Accounts payable can ultimately be a nightmare for small and large businesses alike. Despite the headaches that can intrinsically be part of accounts payable, it has a huge role in cash flow and overall management of the business.
Making sure invoices are paid in a timely way is also a huge factor in the relationships a business has with their vendors. Those relationships can ultimately make or break a business.
So what can you do if your accounts payable process is clunky or inefficient? How can it be modernized, streamlined and made more efficient?
Use An Invoice Management System
At this point, most vendors have probably already moved to an eInvoice system, but sometimes that doesn’t make things that much easier on your end. You’re receiving large numbers of electronic invoices, and they may be in different formats and types of files.
Using an eInvoice management system allows for the option to convert all the different formats into importable files. You can create templates for your suppliers, define the rules, upload supplier data and then it’s imported into the eInvoice system.
Once that happens, workflow routing is automated. Along with the increased organization that occurs with an eInvoice system, you’ll also be able to see trends in spending and billing that you can use to make data-driven business decisions.
Ultimately, if you don’t do anything else when it comes to accounts payable, you should ensure that you’re cutting out the manual data entry and automating invoice management.
Track Relevant Metrics
This was touched on briefly above, but it can’t be emphasized enough. So many businesses put accounts payable on the backburner, and they don’t really look at where the money is going, and whether or not spending is optimized.
The information that can be derived from accounts payable can be used to make far-reaching decisions in the business. Key decision-makers should regularly be looking at what’s happening in accounts payable and making sure that they’re always operating with best practices in mind.
Don’t Underestimate the Importance of Accounts Payable
Sometimes businesses won’t see the importance of accounts payable, and the benefits that updating how things are done can have throughout the entire organization.
Accounts payable is where you’re spending your money in a business, and by making changes, you can save not only time but also money.
Create a Master Vendor List
Small businesses don’t necessarily need a master vendor list, but large ones do. Accounts payable should keep a regularly maintained and updated master vendor list that makes sure compliance requirements and regulations are being met.
A registrations system can be a good way to avoid potentially problematic vendors, and this list shouldn’t be viewed within a set-it-and-forget mindset. It needs to be regularly reviewed and updated when necessary.
The vendor list needs to not only have vendors removed when necessary, but it needs to be checked for accuracy on a regular basis as well.
Automate When Payments Are Sent
A lot of organizations have an accounts payable strategy that focuses on waiting as long as possible to send payments. This isn’t just inefficient- it can also be more expensive and detrimental.
The sooner payments are sent, the more options there are going to be for early payment discounts. Businesses are also going to establish better relationships with vendors, which can come in handy when negotiating terms, or when a business may be having problems with cash flow.
It’s really important to have a specific system in place for approving invoices within a certain window of time. This is just one of the many benefits of using a digital system—it automatically approves invoices, or the right people can be sent a notice when an invoice isn’t received.
Separate Duties But Maintain a Point Person
There are two different elements in this bit of guidance. First, when it comes to accounts payable if you’re using an automated system, you’re taking a lot of work out of it, but still have different people be responsible for different aspects of the process. This reduces the risk of fraud and human errors. Have very clearly defined roles and duties.
Along with that, even though the duties are separated, there should be a designated point person who oversees everything happening within accounts payable. You want to have one person who people can go to if there’s an issue or a problem, so there are not multiple people providing different answers and information.
Finally, if you are moving from a primarily paper-based system to automated accounts payable, you need to ensure all employees who are going to be using the system are well-trained. Too many businesses make the mistake of introducing new technology, but not taking the time to train employees on how to maximize it and make the best use of it.