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Businesses need to manage accounts payable effectively for better financial management. Proper accounts payable management helps them on several counts - from improved vendor relationships to enhanced accuracy and compliance; and from stringent reconciliation to quick decision-making. All this is possible only when businesses adopt and implement the best accounts payable practices.

Implementing best practices in accounts payable has a significant and far-reaching impact on a business’s financial well-being and operational efficiency. It streamlines the payable process and allows businesses to focus on automation and electronic invoicing. This results in prompt invoice processing and approval times. Ultimately, such promptness nurtures vendor relationships and directly impacts the bottom line.

In this blog, we will explore 5 best practices in accounts payable that empower organizations to optimize their accounts payable processes.

According to a report by Bottomline, only 56% of accounts payable teams currently use electronic payments.

Best Practices in Account Payable

Here are the 5 Best Practices in Accounts Payable:

1. Streamlined Invoice Processing

Streamlined invoice processing refers to optimizing and simplifying the steps involved in handling and managing invoices within a business. It accelerates invoice approval cycles, reduces errors, and enhances accuracy in financial records.

Therefore, as a best practice, you first need to streamline your process of invoice processing. The first step in this direction is eliminating paper-based processes and adopting digital solutions.

Today, automated tools are helping to streamline invoice processing in highly efficient ways. The big advantage is that it optimizes workflows to digitize, capture, validate, and approve invoices, minimizing manual intervention.

As a business owner, you can transform your invoice processing by automating the process with the help of tools like invoice management software, accounting software and others. These tools also provide real-time insights into financial data for better decision-making and cost control.

Did You Know?
According to a report by

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Did You Know? According to a report by PYMNTS, nearly 44% of businesses in the USA are looking to add automation to their payables processes.

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How to improve the account payable process and measure its performance?
To enhance the accounts payable process, optimize invoice processing, implement clear communication with vendors, automate tasks, and strengthen financial controls. To track improvements, monitor performance using key metrics like invoice processing time, error rates, on-time payments, and vendor satisfaction. To learn more about accounts payable KPIs, read our blog Top Key Performance Metrics to Measure Accounts Payable Performance.

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Streamlined Invoice Processing Helps with Timely Accounts payable: A Case Study

Streamlined invoice processing is one of the best practices in accounts payable. Coca Cola utilizes advanced automation and digital technologies to enhance efficiency and accuracy in invoice processing. Through their automated AP systems, invoices are digitally received, validated, and routed for approval without manual intervention, significantly reducing processing times.

For instance, when Coca-Cola receives invoices electronically from suppliers, these documents are automatically matched with purchase orders and goods receipts in their ERP system. This minimizes errors, speeds up payment cycles, and improves vendor relationships by ensuring timely payments. Additionally, automated workflows enable real-time tracking of invoice status and provide comprehensive audit trails for compliance purposes.

This approach helps the company maintain financial transparency, reduce operational costs, and enhance overall organizational efficiency in managing accounts payable. (Source: Coca-Cola).

2. Clear Vendor Communication

When you have clear communication with vendors, you eliminate confusion related to expectations, terms, and requirements. If this happens on a consistent basis and with all your vendors, you can make them align their products or services more accurately with business needs, leading to improved quality and satisfaction.

Therefore, establishing clear communication should be a top priority for any business owner. The best practice in this direction is to have effective tools and strategies in place.

For instance, a Vendor Management System (VMS) helps centralize vendor information and interactions. Likewise, implementing a robust email communication platform and project management software ensures timely updates. Utilizing collaborative document-sharing tools like Google Workspace or Microsoft 365 enhances document exchange. While tools are indispensable, what helps the most is meetings. Try to have virtual and in-person, foster an open dialogue, and clear Service Level Agreements (SLAs) which outline expectations.

Effective Communication Tips — Figure 1: Best Practices for Accounts Payable Internal Communications

3. Robust Financial Controls

Implementing robust financial controls in accounts payable is essential to prevent fraud, errors, and mismanagement. The key elements of robust financial control include invoice verification, matching purchase orders and receipts.

To maintain robust financial controls, you should go for a suite of essential tools and technologies like invoice processing software, expense management, etc. These tools help your businesses automate invoice validations, expedite invoice processes, and more. Also, expense management software enables them to handle employee expenses and streamline reimbursement processes. Combinedly these tools help with cost saving by reducing accounts payable processing time, preventing errors and optimizing cash flow management.

