The Costs of Complexity
Accounts Payable is often seen as a back-office function, but it's one that can have a big impact on your bottom line. Manual AP processes are inefficient and error-prone, which can lead to duplicate payments, overpayments, and even fraud. This can have a negative impact on your company's finances and other business areas, such as accounting, finance, treasury, and logistics.
Here are some of the best practices we have learned over the years:
Automation
Automation through AP software is, in our opinion, the best thing you can do to optimize your AP process. AP software does not have to be costly - there are many great tools out there.
- Reduced time and costs: Manual AP processes can be time-consuming and costly, due to the need for data entry, invoice routing, and approval. Automation can help to eliminate these manual tasks, freeing up AP staff to focus on more strategic initiatives.
- Improved accuracy: Automated AP systems can help to reduce errors, such as duplicate payments and overpayments. This is because automation can help to ensure that invoices are accurately matched to purchase orders and that payments are made to the correct vendors. In addition, AP software can help catch when an invoice is entered in twice.
- Enhanced visibility: Automated AP systems can provide real-time visibility into the AP process, from invoice receipt to payment. This can help businesses to identify areas where they can improve their AP processes and to make better financial decisions. AP software can generate reports that are reviewable by finance and accounting departments - who can ultimately decide the payment cadence to invoices, making it easier for cash flow forecasting.
- Increased compliance: Automated AP systems can help businesses to comply with financial regulations by providing audit trails and other documentation. This can help to reduce the risk of fraud and financial penalties. Perhaps the most important being the Segregation of Duty. By setting different permissions and duties in the software, you can prevent someone from taking an invoice from entry to payment.
- Improved customer satisfaction: By automating the AP process, businesses can improve their customer satisfaction by paying vendors on time and in full. This can help to strengthen relationships with vendors and to reduce the risk of vendor disputes. By strengthening vendor relations, you can find areas of cost savings i future negotiations.
- Easier accruals: AP software can generate aging lists of vendors by GL, vendor, and category, making it easier for your accounting team to know which invoices need to be accrued.n
Record Keeping
- Improved efficiency: By streamlining the record-keeping process, AP teams can save time and improve their efficiency. This can free up staff to focus on more strategic initiatives. With a standard for every invoice, AP staff can quickly retrieve details and provide necessary information to auditors or other departments.
- Enhanced visibility: Optimized recordkeeping can provide real-time visibility into the AP process, from invoice receipt to payment. This can help AP teams to identify and resolve problems quickly and efficiently. This also helps AP staff answer invoice and payment status questions quickly.
- Increased compliance: Optimized record-keeping can help businesses to comply with financial regulations by providing audit trails and other documentation. This can help to reduce the risk of fraud and financial penalties.
Vendor Management
Implement a structured vendor management system to keep track of all contracts, terms, and payment schedules. This not only helps in building better relationships with vendors but also in negotiating better terms. Vendors should be pre-vetted before any business is done. A proper Procure-To-Pay process should be in place to ensure that only trustworthy vendors are engaged.
If you are interested in seeing if your AP process can be approved, talk to us. We can even outsource your AP - freeing up your resources to expand on your business. Starkmont partners with AP software, so you can rest assured knowing that we have all the procedures and automation in place.
