Appropriate Time to Resolve Accounts Payable

It’s been a challenging year for the global economy. Europe, the US, and China are among the countries drifting toward economic downturns. In the US, inflation was a major concern, triggered by rising food and gasoline prices. Interest rates are rising and the stock market is showing a significant drop. 

Given this backdrop, is this the right time to find methods to make your finance group more efficient?

Definitely, Finance associations should double down on their actions to streamline accounts payable procedures. When times are tough, efficiency and cost control are crucial to competitiveness and corporation performance.

The Account Payable Opportunity

When times are good, companies tend to concentrate on increasing their top line. An inadequately performing accounts payable process may go unrecognized. When the economy slows, efficiency and cost control earn even more engagement. And there’s no better company procedure to facilitate than accounts payable.

Why? Because specific accounts payable divisions have not yet fully embraced automation to enhance their enterprise operations. In addition, communities that adopt automation have a more determined and dynamic AP staff, less likely to seek other possibilities that may come ahead.

Evaluate your association. What is your volume of writing invoices, physical examinations, or supplier cost status inquiries? If the amount is large, it may adversely affect our operating results and affect our cash flow management and working capital.

Whether your AP procedures require a complete overhaul or just some fine-tuning relies upon the present state of your payables.

Let's take a look at some steps you can take to improve how your business manages its payables.

Collaborate with Suppliers

To begin, review how you commit to your suppliers and dealers. If this is a manual paper-based procedure, the time and effort involved can be much greater than an automated methodology.

Evaluate the following supplier-related tasks:

• Apprehending supplier data
• Delivering policies to suppliers and accepting diverse information
• Conducting supplier verification inspections
• Placing up payment particulars
• Configuring an electronic record for ordering
• Handling a considerable volume of transaction documents (i.e., purchase orders, invoices, goods receipts, and advance ship information)

The allocation of resources to these activities will not scale with your business growth, and you will struggle to manage the increased demands on your accounts payable processes to support that growth. So, This is where supplier portals come into play.

As a self-service device, a supplier portal authorizes suppliers to upload and furnish the information and onboarding records required for a business transaction. Here is a partial checklist of the details that suppliers can self-provide via a portal:

• Contact information
• Business description
• Bank account details
• IRS and VAT tax IDs
• W8, W9, and related tax forms
• Product information and pricing
• Certification details
• Payment terms
• Payment remittance format preference
• Sustainability rating
• References
• Miscellaneous information (specific to industry or product category)

In addition to critical supplier information, you may also be required to accomplish reference reviews and risk assessments. Risk assessments can contain a broad range of checks involving strategic, functional, and business continuity threats, such as compliance and regulatory risk, information security risk, financial-credit risk, and prominence risk.

Finally, supplier performance indicators effectively tracked and evaluated supplier performance. This procedure can take multiple months. Similarly, onboarding suppliers have expanded more demanding due to the pandemic and global supply chain disruptions. Trying to find shortcuts and workarounds around these disorders could undermine your goal of developing a dedicated and tolerable supply chain.

Automating the supplier enablement and onboarding approach delivers a significant return on investment. Investigations have revealed that a largely manual operation can take hundreds of hours to onboard a single supplier vs. a few hours through an automated method. 

Even if you only add a few dozen suppliers per year, you can still get a return on your investment. For organizations onboarding hundreds of suppliers each year, mechanization may suggest one of those most lucrative ROIs in all of finance.

Move to Electronic Payment

Once you have a dedicated automated system for vetting and activating suppliers for a business transaction, you can start transacting with them and are willing to automate distinct business processes.

A manual payment procedure has many moving regions and unnecessary overhead, from documenting data across numerous bank and payment portals, specifying payment terms, manually initiating payments, and handling currency transformations for global transactions, among other tasks. What’s better, you incur costs that alter by payment medium.

For an establishment like Zipline, an innovative logistics provider that benefits around 240 million people globally, automating payments was a valuable foremost stage in streamlining their financial functions. We desired our procedures to increase in new nations without the headache of payments.

Limit Access and Establish Controls 

Limiting access and establishing controls in the Accounts Payable (AP) system of a company is crucial to ensure financial integrity and mitigate risks. By restricting access to authorized personnel only, the company safeguards sensitive information and prevents unauthorized individuals from tampering with financial data. This helps maintain data accuracy and prevents fraudulent activities.

Effective controls within the AP system help prevent errors and fraud in invoice processing. Implementing segregation of duties ensures that different employees handle different stages of the invoice process, reducing the likelihood of fraud collusion. Proper authorization procedures ensure that only valid invoices are processed and paid, preventing unauthorized payments.

Additionally, limiting access to AP records ensures the confidentiality of sensitive financial information, safeguarding the company's reputation and customer trust. Regular reconciliation of invoices and payments helps identify discrepancies, preventing overpayments or duplicate payments. Audit trails established through controlled access allow for accountability and traceability, aiding in investigations if any discrepancies arise.

In conclusion, limiting access and establishing controls in the AP system of a company enhances financial security, prevents fraud, and promotes accurate and reliable financial operations. This ultimately contributes to the company's overall stability and success.

Going Electronic with Invoice Processing

With the payment procedure effectively automated, the following logic is to automate the invoice cycle. With electronic invoicing, finance associations take advantage of optical character recognition (OCR) and advanced data extraction technology, eradicating the necessity for manual data entry. 

