Accounts payable (AP) has been viewed for far too long and frequently as merely carrying out an important but monotonous back-office activity. Payments are made in response to invoices. However, there has been pressure for those departments to establish and implement best practices as CFOs and other financial management have grown to understand the added value that Account payables management may give (for example, enhancing cash flow).
By automating the invoice processing process, accounts payable can be improved such that accurate invoices are automatically delivered without human intervention to the ERP or accounting system for payment, freeing up the account payables management department to concentrate on exceptions.
The extra time freed up can investigate ways to boost cash flow, enhance supplier relationships, identify chances for favourable payment terms, and manage working capital more effectively.
Every AP department needs to concentrate on the five procedures listed below to guarantee that payments are correct, timely, and fraud-free.
1-Consider using a paperless automation system
Whether or not you use an account payable credit software solution to automate your procedures, each of the recommendations on this list should be followed. However, the truth is that eliminating paper invoices and manual processes—which are fundamentally expensive, time-consuming, and prone to human error—will greatly increase your chances of optimizing these practices and, consequently, your operations.
2-Sort and order the invoices
Keep track of what must be paid when and how much, depending on the size of your business and the amount of invoices received, to manage cash flow and prevent late payments, which can harm relationships with suppliers. Invoices should be paid in the order of due date and payment terms when determining priority.
3-Simplify your operation
The likelihood of mistakes or late payments increases as system complexity increases. Look at your current workflows to locate the areas where the approval process is experiencing bottlenecks. Centralizing and standardizing processes and reporting across the company is another step toward streamlining the approval process.
4-Use KPIs to gauge the effectiveness of accounts payable
What you can't measure, you can't manage or improve. To monitor how your department is following the new or changed processes, especially once those processes have been automated, set up specific targets and KPIs.
5-Create a trustworthy fraud detection system
Fraud is always a possibility when working with money. Fraud can come from various sources, including suppliers, workers, and cyber criminals. And the likelihood of account payable credit fraud is significantly higher when paper checks are used as a payment method—reducing that risk strongly correlates with adhering to policies and procedures.
Conclusion
Once this is accomplished, your account payables management staff will be better able to manage exceptions and devote time to more valuable things. That is how a back-office cost centre becomes a source of income.
Mike Watling is the author of this article. For more details about Online Payment Services please visit our website: simplypay.app
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