Automating Accounts Payable in Xero for Hassle-Free Payments

Xero offers essential features for small businesses to manage payables, such as:

• Track and view unpaid bills, expenses, purchase orders, and bills in various stages (draft, awaiting approval, ready for payment)
• Manage and schedule batch payments in advance, including repeat bills, all stored in one place
• Generate detailed aged payables reports to monitor overdue bills, credit notes, and overpayments

However, as your business grows, you find yourself bogged down by manual tasks such as entering invoices into the system, chasing approvals through emails, and reconciling documents scattered across multiple resources.

This leads to a messy accounts payable process, particularly if you're dealing with hundreds of invoices each week, especially those with multiple line items. The challenges only increase if you need to implement conditional approvals or manage multi-currency transactions.

The Accounts Payable Automation Trends 2024 report by SAP Concur highlights the following struggles of accounts payables (AP) teams:

• 52% of AP teams still spend over 10 hours a week processing invoices, with 60% manually keying invoices into their accounting software.
• 64% of respondents identified stress from outdated processes as their biggest challenge, with 40% concerned about strained vendor relationships.
• Only 7% of respondents currently leverage AI t
• echnologies for spend management.

These findings reveal the significant inefficiencies and stress associated with manual accounts payable processes. 

So, in this blog post, we will explore how you can automate accounts payable specifically for Xero, enabling your business to streamline operations and overcome these challenges. 

What Does AP Automation Do?

AP automation takes over tasks like filing, approving, and submitting invoice payments, allowing you to process payables faster and more accurately. 

Additionally, AP automation allows you to decentralize accounts payable, enabling employees across different departments to submit invoices directly into the system. These invoices are then automatically routed to the finance team for review and approval. 

This decentralization speeds up the process, prevents delays, and provides better visibility and control over all invoices submitted.

Here is an overview of how your process is refined with AP automation for Xero. 

Integration with your Payables Email 

Every single company has a payables@acmecorp.com , the ideal AP automation software integrates with this email so that it can automatically capture all invoices that are coming from that inbox. 

Invoice Capture

AP automation removes the need for manual data entry by using optical character recognition (OCR) technology to capture invoice line items and headers. This process accurately extracts information from unstructured documents, such as receipts and invoices, and automatically updates Xero. 

It digitally captures, stores, and manages invoices, payments, and related documents. By accurately recording exact items such as SKUs, tax codes, GL codes, and amounts, you eliminate the need to manually enter and verify the invoice details added to Xero. 

Additionally, a searchable digital paper trail of past invoices and canceled checks is maintained, enabling you to find the exact information you need quickly.

Approvals 

AP automation supports multi-layer, multi-entity, and rule-based automated approvals. 

Multi-entity approvals allow organizations with multiple business units or subsidiaries to manage approvals across different entities within a single system. 

Multi-layer approvals involve multiple levels of authorization, ensuring that transactions are reviewed by the right stakeholders before proceeding. 

Rule-based approvals use predefined criteria—such as invoice amounts or expense types—to automatically route transactions to the appropriate approvers, reducing the risk of errors and ensuring compliance with company policies.

With customizable workflows, each invoice triggers notifications to the relevant stakeholders, ensuring that the appropriate individuals review and approve transactions.

With all documents centralized in one system, two- or three-way matching becomes easier. This ensures instant accounts payable and payment reconciliations, enhancing overall efficiency.

Payments 

After the approval is complete, payments are often queued up in your Xero dashboard, allowing you to pay them all at once. 

However, if you are using a dedicated spend management tool like Pluto, you gain the advantage of making payments directly within the platform. This approach eliminates the need to switch back to Xero for payouts, as the spend management tool syncs everything in real-time. 

This ensures that your financial records in Xero are always up-to-date and accurate, reflecting the most current payment activities without any additional manual input.

Audit Ready

AP automation maintains a complete audit trail, recording every action such as approvals, rejections and comments. 

With all documents stored in a single place and synchronized with Xero, you are always audit-ready. This comprehensive visibility over financial activities ensures that you easily meet audit requirements, providing peace of mind and enhanced control over your finances.

