Considered as a back-office function, accounts payable does not have center stage in business growth or building competitive advantage. But increasing payables must be a core focus when working capital optimization comes into the picture. Many businesses try to implement this strategy by expanding payables to maximize free cash flow, but ultimately this is not the right way to go about expanding payables. Delays in payment can damage goodwill with the supplier, leading to lack luster deliveries and a slowdown of response rates to queries. On the other side, early payments yield considerable benefits in certain situations where suppliers may offer discounts or rebates for paying early.
Businesses must follow a strategic approach with accounts payable for identifying opportunities and taking the necessary action when they face conflicting outcomes. But just wait! Here are a few ways by which you can improve your accounting process. Simply use the tips below to ensure your AP is handled properly and can run on auto-pilot.
Make the Process Simple
When you pay with a paper check and forget to note it down, your book keeping entries may get lost or misplaced resulting in problems down the road. To simplify your accounts payable process, maintain a digital record of bills that are due, that employees need to access. Digital record keeping is much easier and you will not be left lost after transactions are made.
Monitoring Significant Metrics
An effective accounts payable software helps you to track every aspect such as agreements with vendors, terms and clauses in the agreement, and more. In this technology-driven world, you can virtually create scorecards and view which vendors are performing well and which are not. This will let you manage your cash flow in a better way while you are addressing issues with your AP process or vendors.
By creating management workflows, you can enhance the effectiveness of your accounts payable procedure. This aids in identifying and resolving congestion in the system, streamlining process handoffs for improving the liquidity management in the best possible manner.
Creating Business Budgets
To avoid late payments, you should need to create business budgets to enhance your accounts payable process. With an automated accounts payable software solution, you can utilize your accounts payable sheet in your dashboard and stay updated about any payments you need to make. You will get a clear view on your every spend so that you do not make any extra payments on the fines and late payments.
Get Rid of Paper Cheques and Invoices
Paper-based invoices lead to losses of hardcopy bills or misplacements whereas the online payments help you in paying your bills on time. You can import online invoices into your accounting software as well as scan and upload those paper invoices into the software in order to keep your bills intact. An online accounts payable software solution makes online payments easy for you so that you only need information such as contact information, account number, and the amount owed. No need to worry about paper checks any more, you can manage your payments from your digital devices or mobile phones.
One of the best things for the accounts payable management process to keeping track of your invoice data such as invoices, receipts, notices, orders, and more. After receiving billing documents, store them in your accounts payable software immediately. This will help you pay your invoices accurately.
You will have the knowledge of how much should you pay, whom should you pay, and what exactly are you paying for. You can refer to these documents when answering invoice related questions.
Ensure a Transparent Process
An automated accounts payable system will make it easier for employees to gather adequate and important information about payments, terms and conditions with vendors, and more, all from any device.
The Bottom Line
An automated accounts payable process that consistently tracks important metrics will help businesses to streamline their processes and have good working culture at the organization. And if handled properly, this will minimize process complexity, reduce risks connected with day-to-day transactions, cost management, and also improve vendor contract compliance.