Working with suppliers and vendors is a major core aspect of running any business. When it comes to paying the suppliers and ensuring they’re given what they’re owed, compensated fairly, and compensated accurately, there can be plenty of challenges. The daunting nature of ensuring invoices are paid accurately and on time usually falls to the accounts payable department. Working in accounts payable, or AP can be a rewarding job. But it does come with its own fair share of meticulously detailed work and operating under certain standards/practices. Many AP departments are still operating manually, which can be inefficient.
Digitizing AP processes can make everything more efficient, easier, and give your employees more agency over their roles within the organization.
1. Streamlined Invoices.
Paper invoices can take some time to process. E-invoicing is a better proposition for most businesses today. With this type of software, you don’t have to worry about invoices being billed to the wrong accounting codes or routed to the improper locations. Because the GL codes are automatically assigned to all invoices and purchase orders that come through, the system automatically ensures they are accounted for to the proper expense accounts.
Furthermore, invoices can be authorized for pay out from any member of the department’s mobile phones. This reduces the total cost per invoice while also improving your AP department’s overall workflow. And if your company wants to save plenty of money by leveraging early payment discounts or reducing days for payment outstanding, e-invoicing makes it possible through the simplified/streamlined nature of submitting and paying invoices electronically.
Automation makes invoice matching throughout the procure to pay process easier for the department to handle. In AP automation, every aspect of running an AP department is available via automation and powerful software. Do you need to manage expenses in a scalable way? How about optimizing your working capital? What about monitoring late payments on invoices or managing both pre and post-approved to spend throughout the organization? Automation allows you to leverage the talent you already have on your team but with an improved workflow. It’s just easier to track, pay, and manage invoices with an automated system.
3. Scalable AP Process.
To smooth out an AP process, it should be scalable. In accounts payable, scalability is as essential as having term life insurance in our private lives. Scalability is a vital metric when you’re dealing with more transactions. It’s especially valid when transactions increase throughout the month. Imagine you do 200 to 300 transactions per month. Suddenly, you have an influx of additional business and are doing 600 to 800 transactions. Your AP processes need to be scalable in order to handle that workload. That’s difficult to accommodate with a manual or traditional process. To ensure your AP department’s ability to keep up with transactions grows with your company, you’ll definitely need to ensure the cloud-based automation system you’re using can handle an increased workload.
Many Enterprise Management Systems used to automate AP processes are scalable, meaning you can take advantage of the automated process as well being comfortable knowing your company’s growth will not be stunted or inhibited by software that can’t keep up.
4. Fraud Reduction.
Since the dawn of time, someone has always been looking for ways to rip someone else off. Fraud is one of the single largest challenges facing most businesses today. Most effective message for reducing fraud in accounts payable include:
- Conducting regular audits
- Double check banking statements
- Monitor key performance indicators (KPIs)
- Establish purchasing compliance procedures and enforce them
- Use Guided Buying
- Clearly outline expense reimbursement guidelines
- Separate responsibilities and define roles
- Keep supplier lists updated
- Teach employees about fraud and risk
- Automate AP processes
Ultimately, technology makes committing fraud more difficult. It tends to automatically reinforce some of the techniques that work best for fraud prevention. AP fraud leads to significant financial problems if not prevented, so it’s best to have a high quality fraud prevention and risk management system in place to assist with the AP department’s operations.
5. Optimize Working Capital.
How does your company handle it’s invoices, payables, and receivables day to day? How about inventory? Understanding where your company’s cash is tied up is the key to optimizing your working capital. Working capital is determined throughout a year-long period. Calculating payables, inventory, and receivables means using complex equations to manually determine these figures from cost of goods, and other vectors.
The reason why software helps with optimizing working capital is because it can do these formulas for you and give you the information quickly analyzed. From there, you can get valuable insights to help me make better decisions. It all comes down to optimized treasury management that helps you monitor your cash flow, monitor the number of outstanding days for a payment, leverage early payment discounts, and reduce risk or borrowing costs throughout the organization.