Additionally, controlled user access ensures that only authorized personnel can view or modify transactions. The ability to lock transactions once approved prevents unauthorized changes or breaches, further securing the integrity of your financial records.

Most Popular Xero Accounts Payable Automation Integrations

The most common Xero accounts payable automation integrations are — Hubdoc, Dext + ApprovalMax, and Veryfi.

Let’s take a look at each of these and understand how they help with AP automation for Xero. 

Hubdoc

You don’t need to separately integrate Hubdoc; it comes as part of Xero integrations. 

Hubdoc automatically fetches bills, receipts, and invoices from email accounts, cloud storage, and over 700 financial institutions and vendors. It uses OCR technology to extract key data from documents, such as dates, amounts, and vendor information. You can set predefined rules for categorizing bills by vendor, categories such as office supplies and travel, projects, payment methods, and more. 

Additionally, Hubdoc offers a mobile app that allows users to capture and upload receipts and invoices on the go. It keeps a detailed record of all financial documents and their associated metadata, simplifying audits.

However, user roles in Xero organizations and practices aren’t synced to Hubdoc. You need to invite each user into a Hubdoc organization separately and give them the relevant permissions. This can make getting started on Hubdoc tedious if you have a larger team managing bills. 

Additionally, users dealing with multi-line items often find the invoice capture inconsistent. 

So, if you need a simple, free tool to auto-capture and categorize your PDF-based invoices to feed into Xero, Hubdoc is ideal, especially if you have a smaller team.

Dext and ApprovalMax

While Dext and ApprovalMax are two different applications, combined together, they offer a more comprehensive experience. You don’t need to purchase Dext separately; it comes integrated within each ApprovalMax tier.

Dext captures and processes receipts and invoices using advanced OCR technology to extract and categorize data automatically. When combined with ApprovalMax, you can create conditional multi-step approval workflows to accommodate your hierarchical requirements.

Dext also matches transactions with bank feed data to streamline reconciliation processes. Similar to Hubdoc, you can categorize expenses based on predefined rules, such as vendor, expense type, and project. Additionally, it handles receipts and invoices in multiple currencies, converting them to the base currency.

ApprovalMax focuses on automating approval workflows, offering customization of approval rules and multi-step approval workflows. It notifies approvers and requesters, keeps them informed of the status of approvals, and maintains a detailed audit trail of all approvals, providing transparency and accountability.

However, combining Dext and ApprovalMax is complex to set up and manage, especially for teams without dedicated IT support.

Veryfi

Veryfi automates invoice capture and invoicing with real-time sync to Xero.

Veryfi begins by importing all banking transactions into Xero. Then, it pushes purchases into Xero’s Purchases section in a Draft state for further review. Users can then reconcile transactions by matching them with purchases from Veryfi. The tool utilizes OCR to extract and categorize data from receipts and invoices automatically.

It also supports multi-currency transactions, converting them to the base currency as needed. With its mobile app, users can capture and upload receipts on the go, and the secure cloud-based storage ensures that all documents are well-managed and easily accessible.

However, users experienced inconsistencies when dealing with multi-line items, and while Veryfi is designed for automation, occasional discrepancies require manual intervention. 

The Need for a Better Xero Accounts Payable Automation Tool

When using several platforms for invoice capture, approval workflows, and payment processing, data is scattered across different systems, leading to manual reconciliation and increased chances of errors. Each tool also has its own audit log, creating a fragmented view of financial activities. The lack of a centralized overview further complicates tracking and managing expenses, approvals, and payments, making it harder for teams to stay synchronized.

A comprehensive platform that integrates all these disparate systems into one solution simplifies these processes. It ensures a consistent audit log, provides a centralized overview for all team members, and offers seamless synchronization with Xero. This streamlined approach reduces manual effort, minimizes errors, and enhances overall efficiency.

A One-Stop Solution for Xero Accounts Payable Automation

Pluto is your comprehensive solution for accounts payable automation for Xero, offering a centralized platform that ensures complete transparency and control over your AP processes. 

