Streamline Your Accounts Payable Process
You have every reason to streamline the accounts payable process…and no reason not to. Checking all the boxes on AP can be expensive, labor-intensive, time-consuming, and high-risk. However, when designed right, the process runs more efficiently and effectively, it consumes fewer resources, opens the door to early-payment discounts, and enhances supplier relationships. When AP runs inefficiently, however, it becomes an outsize distraction that leads to late-payment penalties and cash-flow problems.
Every company has to pay their bills. The question is how to optimize the accounts payable process and treat it strategically. The answer looks a little different at every company, but it always involves these best practices:
Collect Invoices in a Central Location
As companies grow, take on additional suppliers, and handle more invoices, it becomes important to ingest all those invoices in one place, ideally a single email address or mailbox. Having invoices sent to multiple locations risks something getting lost or overlooked. It also creates time-consuming, unnecessary work moving the invoice to the right place.
Standardize Review and Approval
Nothing could be more important than following the exact same procedures for every invoice that moves through the accounts payable process. Have the same person or department review each invoice; have policies in place for handling errors or anomalies; and have a department head approve payments (when necessary). Do not deviate from these procedures under any circumstances.
Prioritize Payments
Prioritizing which invoices to pay first based on which suppliers offer early-payment discounts adds some time and complexity to the accounts payable process. However, the savings can make it worthwhile. And when the other aspects of AP are firing on all cylinders, there’s more time to focus on paying bills strategically.
Negotiate Payment Terms
Another step worth taking is negotiating (or renegotiating) the same payment terms with every supplier. The accounts payable process runs more efficiently when there are fewer variables to account for. Plus, standardizing payment terms frees up working capital and helps with cash flow management. Be sure to weigh the pros and cons of standardizing payment terms against paying invoices earlier or later as necessary.
Prioritize Fraud Detection
Never trust that the accounts payable process is free of fraud. This is something that must be checked and verified constantly, alongside safeguards that prevent fraud from happening. Fraud detection can feel like an obstacle to an efficient accounts payable process, but it’s one that should not be neglected.
Digitize and Automate
The more dependent the accounts payable process is on paper documents and manual data entries, the more time, work, and risk it requires. Tech tools such as Ramp and Bill.com that digitize and automate the accounts payable process make the whole system run faster, smoother, cheaper, and with less input from the accounting team. Humans will still always be involved, of course, but technology can (and should) do most of the heavy lifting.
To streamline the accounts payable process, step one is taking a critical look at the current process. Do that with the help of Proseer, a top-notch consulting team helping striving businesses take their financial function to the next level. Get better with every payment cycle – contact us.