4. Efficient Payment Processes

Efficient payment processes in accounts payable involve optimizing the disbursement of funds to vendors and suppliers. It encompasses several key elements, such as automated payment workflows to reduce manual intervention and errors and electronic payment automation techniques like ACH and wire transfers for speed and security.

As a business owner, you should rely on a diverse array of tools and technologies designed to streamline and optimize the payment lifecycle to maintain efficiency in your payment systems. Such tools enable secure, swift, cost-effective electronic payments, encompassing ACH transfers, wire transactions, and international remittances. On the other hand, various invoice and expense management software solutions will help you automate invoice approval workflows and efficiently manage employee expenses, ensuring strict adherence to payment policies.

According to a report by Pymnts.com 98% of businesses believe automated AP will improve their speed of managing payables.

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How to Achieve Paperless Accounts Payable?

Paperless accounts payable (AP) can be achieved by:

Document Digitization: Scan and convert paper invoices and documents into digital formats for easy access and storage.
Electronic Invoicing: Encourage suppliers to send invoices electronically to minimize paper handling.
Cloud-Based Document Management: Utilize cloud storage and document management systems to securely store and manage digital invoices and records.
Automation: Implement AP automation software for invoice processing, approval workflows, and payment scheduling to reduce manual tasks.
Digital Approval Workflows: Establish electronic approval workflows to streamline the review and approval process.
Electronic Payments: Adopt electronic payment methods such as ACH transfers and virtual credit cards to expedite payments and reduce paper checks.
Data Security: Ensure robust cybersecurity measures to protect sensitive AP data stored electronically.
Regular Audits and Compliance: Conduct regular audits of digital records to ensure accuracy, compliance with regulations, and internal policies.
Vendor Collaboration: Foster relationships with vendors to facilitate smooth electronic invoicing and payment processes.

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Tips on Negotiating Payment Terms with Vendor — Figure 2: How to Negotiate Better Payment Terms with Suppliers

5. Accurate Record-Keeping and Reporting

Accurate record-keeping and reporting in accounts payable are foundational best practices that involve meticulously documenting financial transactions. This encompasses precise data entry, comprehensive storage of invoices and receipts, and regular reconciliation of accounts to identify and rectify discrepancies. Timely generation and sharing of financial reports, such as accounts payable aging and cash flow statements, ensure transparency and provide insights for informed decision-making.

Moreover, these practices serve as an essential audit trail by offering a historical record of financial activities which are valuable during audits and financial planning processes. They help build confidence among stakeholders and reinforce trust in the business’s financial integrity.

Accurate record-keeping and reporting in accounts payable benefit from various tools and software solutions designed to enhance precision and efficiency. Accounting Software simplifies data entry and automates transaction recording, whereas document management systems help organize and securely store invoices and receipts, ensuring easy retrieval and audit readiness.

Essential Tools for Streamlining Accounts Payable Workflows

Here are the tools businesses should use to streamline their accounts payable process, improve accuracy, and ensure better control over their financial management.

