While most businesses primarily focus on accounts receivable, your company’s accounts payable processes matter too. But when was the last time you paid attention to this arm of your business?
How to Give Your Accounts Payable Processes a Boost
The accounts payable department is a wholly important yet underappreciated department within every organization. In fact, no business can exist or function – not healthily, at least – without accounts payable.
“The accounts payable department is responsible for accurately tracking what’s owed to suppliers, ensuring payments are properly approved and processing payments,” NetSuite explains. “Accurate information on accounts payable is essential to producing an accurate balance sheet.”
If you have a small organization, the responsibilities for your accounts payable and accounts receivable may be rolled into one department or position. However, in most larger companies, these are totally separate functions (and for good reason).
There are lots of responsibilities that go into this process, including reviewing and recording invoices, routing invoices for approval, remitting payment, developing monthly reports, corresponding with vendors, maintaining healthy supplier relationships, and more.
If the accounts payable tasks within your organization feel like they’re moving slow, or perhaps they aren’t being performed well, it’s time for a change.
Create an Accounts Payable Workflow
The basic accounts payable process is fairly similar in most organizations: The accounts payable department receives the invoice. The invoice is inputted into the system. The invoice is checked against the original purchase order or receipt. The invoice is routed to the appropriate parties for approval. Payment of the invoice is scheduled.
You don’t need to complicate your workflow. If anything, you should focus on ways to simplify it by reducing the number of check runs per month and carefully consolidating all data into a single central repository.
Implement Accounts Payable Software
If your team is still trying to approach accounts payable entirely manually, something is off. Technology has improved over the past several years and accounts payable software is now able to automate most of your workflow.
“In a nutshell, accounts payable automation engages the latest cloud-based technology to reduce manual accounting tasks, streamline business operations, improve accuracy and enable custom control over critical financial processes,” Medius explains.
Armed with the right accounts payable software, you can easily submit invoices and process all payments through a single platform. Not only does this save time and money, but it eliminates a lot of the stress associated with trying to juggle invoices and payments across different places.
Prioritize Invoices With Discounts
You can save a lot of money for your organization by simply paying on time and leveraging discounts. You won’t always see early payment discounts on the invoices themselves, but they’re out there.
Call up your vendors and find out what discounts and rebates are available for paying early. You’ll be surprised how friendly the terms can get. Some accounts might even lower interest rates for payments that are made on time and in full.
Implement Measures to Prevent Fraud
Anytime money is being handled, you have to be on high alert for risks and threats (both internally and externally). Unfortunately, accounts payable fraud does exist. Make sure you’re implementing smart and proactive procedures that are designed to mitigate that risk.
Dummy vendor accounts are one common type of employee fraud. However, if you have the right parameters in place – like restricting who can create new vendors – you won’t have to worry about this.
Motivate Your Team
Motivation goes a long way toward getting people to be productive, efficient, and transparent. Make sure you’re motivating your team and incentivizing them to work hard every day. This doesn’t have to be financial. It might be as simple as giving employees flexibility or extra time off.
Adding it All Up
Sometimes the biggest improvements in your business require you to pop the hood and study what’s happening with each individual part and process. While accounts payable might not be the most exciting part of your business, it’s one of the most important processes. The more efficient, accurate, and intentional you are, the better (and more profitable) your business will be in the long run.