Just like every part of a successful business, accounts payable also plays a pivotal role in keeping your company developing, competitive, and profitable. It is how you handle your AP processes that can make a deep impact on your cash flow, reputation, and creditworthiness.
Hence, implementing good practices for AP is a straightforward affair. You must invest necessary resources and time into professional and smart policies that pay for themselves in added value and lower expenses.
To become efficient, every part of your AP system must support your organization’s success by making sure suppliers and creditors get the right payment on time. While creating and implementing AP best practices, you can see fewer mistakes to correct.
Also, you can avoid expensive penalties and fees, which indicate that your organization will have a more working capital- robust relationship with suppliers and creditors alike.
Internal controls are a good start for a successful accounts payable system, but for that, you will require some good strategies to get the best out of your accounts payable team.
1. Managing Invoices in a Better Way
It is true that automation streamlines invoice payment and tracking. But there is always room for enhancing the process.
Say No to Paper Invoices
Do you still wait for snail mail and risk lost or late payments? Digital invoices are easier to link receipts, purchase orders, and transaction-related documentation as well. If vendors offer paperless billing, you can save valuable money, time, and work hours.
Avoid Paying Invoices from Copy
Pay the original invoice every time. This is streamlined in a paperless environment, unlike the original process where you pay from copy, re-examine with the original to confirm the amount, due date, invoice number, related purchase orders, and more.
Update Invoice Processes
A. Efficient processes pair well with automation and give accountability and additional security. Make sure that all invoices are sent to the accounting team for logging before they get routed for approval.
B. Cross-check invoices regularly against receipt paperwork in order to avoid losing money and time to fraudulent activities.
C. Automated accounts payable solution which re-examines for you will keep the opportunities from cold-calling with an invoice they presume will be paid before getting discovered.
D. Make sure that each invoice has detailed information on delivery, special terms, and handling. Ensure that you have a clear policy on how the invoice numbers and codes should be listed in order to avoid mistakes and confusion.
E. Enter the full amount of the invoice as billed. When you need to pay an amount other than what is indicated on the invoice, ensure your team members know how to explain and document the discrepancy properly in the AP solution. It minimizes the risk of errors and gives critical context for auditing and reporting.
F. Prevent batch entries. Accounts payable software must connect every invoice to the corresponding purchase order and delivery tickets. But individual entry makes sure a clear and unbroken audit trail.
Allocate Roles Properly
Ensure that your accounting team allocates separate team members and departments to each of the functions.
With a centralized solution, every team member and the group can access the information they require without enhancing the risk of fraudulent activities.
Acquire Supplier Buy-in
Your system and the one utilized by approved suppliers are compatible and can share details without exposing parties to needless risk or enabling them to access information that they should not.
If they cannot, then it is a good idea to make sure your vendors are familiar with your policies and protocols and the way your solution manages format, payment, invoice numbers, and more.
If your procurement system supports a vendor portal, make sure they have got the training on how to access and leverage it, thus providing detailed instructions for potential suppliers using the portal to apply for consideration.
2. Eliminate Payment Pain
Handling when, who, what, and how of AP does not have to be suffering. Very few policy changes can streamline the lives of your team members in the AP team.
Make Early Payment
If a supplier provides early payment discounts, take that advantage. Pay them first, and keep more working capital handy for other uses.
Credit Cards Offer Good Rewards
Using a corporate credit card to pay your suppliers adds another layer of easy to monitor data to your detailed stream for reporting, audit purposes, and forecasting. Depending on this credit card, the bank, and your complete spend, you can receive incentives such as rebates.
Keep a Watch on Due Dates
Late payments can create late fees and result in duplicate payment if the supplier has to issue a second invoice. Accounts payable system can generate automatic payment authorization and set reminders to make sure that suppliers receive their amount when they require.
Launch a Team that Can Resolve Disputes
Suppose you get a fraudulent invoice, maybe the goods and services you have bought are damaged or destroyed. Whatever may be the case, a trained team can readily address and solve disputes whenever they take place and will make it easier to reduce escalation, protect significant relationships, and make sure that both the parties are fairly compensated.
3. Streamline and Merge with Procurement Software
Potential savings afforded by enhanced AP processes are substantial and need complete transparency and integration to be realized. If you lack a comprehensive online procurement solution, implement one either as your primary system or in tandem with the ERP solution.
Additionally, automating AP processes, and ensuring full communication of transactional data, implemented accounts payable automation allows you.
Tracking supplier performance goes hand in glove with monitoring your own payment data and behavior containing early or late payments, invoice processing, cross-referencing PO to invoice numbers, and more.
The solution streamlines tracking and allows you to recognize potential issue areas, strengthen audit trails, and makes sure that each vetted supplier and creditor in the supply chain is getting the best performance as a customer.
Once a real-time accounts payable solution is set up that makes transactional information available instantly, it becomes easier to identify and eliminate potential errors. Late and duplicate payments, missing original invoices, inaccurate invoices amounts are some of the potential errors in your accounts payable, which can be addressed by a well-implemented payable solution.
Build and Handle Supplier Master File
No matter whether it has a dozen entries or thousands, your supplier list must involve assessed and approved vendors who take an interest in developing strategic and mutually beneficial relationships with your organization.
A solution that makes it easier to track supplier compliance and make sure supplier payment details and contact, terms, and considerations are properly factored into each purchase.
Digitize Data for Complete Transparency
Accounts payable automation indicates that your employees are not bogged down with traditionally tracking paper invoices and delivery receipts. Moreover, inside and outside of AP, when every stakeholder has complete access to the details and documents, they require making sure approvals, prompt orders, and full organization benefits.
This process enhancement allows you to develop policies, hierarchies, practices which support your procurement strategy overall with very fewer roadblocks and higher effectiveness. It also streamlines forecasting, financial reporting, and audits.
The Bottom Line
AP signifies a good opportunity for businesses willing to invest in constant procedure enhancement and take necessary actions to create accounts payable solutions built on transparency, reliability, and security.
Update your AP methods and find out how easily you can sustain healthy cash flow, build lasting and productive relationships with your vendors and internal clients.