Automated Invoice Processing Software: Invoice automation tools capture, process, and route invoices for approval, eliminating the need for manual data entry. These systems extract key data points and validate the accuracy of invoices, reducing human error and speeding up the process. Popular tools include Tipalti, Basware, and SAP Concur.
Electronic Payment Solutions: Electronic payment platforms enable businesses to make quick, secure supplier payments. These platforms often integrate with your accounts payable system, providing seamless payment processing and eliminating the need for paper checks. Tools like Bill.com and Veem streamline payment processing while offering robust tracking and reporting capabilities.
Cloud-Based Accounting Software: Cloud-based accounting platforms, such as QuickBooks Online, Xero, and NetSuite, allow businesses to manage accounts payable in real-time from anywhere. These solutions offer integration with banks, suppliers, and ERP systems, ensuring a smooth flow of data and easy access to financial reports and analytics.
Purchase Order Management Systems: A purchase order (PO) management tool helps businesses create, track, and approve orders efficiently. By automating PO creation and approval workflows, companies can ensure accurate matching of invoices and reduce errors or discrepancies. Tools like Procure-to-Pay (P2P) systems provide end-to-end control of procurement and AP processes.
Accounts Payable Reporting Tools: AP reporting tools generate reports that track payables, outstanding invoices, payment due dates, and vendor relationships. With customized dashboards and visualizations, these tools allow companies to gain insights into cash flow, identify trends, and manage payment cycles effectively. Coupa and Zoho Books offer robust reporting features to optimize AP processes.
Vendor Management Systems: Vendor management systems (VMS) allow businesses to centralize all vendor-related information, including contracts, payment terms, and performance. These tools help ensure accurate vendor data and timely payments. Popular solutions include SAP Ariba and Oracle Procurement Cloud, which offer supplier collaboration features to streamline communication.
Robotic Process Automation (RPA) Tools: RPA tools help automate repetitive tasks such as data entry, invoice reconciliation, and payment approvals. By reducing manual intervention, RPA increases efficiency and lowers the risk of human errors in the accounts payable process. UiPath and Automation Anywhere are leading RPA tools used in AP automation.
Document Management Systems: A document management system (DMS) allows for the digital storage and retrieval of invoices, purchase orders, contracts, and payment records. This reduces the reliance on paper documents and makes it easier to access important information when needed. Solutions like M-Files and DocuSign offer secure document management and e-signature capabilities.
Payment Fraud Detection Tools: Security is a top priority in the accounts payable process. Tools that help detect and prevent payment fraud, such as Fraud.net and Sift, monitor payment patterns, validate recipient information, and flag suspicious activity. These tools enhance the security of electronic payments, protecting businesses from financial loss.
Bank Reconciliation Tools: Bank reconciliation software helps businesses match their accounts payable data with bank statements. This tool ensures accuracy in the payment records and helps identify any discrepancies. AutoRek and ReconArt are popular solutions that automate reconciliation processes, improving financial visibility and operational efficiency.

Conclusion

Accounts payable processes are poised to undergo significant transformation driven by technological advancements. Automation, artificial intelligence, and blockchain will streamline invoice processing, reducing manual tasks and errors. Smart contract implementations on blockchain could facilitate secure and automated payments, enhancing transparency and trust among vendors and businesses.

Moreover, the shift towards sustainable practices may incorporate environmental considerations into vendor selection and payment strategies. It will align accounts payable with broader corporate social responsibility initiatives for a more efficient, environmentally-conscious future.

Invensis is a specialized service provider of tailored accounts payable services to businesses across the globe. With over 24 years of experience under its belt, the company has assisted businesses in simplifying their accounts payable workflow and acquiring greater control over their finance. Contact us to know about our accounts payable and keep your financial position healthy and transparent.

Frequently Asked Questions

1. What are the best practices to handle accounts payable in general?
The best practices in accounts payable in general are as follows:

Timely invoice processing
Accurate data entry
Regular reconciliation with vendor statements
Good vendor relationships
Payment schedule optimization for cash flow management
Implementation of robust internal controls to prevent errors and fraud

2. What is a good strategy in managing accounts payable?
A good strategy in managing accounts payable includes:

Establishing clear processes for invoice receipt, approval, and payment
Utilizing automation for data entry and workflow
Ensuring timely payments while maintaining accurate records
Fostering strong vendor relationships

3. How to make accounts payable more efficient?
Businesses can make their accounts payable efficient by:

Implementing automation for invoice processing
Using electronic payments to expedite transactions
Streamlining approval workflows
Regularly reconciling accounts
Negotiating favorable terms with vendors to optimize cash flow

4. What is a good accounts payable process?
A good accounts payable process starts with receiving and reviewing invoices promptly. It involves accurate data entry, proper coding for expenses, timely approval workflows, regular reconciliation with vendor statements, and efficient payment processing to maintain good vendor relationships and financial transparency.

5. How to improve accounts payable process?

Improving the accounts payable process includes implementing automation for invoice processing, adopting electronic payments, streamlining approval workflows etc. Businesses should also conduct regular audits for accuracy, negotiate favorable terms with vendors, and foster communication between finance and procurement teams for better coordination.

Rick Johnson

Rick is a highly accomplished finance and accounting professional with over a decade of experience. Specializing in delivering exceptional value to businesses, Rick navigates the complexities of the financial realm easily. His expertise spans various industries, consistently providing accurate insights and recommendations to support informed decision-making. Rick simplifies complex financial concepts into actionable plans, fostering collaboration between finance and other departments. With a proven track record, Rick is a leading writer who brings clarity and directness to finance and accounting, helping businesses confidently achieve their goals.