when needed.

• Maintenance and support: Automation platforms require continuous maintenance and technical support to function. Inadequate support can lead to operational delays and inefficiencies.

Finances

• Initial investment: Implementing an automation platform poses substantial up-front costs, including licensing fees, integration costs, and training expenses.

• Return on investment (ROI): There’s always a risk that the ROI might not justify the initial costs, especially if the platform fails to deliver the expected improvements or cost savings.

Strategy and relationships

• Supplier resistance: Some suppliers might be reluctant or unable to adapt to the electronic payment methods that the automation platform uses. This could strain relationships.

• Negotiation leverage: Automated payment terms might decrease businesses’ flexibility to negotiate terms with suppliers on a case-by-case basis.

• Internal processes: Automating payments can require major changes to internal financial processes and controls. This can disrupt established workflows and involve a period of adjustment.

Growth and flexibility

• Limited customisation: Some platforms offer limited customisation options, which might not fully meet the unique needs or complexities of every business.

• Growth limitations: As businesses grow, their financial operations become more complex. A platform that isn’t designed to grow effectively can hinder growth rather than facilitate it.

How to choose a payment automation platform

Here’s a step-by-step guide to choosing the right payment automation platform for your business.

Assess your business needs

• Determine which aspects of your payment processes need improvement, such as speed, accuracy, and security.

• Define what you want to achieve with payment automation, whether it’s reducing operational costs, improving cash flow management, boosting security, or all of the above.

• Think about your current business size and future growth plans. The platform should be able to handle increasing transaction volumes and complexity.

Evaluate key features

• The platform should integrate with your existing ERP, accounting systems, and other financial tools. Check for compatibility.

• Ensure that the platform has strong security measures such as encryption, multi-factor authentication, and compliance with relevant financial security standards.

• Check whether the platform’s user interface is easy to use for all team members, reducing training time and resistance to adoption.

• Consider what kind of automation is offered. Does it cover processes such as invoice processing, payment execution, and reconciliation?

• Check whether the platform allows customisation to fit your specific business processes and workflow requirements.

Consider compliance and security

• Ensure the platform complies with industry regulations and standards relevant to your business.

• Investigate the platform’s data security protocols, backup procedures, and disaster recovery plans.

• Verify that the platform provides comprehensive audit trails for all transactions.

Analyse costs and ROI

• Examine the platform’s pricing structure. Does it charge per transaction, per month, or is there an annual fee? Understand all potential costs including setup, subscription, and any additional fees for extra features or services.

• Consider the potential ROI from using the platform. Will the cost savings and efficiency gains justify the expenditure? Conduct a cost-benefit analysis to make an informed decision.

Review support and vendor reliability

• Research the vendor’s reputation in the market. Read customer reviews and case studies to gauge user satisfaction and the platform’s effectiveness.

• Consider the level of support. Does the vendor provide 24/7 support, training resources, and ongoing maintenance?

• Look at the vendor’s track record for improvements and updates. Choose a vendor that actively improves and updates its software to keep the platform effective as new technologies and standards emerge.

Conduct trials and testing

• Before making a final decision, request demos from a short list of vendors to try the platforms. This can help you better understand the features and usability of each option.

• If possible, conduct a pilot test with the platform. Implement it in a controlled environment to evaluate its performance and impact on your processes. This can provide practical insight that might not be apparent in demos.

Seek feedback and references

• Involve members from your team in the evaluation process, as they will be the primary users of the platform.

• Ask the vendor for references from other businesses similar to yours. Contact these references to discuss their experiences and the outcomes they’ve achieved with the platform.