Given the operations that have to be carried out within the organization, companies need to create efficiencies within their operations that can help them to streamline their processes and create better outcomes for all the respective stakeholders involved in the overall process.
Accounts payable management is one of the areas where companies often struggle to maintain and manage a plethora of different accounts.
Given the overall diversity and quantities that exist when it comes to varying supplier accounts, it is often challenging to manage the process and ensure that it has been optimized for the best possible outcomes. Here are a few tips and tricks that companies can use in order to improve the accounts payable process.
- It is highly important to have a proper technology-enabled system that can ensure that the company is able to keep proper track of the supplier accounts. This can help them to maintain proper invoices, with accuracy in dates, amounts payable, and the discount that can be availed (if applicable). Therefore, in this case, having technology and artificial intelligence systems integrated into the overall process can be really helpful in improving the process, since it will reduce excessive dependency on employees having to track down all the invoices manually.
- Secondly, it is also highly important to have internal controls that can prevent and mitigate the overall risk of fraud within the company. This can be made possible by ensuring that there is a certain hierarchy present within the company, that can ensure that authorization of payments is only done via the responsible personnel. The signatory authority is mostly given to upper management within the company so that the overall process is passed on without much risk. This can also be enabled by the segregation of duties within the organization so that different people are responsible for different tasks within the different rungs present in the organization.
- Moving on, another important and useful technique to improve the accounts payable process is to negotiate for better terms with the creditors and the suppliers. Doing so can greatly help the company in availing discounts, and saving costs for that matter. Furthermore, proper management with vendors can also help in creating a good rapport with suppliers, so that the overall creditworthiness of the company increases. This has a snowballing impact, and eventually, other suppliers will also be readily adamant on extending flexible credit terms to the organization, since they know they would honor their commitment, like always.
- Centralizing Accounts Payable Processing and reporting is also a very helpful technique in improving the overall accounts payable process. This can be made possible by ensuring that the company is able to process and report such as invoices (payables), through a shared environment. This has a number of advantages. Firstly, there is transparency pertaining to the overall payments that are made in this regard. Secondly, it also helps to foster internal communication within the organization, as the department authorizing the payment, and the department using the procured resource are all aware of the process being made.
- Enabling Electronic Data Interchange (EDI) is also an increasingly effective mechanism to improve the accounts payable process. This can enable proper end-to-end technological integration of the resources and can help the organization streamline their payment process.
- Implementation of robust governance practices is also a rudimentary approach, which can fundamentally be utilized for greater outcomes, vested on the grounds of strict compliance and adherence to the law. Under this premise, it becomes inherent that the organization is abiding laws and regulations that make them a fully protected organization with internal controls in place that can prevent them from any possible loss that might otherwise occur.
- The creation of management workflows has proven to be another extremely useful strategy in enhancing the efficiency of the accounts payable process. They are particularly helpful in identifying and resolving system bottlenecks and streamline processes handoffs which can improve liquidity management. This can, in return, have a favorable impact on the overall cash management cycle within the company.
- Furthermore, the creation of strengthened and consolidated purchasing approval processes is also an important factor, which can define the level of management authority that is required before placing orders for various-sized purchases.
- The vendor selection process can also be streamlined and subsequently improved to ensure that the company is able to work with vendors that are best suited for their respective businesses. For example, some vendors might offer better rates, but no credit facility, whereas some vendors might extend credit, but at higher rates. Therefore, this scrutinization before placement of orders is also a very important part, because it can greatly impact the overall accounts payable functioning within the organization.
- The creation of portals for vendors can be really helpful when it comes to maintaining and managing suppliers in an organization. Given the overall extensive number of suppliers, a company might have, having a portal can help them create a streamlined communication channel with the suppliers. From a vendor’s perspective, it is highly well-suited since they can track their payment status in real-time. Furthermore, if there are any discrepancies in payment, they can be communicated via the portal, and the issue can subsequently be resolved in a timely manner. It eliminates other communication channels, which might be confusing, and might potentially lead to loss of data for the company. Having a portal eliminates all such risks, and makes vendor management a lot easier.
Therefore, it can be seen that accounts payable can greatly be improved if these tips and tricks are taken into consideration.
It can help the company to create a very smooth process for accounts payable management, where they can ensure that they are not only able to pay their suppliers right on time, but they are also able to avail relevant discounts where applicable.
This can have a very formidable impact on their liquidity position, and their ability to maintain their cash flows in the firm. This can also prove to be fruitful for investors, and other long term objectives for the company.
