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Actionable ways to Improve your Accounts Payable Processes

Some Actionable ways to Improve your Accounts Payable Processes

In today’s competitive climate, streamlining back-office functions to unlock profit is top of mind for all finance executives. CFOs and finance leaders feel the pressure to concentrate resources on driving the business forward and improving accounts payable processes. This is an area that can immediately provide bottom-line benefits when addressed properly. If you’re well on your way or just beginning the discussion, we’ve outlined five actionable ways to improve your accounts payable processes.

Accounts Payable Steps

What are the steps for accounts payable?

Managing accounts payable involves all the company’s payables amounts to all the suppliers for any goods and services received. In short, the aim is to follow the process of receiving the company’s bills, inspecting them, and then paying them. There are generally five main steps in this process:

  1. Generate and process a purchase order
  2. Receive the goods from supplier (i.e., goods received note)
  3. Receive the invoice from supplier
  4. Match information on the PO, received note, and supplier invoice
  5. Approval for payment

However, there are many manual steps within these five steps, leaving room for error, fraud, and costly mistakes. To help minimize these risks, we’ve compiled a list of ways to streamline your accounts payable processes.

How to streamline your accounts payable processes

Streamlining your accounts payable processes is all about establishing a simple and clear way to track your payables and suppliers. In these five actionable tips, we’ll help you figure out how to get there and how to drastically improve your accounts payable processes.

1. Simplify Complex Workflows

As an organization grows, its processes must grow with it. Common across many industries, businesses often find themselves juggling multiple disparate data sets across numerous systems, resulting in a lot of wasted time and resources. If you want to streamline your accounts payable process, you need to fix that.

Start by looking at the redundancies, bottlenecks, and inefficiencies in your accounts payable process. An easy way to do this is by visually mapping out workflows with your team and identifying dead ends or areas where there isn’t clear ownership. Pose the question: what would a more streamlined system look like? Does your process look like an assembly line or a subway map of New York City? Hopefully, you can identify areas that are unnecessarily complex and begin simplifying workflows.

2. Reduce Manual Data Entry

Data entry errors can ruin any hope of streamlining your accounts payable process. As one of the most common reasons for data entry errors, manual entry mistakes (even those that seem small) add up costing companies time and money when trying to correct them or dealing with the fallout. The more human hands you have on a process, the greater risk you have of errors occurring – not to mention the hours you can reallocate to more value-added tasks.

3. Eliminate Paper Invoices

The impact of paper invoicing is severe and far-reaching, so addressing this portion of the process is critical. Physical, paper invoices not only result in substantial delays in receiving, processing and approving invoices, but also leave your process open to errors, exceptions and increased risk. Receiving business documents in an electronic format such as email, PDF, or through a business network are simple ways to abandon paper, readily keep documents organized and secure, and access them with ease.

If you send or receive PDF invoices via email, you’ve reduced your paper consumption. But you’re not e-invoicing. If you’re using a scan and capture solution, you’re still processing needless paperwork. And using PDF invoices, which have to be scanned and captured using OCR (Optical Character Recognition) technology, is basically like dealing with paper. While a PDF attached to an e-mail is an improvement over receiving a paper document, it still doesn’t deliver the full benefits of e-invoicing.

4. Avoid Duplicate And Late Payments

This one may seem obvious, but as already mentioned above, unnecessary complexity, unclear ownership, manual data entry and reliance on paper offers a big area of opportunity for duplicate and late payments. As one of the main steps within accounts payable, PO to invoice matching can be one of the main culprits for slowing down payments and missing important information. Automating this portion of the process to automatically match POs, goods receipts, and any other required matching points, ensures on-time payments and potential early payment discounts.

5. Increase Transparency

Manual processes and stacks of paper eventually lead to data siloes that inevitably break up transparency in your business, making it harder to fully analyze company spend. Organizations with decentralized payables operations, disparate financial systems, and manual processes often find they lack easy access to their financial data. Or, where data is available, it is often incomplete or inaccurate. Without one clear view of your purchasing process, you’re opening yourself up to risk and multiple inefficiencies and visibility into transactions, suppliers and spend is effectively impossible.

AP automation process hacks

Are there ways to improve your AP automation processes?

Despite the difficulty of predicting economic shifts, if you’re still relying on paper invoices and manual processes, you’re likely facing several challenges – high invoice processing costs, lengthy payment cycles, unnecessary errors and exceptions, increased supplier payment status inquiries, and late payments – all resulting in a substantial impact to your bottom-line.

Automation ensures that you gain visibility across all your processes and spend from a single, centralised location. The analytics capabilities available as part of automation solutions enable you to drill down into transactions, identify and resolve bottlenecks, and ultimately gain actionable insights. With an automated software-as-a-solution (SaaS) system in place, you can eliminate manual tasks and human errors. And with aggregated data, you can achieve complete spend visibility, offering insights into the future for more strategic, data-driven decisions.

Best Practices

Adopting best practices with accounts payable automation

As summarized in this blog, 8 Reasons Why You Should Automate Payments, it’s clear that the benefits of AP automation are no longer “nice to have”, but a necessity to streamline accounts payable processes.

Ardent Partners says, “AP sits in an ideal position today to take the reins of cash management by implementing basic strategies that can augment the treasury department’s processes, and become a true strategic partner in managing enterprise liquidity.” So, finance leaders should think about how to transform their AP departments to be the hub of financial data and cash management while arming their teams with the skill set to support the business in this way.  

Quick Tips

Quick Tips for Improving your Accounts Payable Processes

The risks are simply too great to leave to chance. A vulnerable accounts payable process can not only damage your relationships with suppliers but can open you to the risk of fraud. To give your company the best shot at a highly productive accounts payable team, think about these actionable tips and decide how you can improve your systems.

  1. Simplify complex workflows
  2. Reduce manual data entry
  3. Eliminate paper invoices
  4. Avoid duplicate and late payments
  5. Increase transparency
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