Top 5 Best Practices in Accounts Payable

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. 

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.

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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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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.

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.

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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.

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.