7 Simple Ways to Control, Automate Your Accounts Payable

Spend Matters welcomes this guest post from Finly, a provider of business spend solutions.

Accounts payable involves a lot of challenges, like providing payment approvals on time, budgetary restrictions, ensuring policy compliance and keeping the accounting systems up to date. Organizations reach a saturation level where manually processing all these becomes increasingly tedious and difficult to maintain.

Failing to properly manage accounts payable can seriously affect a business. CFOs who do not develop an effective control over their accounts payable strategy can severely limit their company’s liquidity, leaving them with insufficient cash on hand when they have narrow windows to seize fleeting opportunities.

An automated accounts payable system is a great way to overcome these issues and increase effective communication as well as employee productivity. To control your accounts payable, let’s understand the bottlenecks involved in the manual process of accounts payable.

How Does the Manual Accounts Payable Process Work?

Manual processes are time-consuming and prone to costly errors. They require high attention to detail, and an increase in volume can overload a manual accounts payable process, resulting in compliance issues, invoice matching errors or an error during month-end book closures.

  • The accounts payable process begins when the invoice is received by the finance department for any goods or services that are delivered.
  • After receiving these invoices, they are verified against the goods or service delivered.
  • Upon receiving the confirmation about the same from the respective department, the payment for the invoice has to be approved.
  • Before processing the payment, the finance team checks whether the invoice is under the organization financial compliance and other policies.
  • Next, the invoices are manually typed into an accounting system, and a physical copy is maintained for auditing purposes.
  • After all the above mentioned is completed, the payment is then processed to the vendor.

If a simple manual error in any of the above-mentioned process occurs, there will be a huge delay to process the payment, and that’s when issues begin to snowball and vendor relationships deteriorate.

How Does the Automated Accounts Payable Process Work?

Automated accounts payable systems can create a process that’s simpler, more accurate and highly efficient. It helps in reducing the business payment cycle, governs the financial policies, automates the approval mechanisms and stores the record in a digital archive — making the entire process paperless.

When the invoice is received, the system checks each line item against the purchase order and receiving information to be sure that the goods and services ordered are the same as the items received and billed. If an error is found, an alert is sent to the accounts payable department for verification.

Automated emails can be set up to remind for the pending approval, processing payments and avoiding a delay. Automatic three-way matching can take place against the purchase orders to invoices to verified delivery slips, thus keeping your accounting systems up to date.

7 Ways to Control Accounts Payable

Automate Repetitive Tasks — Tasks, like approving purchase orders or making payments against invoices, are laborious and consume a lot of time for finance teams. Automating these tasks by setting up email notifications for any pending approval, processing payments, matching invoices against purchase orders, etc., can significantly increase the productivity and give them ample time to focus on more important tasks.

Vendor Portals — A vendor portal enables your vendors to submit and track a quote instead of emailing, communicate instantly with the purchasing team and receive automated payments. Vendors can get discounts by setting up rate contracts and can track statuses of deliveries in a single workflow.

Avoid Fraudulent Errors — With an automated accounts payable system, you can minimize fraudulent money transfers, theft or costly errors. Add additional security layers by scheduling a one-time setup of recurring payments, requiring more than one person to authorize a payment, email or SMS notifications for every payment made. That will help reduce the risk factor involved in payments.

Establish Governance & Compliance — Set up advanced approval hierarchies and multi-stage approval workflow to process any purchase orders or invoices. Implement robust protocols and accounts payable procedures to categorize and automatically approve certain types of requests made by specified people to streamline the approval process.

Audit Trails — Get the complete transaction details when purchase orders are processed. In a robust system, all the events are recorded that occurred in the execution of any purchase order or payment transaction, and the system should offer instant access to complete budget and spend details.

Automatic Reconciliations — Any purchase order raised through an automated e-procurement system should be automatically mapped against the invoice received. Multiple other data points such as the delivery of the product and payments should be auto-mapped against the purchase order.

Business Payment Automation — When a payment is processed, ideally a transaction ID should be generated. The system should automatically capture and get mapped against the invoice so that three-way matching happens in real-time and the payment trail can be tracked at any instant. The benefits that CFOs should see after moving to a system like this are the improved accounts payable governance, streamlined processes, total control on budget spend, increased productivity, effective communication and collaboration, faster invoice processing, and the minimized risks associated with routine invoice payments. This yields to a better relationship with vendors by allowing them for preferred service and better deals.

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