Best Practices to Optimize Account Payable Processes
Businesses are looking for ways to optimize the accounts payable process. This article lists out some of the accounts payable best practices that can simplify the process end-to-end.
Access controls
Set internal controls within the AP department and determine who has access to what. Ensure only a few employees have access to the master vendor file for better control. You can also track your payments and identify mistakes in data.
Prioritize invoices
Invoices must be prioritized by the due date and payment terms to maintain a healthy cash flow. Paying invoices as they come in can hurt your cash flow. Therefore, one must track which invoices should be paid first as per the payment due dates.
Leverage technology
AP department has to use technology to speed up the accounts payable process. Technology can help identify data errors and fraud and you can keep track of all transactions.
Identify fraud
Money, if handled wrong, could result in high-risk for any business. Implement policies and procedures that can flag fraud and mitigate risk. Look for duplicate invoices, vendors, and payment processes while processing invoices.
Payment terms
Although invoices come at 30, 60, or 90-day payment terms, you can always have a chance to renegotiate. Late payments could ruin the relationship with suppliers, and renegotiation is always the best idea.
Supplier portal for vendor management
A supplier portal enables vendors to track invoices, payment status, and tax-related information. Vendors can update any information directly, so there would be no chance for errors.
Look for discounts
Early payment discounts are the best possible thing that the accounts payable department can take advantage of. Find out what discounts or rebates your vendors offer for paying invoices. Some vendors may cut interest rates for certain payments made on time. Early payment discounts can help suppliers increase liquidity by getting paid faster.
Paperless process
Businesses are looking to digitize their processes, and paperless invoices are becoming obsolete. Digitizing the invoice-to-pay workflow can eliminate most of your manual work. Digitization includes OCR and AI that takes the headache of data entry, and you can focus on supplier relationships. And, there is no need for a paper trail as the AP team can perform audits through the solution.
Process automation
Accounts payable software automates invoice capturing, matching, and approval processes. You can manage a global base of suppliers and easily comply with tax norms, and automation speeds up the approval process and helps you stay on track with spending.
Duplicate payments
Whether you have an automated solution for payment processing or matching invoices manually, it is essential to check for duplicate invoices always. Keeping track of duplicate invoices would not affect your cash flow and keeps your books organized.
Data review
The accounts payable department has to eye on cashflow and identifies any issues that occur in AP processes:
- Risk mitigation and fraud
- Improve the cash flow process.
- Increase work capital
- Keep track of invoices and payments
- Audit trails
Maintain good relationships
Businesses have to maintain good relationships with vendors, and it is essential to address any disputes quickly. Healthy vendor relationships not only help in delivering good products but also help you procure quality products at the best prices down the road. It is crucial to track vendor disputes and resolutions efficiently.
Reconciliation
Reconciling accounts is a good idea for every business. If payments don’t match your records, it will be a significant issue down the line, hurting cash flow and reflecting bookkeeping practices. Setting up best practices will help save the business time and money and optimize accounts payable workflows.
