Automating accounts payable (AP) in Xero can save time, reduce errors, and improve payment processes. Manual AP processes often lead to wasted time, input mistakes, and late payments. Xero offers tools like Hubdoc integration to streamline bill entry, approval workflows, and payment scheduling. For advanced needs, third-party integrations like ApprovalMax or Ramp add features like AI-powered data extraction, multi-level approvals, and better analytics. Here’s a quick overview:

• Key Features in Xero: Automated bill processing, recurring payment scheduling, and basic approval workflows.
• Limitations: Limited OCR accuracy, basic approval systems, and lack of detailed analytics.
• How to Get Started:
  1. Link Hubdoc to Xero for automatic bill entry.
  2. Set up approval workflows with defined roles.
  3. Automate payments by linking your bank account.
• Advanced Tools: Add-ons like ApprovalMax or BillBjorn enhance workflows with features like advanced OCR and detailed reporting.

Cloud Accounts Payable Appstack

Basic AP Automation Features in Xero

For small businesses aiming to simplify their accounts payable (AP) processes, Xero offers built-in tools that cover key needs.

Main AP Tools in Xero

Xero’s AP automation features focus on making daily financial tasks easier. A standout feature is its Hubdoc integration, which changes how businesses manage bills and invoices. Hubdoc uses AI to pull key details from uploaded or emailed bills, creating draft invoices for review.

The platform’s automated bill entry system works to minimize manual input, with several key features:

What Xero’s Basic Tools Can’t Do

While Xero covers the basics, its built-in features have some limits that may affect growing businesses:

• OCR Limitations: Struggles with complex or non-standard invoices.
• Approval Workflow Constraints: Only supports straightforward approval processes.
• Lack of Detailed Analytics: Advanced spending reports and real-time insights are missing.

"Tasks such as advanced invoice matching, customizable approval workflows, and real-time insights are not fully supported by Xero’s basic tools", highlights a recent assessment of the platform’s capabilities.

For businesses managing a high volume of invoices or needing advanced AP tools, third-party integrations like Ramp can fill the gaps. These tools offer features like intelligent invoice approvals, tailored workflows, and in-depth spending analytics, all while syncing smoothly with Xero’s core accounting functions. These limitations underline the importance of additional tools to expand Xero’s AP automation capabilities, which we’ll discuss in the next section.

How to Set Up AP Automation in Xero

Setting Up Automatic Bill Entry

To start automating bill entry in Xero, you’ll need to configure its built-in tools for smoother bill processing.

Here’s how to set it up:

• Create a dedicated email address for vendor invoices and link Hubdoc to your Xero account through integration settings.
• Set rules in Hubdoc for account codes and tax rates to organize bills accurately.

Over time, Hubdoc gets better at categorizing and processing bills by learning from previous entries, making the system more efficient the more you use it.

Building Bill Approval Systems

After automating bill entry, the next step is to set up a reliable process for reviewing and approving bills. This involves creating a clear approval workflow with defined roles and responsibilities.

Key steps include:

• Assign user roles based on their responsibilities in the approval process.
• Establish approval thresholds (e.g., team leads for smaller amounts, finance directors for higher payments).
• Enable automated notifications to alert users about pending approvals.

Once approvals are in place, automating payments ensures the final step of the process runs smoothly.

Setting Up Automatic Payments

With bills entered and approved, automating payments wraps up the AP workflow. This step simplifies the payment process with scheduled transactions.

To set up automatic payments:

• Securely link your business bank account to Xero.
• Schedule recurring payments and set rules based on vendor payment terms.

Make it a habit to review your automation setup monthly. Regular checks help maintain accuracy and ensure your cash flow stays on track.

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Adding Extra AP Tools to Xero

Xero’s built-in accounts payable (AP) features are reliable, but adding specialized tools can take your automation to the next level. Here’s how you can expand Xero’s AP functionality with integrations that streamline processes and save time.

Top AP Add-ons for Xero

Some of the best add-ons for Xero include ApprovalMax, BillBjorn, and Mesha. These tools bring advanced capabilities like AI-driven invoice processing, multi-level approvals, and enhanced OCR technology:

• ApprovalMax: Streamlines workflows, cutting invoice processing time by up to 75%.
• BillBjorn: Boasts advanced OCR with 98% data extraction accuracy.
• Mesha: Uses AI to reduce manual entry by 85%, improving overall accuracy with machine learning.

Key Features to Look for in AP Tools

When choosing AP software to enhance Xero, focus on tools that address its limitations and improve efficiency. Here are some must-have features and their benefits:

How to Connect AP Tools with Xero

Integrating third-party AP tools with Xero is straightforward but requires careful setup to ensure smooth functionality. Here’s a quick guide:

1. Initial Setup

Grant the necessary permissions to securely connect your chosen tool to Xero. This step is typically handled during the setup process.

2. Data Mapping

Align your chart of accounts, vendor lists, tax rates, and payment terms with the tool to ensure seamless data synchronization.

3. Workflow Configuration

Set up custom workflows to automate tasks like invoice routing. Tools like Ramp can save hours each week by optimizing these processes.

Tips for Better AP Automation

Creating Standard AP Steps

Establish clear, standardized procedures for your AP workflows in Xero. This helps maintain consistency and reduces errors, working hand-in-hand with Xero’s automation features.

Once these workflows are in place, training your team becomes essential to ensure smooth adoption.

Teaching Staff to Use AP Tools

Training your staff can cut errors by 40% and speed up implementation by 65%. A well-designed training program ensures employees can fully utilize automation tools, reducing mistakes and increasing efficiency.

Key steps to create an effective training program:

• Initial Assessment: Gauge current skill levels and identify gaps.
• Hands-on Training: Use real company data for practical exercises.
• Documentation: Provide clear, visual guides that are easy to follow.

Implementing a buddy system can also shorten training time by 30% while boosting confidence among new users. Once your team is trained, the focus should shift to monitoring and improving your AP automation processes.

Checking and Improving AP Systems

Track performance using KPIs to pinpoint areas for improvement. Regular monitoring ensures you sustain the efficiency benefits of automation.

Use this data to refine workflows or expand automation where needed. For instance, if the exception rate exceeds 5%, investigate the root causes and adjust your automation rules accordingly.

"Regular system reviews and continuous staff training are essential components of maintaining efficient AP automation. Businesses should stay updated on new features and best practices to maintain efficiency and accuracy", notes a leading AP automation specialist.

Conclusion: Making AP Automation Work in Xero

Main Benefits of AP Automation

Automating accounts payable (AP) processes can dramatically boost efficiency. For example, data shows that the number of invoices handled per employee jumps by 283% – from 6,082 to 23,333 annually. This also reduces costs by cutting down on errors and freeing up time for more strategic work.

These numbers show how automating AP can make a big difference in both accuracy and productivity.

Getting Started with AP Automation

Start by using tools like Hubdoc for bill entry. For more advanced features, consider integrating tools such as Ramp, which offers optical character recognition (OCR) and custom workflows.

"AP automation eliminates manual errors, strengthens controls, and enhances workflow transparency", says the Association of Certified Fraud Examiners.

To succeed, focus on creating clear approval workflows and routing rules. This ensures consistent processing while maintaining strong controls. Regularly reviewing system performance and adjusting automation rules to match your business needs will help you stay on track.

With 40% of businesses citing late invoices as their biggest payment issue, AP automation in Xero can address this challenge. By using Xero’s tools and integrations, businesses can streamline their AP processes and gain better financial control.

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