10 Strategies for a Better Accounts Payable Process

10 Strategies for a Better Accounts Payable Process

When it comes to your accounts payable process, are you confident that you’re doing everything correctly? Do you have any specific strategies or tips that have worked well for you in the past? If so, we’d love to hear about them!

We’ve collected 10 strategies from several of our contributors below, so take a look and see if anything will help you with your own process. You can also view their full interviews here or follow their respective blogs by clicking their names below.

1) Automate the process It may seem obvious, but automating your accounts payable process is one of the best things you can do to increase efficiency. Automation allows you to track outstanding balances, schedule payment reminders for your suppliers, and create payment batches that can be sent electronically. Many companies also use automation software to send an automatic letter once payment has been made, thanking their suppliers for their business. This simple gesture can go a long way towards fostering positive relationships with your vendors!

2) Establish an accounts payable policy Establishing accounts payable policy will help ensure that your business doesn’t fall behind on its payments. It can also help you avoid non-payment issues with vendors and speed up payment transactions. Keep in mind that one size does not fit all; it may take some trial and error to find out what system works best for your business.

3) Take advantage of automation tools Automation tools like free e-mail reminders can help ensure that you don’t forget to follow up on invoices. And, of course, if your clients are using an automated billing service like Invoicera, then all you have to do is wait until that money hits your bank account. No more late payments! (That is, unless it’s your own business’s invoice you forgot to pay!)

4) Add consistency through policies and procedures If you’re looking to add consistency and professionalism to your financial processes, think about creating policies or procedures. Policies detail what you should do—for example, maintaining proper documentation on expenses—while procedures describe how you should do it. In both cases, each step of an action is spelled out so there are no surprises down the road.

In addition to improving operational effectiveness and efficiency, they help eliminate confusion over who’s responsible for certain tasks—like handling vendor invoices—and establish accountability across multiple departments.

5) Implement necessary checks and balances There are many ways to improve your accounts payable process, but it’s critical that you understand all of your options before attempting to implement them. These 10 strategies, gathered from CFOs at companies of various sizes, can help you ensure more effective checks and balances in your accounts payable process.

6) Focus more on customers than vendors All too often, businesses focus more on getting paid by their vendors than taking care of their customers. Keep that in mind when reviewing your accounts payable process; look at what you’re doing for your suppliers compared to what you’re doing for your customers. Are you making it as easy as possible for them to do business with you? Are they inconvenienced or incentivized to pay promptly? Make sure that any notes or invoices issued are as non-burdensome as possible for your customer, and work with them to set up payment terms whenever possible.

7) Reducing costs through efficient management If you have to request a credit memo—meaning that you overpaid someone—you’re going to have to wait. And as we all know, time is money. On top of that, every day you wait for your money, you rack up more interest on those outstanding invoices. If your accounts payable process is inefficient, it’s costing your business more than just those unpaid invoices; it’s damaging your business bottom line and affecting cash flow and working capital.

8) Streamline the process by staying flexible Now that you’ve got some tips, it’s time to implement them. One of the easiest ways to streamline your accounts payable process is by remaining flexible with vendors. Many of them will work with you on their payment terms—so if

you get stuck paying on credit (which may affect your liquidity), try talking to your vendor about making arrangements for payments.

9) Embrace technology to improve efficiency Technology can significantly streamline many aspects of accounts payable.

For example, an ERP system might come with built-in credit management tools that enable you to quickly see which suppliers have given you open invoices and which ones have issued credit memos. Some companies even automatically use these credit memos when creating purchase orders, thereby streamlining your invoice-to-order process.

10) Get help when you need it!

For smaller companies, it can be tempting to handle all of your accounts payable in-house. But if you’re not careful, you could easily get buried in paperwork. If your company takes on more vendors than you can reasonably keep track of, consider getting help with your accounts payable process.

CONCLUSION The accounting world is complex, which is why some companies turn to consultants to help them set up an effective accounts payable process. But even if you don’t have professional help on your side, there are strategies you can use to create a smooth accounts payable process that streamlines your company’s purchasing needs. Here are 10 strategies that you can use right away.

SOURCE: The Difference Between Accounts Payable and Notes Payable