Unlike traditional methods that require capturing invoices and routing them through an email-based approval system—where teams often have to switch between apps for context—Pluto consolidates everything into a single platform.

Invoice Capture 

Pluto simplifies invoice capture by allowing you to upload invoices via email forwarding, WhatsApp images, or by simply dragging and dropping them into Pluto’s invoice inbox. Its OCR technology accurately captures line items, amounts, and coding details, while also enabling advanced features like split transactions.

Advanced Compound Journal Entries

With Pluto, you can easily split transactions into multiple entries, ensuring that each part of the transaction is accurately reflected in your financial records. With just one click, you can code a single transaction into multiple credit or debit journal entries with separate general ledger coding. This feature allows for complex financial entries to be managed effortlessly.

No-Code Approval Workflow Builder 

Pluto offers a no-code approval workflow builder that supports multi-entity and multi-layer approval processes, including parallel approvals for purchase orders, purchase requests, and invoices. This ensures that your approval workflows are customized to fit your organizational structure without needing extensive IT support.

Each invoice triggers an approval workflow, which can be customized with if-then rules. For instance, marketing expenses above AED 50,000 may require additional approvals compared to smaller expenses of AED 5,000. The admin can design workflows without coding, ensuring that all relevant teams have visibility into the approval status. 

Stakeholders can easily approve requests via the web app or mobile app, making the approval process both flexible and accessible.

Audit Logs

Pluto keeps you audit-ready at all times with comprehensive audit logs. Every action, approval, and payment is recorded, creating a detailed trail that’s easy to review and stands up to scrutiny. It also stores these logs for up to 5 years, ensuring you have a reliable record of all your financial activities.

Additionally, you can bulk download all audit logs and supporting documents in just one click—no more manual searching and gathering individual records.

Read More: How to be accounts payable audit ready?

Single Click Payments 

‍

Pluto allows you to make payments to multiple vendors in multiple currencies with just a single click. You can set up alerts for upcoming payments or schedule payments in advance, helping you manage cash flow more effectively. 

Pluto supports over 200 currencies, making it ideal for businesses with global operations.

Xero Sync 

Pluto integrates seamlessly with Xero, syncing general ledger (GL) codes, tax codes, and vendor lists. 

During invoice capture, Pluto maps GL codes and tax codes directly to Xero, ensuring accurate data entry. After payments are made, Pluto syncs all reconciled transactions back to Xero, eliminating the need for manual updates. 

This bidirectional sync ensures that your financial records are always accurate and up to date, eliminating the tedious tasks of CSV exports, imports, and manual reconciliations.

Using Pluto and Xero has helped us sync all kinds of transactions in no time. With the no-code Xero integration included in our Pluto account, we’ve managed to automate mundane work to close books faster.

~ Saqib Iqbal, UAE Tax Expert SA Consultants

Pluto simplifies accounts payable by allowing each department to manage invoices autonomously while maintaining centralized control. This integration with Xero ensures accurate and up-to-date financial records, streamlining the approval and reconciliation processes for greater efficiency and clarity.

Choosing the Right Xero Accounts Payable Automation Solution

Choosing a tool that provides short-term solutions at minimal cost may seem reasonable, but for effective AP automation, you need a tool that is flexible and can grow with your business. Accounts payable involves more than just receiving bills, approving them, and ensuring timely payments; it also requires maintaining complete records, audit logs, and transparency.

As your business grows, managing multiple tools or transitioning to a better solution becomes cumbersome. Therefore, you need a tool that simplifies payments and manages AP end-to-end, saving your finance and accounting team time and effort.

Pluto aims to simplify accounting for everyone—from employees and managers to accountants and finance professionals. Whether it’s three-way matching, parallel approvals, multi-entity payments, or invoice capture from emails, Pluto helps you save 20+ hours each week, otherwise spent on manually entering invoices and syncing records across Xero. 

Book a demo to learn more about how Pluto simplifies accounts payable automation for Xero.