This opens up the possibility of touchless invoice processing, speeding up approvals and virtually eliminating errors. Cloud-based education platform Top Hat was experiencing invoice processing delays.   The AP employee printed the invoice, and entered the invoice data into the NetSuite ERP system, printed a check, then placed the check in a pile with others to be signed by the CFO and CEO. Today, automated accounts payable processes are being adopted not only by Top Hats but by their customers as well.
Purchase Order Management

For multiple transactions, the supreme goal of payables conversion is to link invoices with payment processing to an earlier stage affecting a purchase order, understood as PO matching. 

Procure-to-pay solutions do just that, allowing you to set up regulations to decide if an invoice is PO-based and if it should go through a matching procedure. You can also connect invoices to corresponding transaction documents such as advanced ship notifications, goods permits, and even contracts to also expedite processing.

To enhance first-time match rates, particularly for charges like freight, delivery, and taxes, you can develop toleration thresholds based on amounts or percentages. If the invoice does not match but is within the threshold, you can proceed to pay without further confirmation, resulting in additional cost savings.

New Potential for Cash Management

With your AP team released from tedious tasks such as data entry, pushing paper, and answering supplier queries, it can support the teams in treasury and finance to skillfully handle cash on hand and working capital.

Two regions of possibility involve DPO (Days Payable Outstanding) management and premature payment discounts. For multiple associations, there are no guidelines governing payment duration. In many circumstances, this results in faster-than-expected invoice settlements. By devoting more aid to help address payment terms—advancing them where feasible—you improve your company’s cash flow while working to an industry policy standard.

For suppliers looking to get settled sooner, you can deliver early payment discounts as part of a payment terms lengthening program. These discounts reduce the cost of goods and services while boosting your return on cash spent, as opposed to what you could earn from the bank on interest.

AP can help in managing these schedules by taking the lead in determining early payment discount opportunities and communicating these offers to suppliers. Typically, no more than 20 percent of suppliers would opt for the discount, so you get the adequately of both worlds: the savings and cash return from the discounts and the net gain in DPO to enhance cash flow.

Reducing Verification and Signature Responsibility 

Accounts Payable (AP) automation significantly reduces the burden of verification and signature responsibilities on company management, liberating valuable time that can be directed towards more critical matters. Through automated processes, invoices are digitally scanned, matched with purchase orders and receipts, and validated against predefined rules. This streamlined approach minimizes manual intervention, diminishing the need for management's constant oversight.

By automating verification and approval workflows, the system ensures that invoices adhere to established protocols before proceeding for payment. This eliminates the time-consuming task of physically reviewing each invoice and obtaining multiple signatures for approval. The streamlined process reduces errors and accelerates invoice processing, contributing to increased time efficiency.

With these tasks offloaded to an automated system, company management can redirect their focus towards strategic decisions, innovation, and business growth. The saved time can be allocated to addressing more pressing issues, fostering client relationships, or exploring expansion opportunities. This results in enhanced productivity and improved decision-making capabilities.

In conclusion, AP automation empowers company management to relinquish the routine burden of verification and signature responsibilities, allowing them to allocate their time and expertise to more pivotal aspects of the business. This optimization of time resources translates to increased efficiency, better strategic planning, and ultimately, greater business success.

The Time is Now

As your corporation grows, so does your business’s dependence on AP assignments ripe for automation. By streamlining your payables procedures and releasing up resources, you can:

• Accomplish root cause examination of problematic invoices
• Execute contract compliance
• Monitor supplier execution
• Determine early payment discounts and payment time lengthening options
• Help with financial research, forecasting, and monthly/quarterly financial close
• Hedge money exchange threat

What are you waiting for? with automating repetitive manual tasks, you can shift resources from traditional paper processes to value-added tasks that enhance your business.

Track and Process Your Invoices With a Great Spend Management Tool

Getting accounts payable right can be time-consuming. After all, you have to keep up with a head-spinning amount of detail. Unfortunately, many companies can't help themselves and use ad-hoc processes even in the software age. Some Luddites still use a physical printed invoice approval system.

Not only is this time-consuming and expensive, but it also carries the risk of user error. Given the level of risk in accounts payable, it's important to get it right the first time. With the right tools, you can clearly and accurately track your bills and handle them with minimal stress. An integrated spend management platform automates every step of the accounts payable process, from invoice collection to payment processing.

For example, Spendesk’s Supplier Invoices module helps you keep track of the dozens of invoices that come your way daily. Spendesk automatically sorts invoices into classes for acceptance and sends reminders when due dates are approaching.
Depending on dedicated software to help organize your accounts payable will keep your company partners happy, and will stop you from evolving “that client” with suppliers.

Conclusion

If you're experiencing problems with unorganized accounts payable, now is the time to take proactive action. One late payment can spiral until you terminate up losing sellers and agreements. Paper records and manual processing cause it harder to notice payment errors like the same payments and inaccurate data entry. Errors can be handled and dealt with individually for a while, but it's only a matter of time before cash flow is affected. Containing an automated accounts payable strategy in place can maintain that from occurring. Automated systems created around online accounting software bring demand and efficiency to your accounts payable processing. By executing a streamlined approach, you can decrease errors and spend your time building company relationships rather than repairing them.

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