Did you know that 56 percent of companies face cash flow issues because of accounts payable bottlenecks? Additionally, they also need to handle these issues carefully to maintain good relationships with their vendors and customers. In fact, 23 percent of companies admitted that suppliers refused to work with them again due to inefficient AP processes. Businesses must retain these connections to ensure business continuity and secure the company’s growth potential. In this post, we shall discuss accounts payable best practices to follow in detail.
One of the most effective ways of accounts payable process improvement is to ensure you simplify them. You could do that by following a couple of steps that include: -
To smoothen your cash flow processes, a business owner needs to know how much they owe, who do they owe, and when they need to pay up. This information can also be used to create better budgets and make better business decisions. Achieving this stage is simpler if you use efficient accounting or expense management software. If you have a lot of routine, recurring payments, you can set up reminders or automated payments to ease your job. Automated recurring payments will reduce your stress and distractions in the long-term.
However, ensure you always review your payments at regular intervals so that you don’t overpay or pay for services you don’t use any more.
This is one of the most important accounts payable best practices to follow. Even though you should log every expense instantly, paying every invoice as it comes may not be the right strategy. If you’re currently paying your vendors five times a week, you multiply your work by five times for a single week. Imagine the time you waste logging the invoices, forming payment batches, checking each invoice, approving it, and processing payments each week! By restricting the payment cycle to twice a week, you can reduce your workload by 60 percent! Moreover, your vendors still get paid on time.
So, it really doesn’t make sense to pay at such a high frequency. Once you check and input the invoices, there’s much less scope for data entry errors. So, it’s easier to handle payments in larger batches.
Due to the technology boom, handling time-consuming repetitive tasks in the A/P function has become simple. Technology helps you streamline such tasks because it: -
Another accounts payable best practice to follow is to go paperless. Handling electronic bills makes the entire A/P process so simple. You no longer have to wait for physical paper bills to arrive in the mail. You’ll also reduce the risk of damaging or losing your paper invoices significantly. Additionally, any risks due to late payment due to these damages can be eliminated. No wonder 52 percent of A/P departments want to move away from paper-based processes. Some vendors even offer electronic invoices as an effort to go paperless and improve efficiency.
Even if your suppliers are more traditional, you can always persuade them to go paperless by sending necessary contact information. Another advantage of an e-invoice is that you can easily import it in your accounting software. If you’re still receiving paper invoices, you could scan them to embrace the paperless practice.
As a good business owner, you should always be on the lookout for discounts. It relieves some of the pressure from your A/P process flow. Some of your suppliers may offer an early payment discount that helps them get paid faster. You need to find if your vendor is willing to give you such an option in exchange for an early payment processing. On the flip side, also learn about the suppliers that levy late payment fees from you.
You could also find a discount by regularly purchasing in bulk. This discount can be particularly helpful for the firm in the longer term. However, always ensure you procure only those commodities in bulk that don’t have an expiry date in the recent future.
By tweaking your payment schedule, you too can reap the benefits of having more liquid cash in your business account. You’ll also gain more interest and be in a better position to pay timely and keep your suppliers satisfied. Here’s what you can do to improve: -
Paying your vendors on time is critical to ensure that they’ll back you in the future. So, opt e-invoices, accounting software, and go paperless to improve your accounts payable processes significantly. Ensure your vendor doesn’t have to chase you to receive payment by leveraging technology effectively.
Over years, Invensis has built up a comprehensive and wide-ranging clientele across industry verticals. We have been successfully delivering customized Accounts Payable outsourcing services that are suited for your particular business requirement. When you outsource Accounts Payable to Invensis, you are able to control your expenditure patterns as well as demand for special privileges from vendors in the form of price or volume discounts.
Invensis' Accounts Payable key metrics throws light on available free credits, payable days, purchase order mandates, and Accounts Payable cycle efficiency. Accurate Accounts Payable reconciliation plays a vital role in clearing unpaid bills within the stipulated date. Outsourcing your Accounts Payable management requirement to Invensis will help you to avoid paying fines or interest for late bill payments.
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