A smooth, efficient accounts payable process ensures timely vendor payments, maintains good relationships, and contributes to a healthy bottom line. However, a sluggish or error-prone AP department can lead to late payment penalties, strained vendor relationships, and wasted resources. Although it might seem simple to make a couple of changes that will lead to AP improvement, it can be time-consuming, costly, and take trial and error. So, how do you improve accounts payable performance and optimize processes? Let’s explore some key strategies that you can implement within your back office.
Automation
Manual data entry takes up a significant amount of time and is prone to errors. Automating key AP processes, such as invoice processing and payment approvals, can significantly reduce processing time and minimize mistakes. Some examples you could implement include solutions that automatically capture invoice data, route invoices for approval, and generate payment files. There are many different methods for implementing automation within your organization, so be sure to choose one that works well for your organization’s structure and budget.
Standardize Your Processes
Consistency is the key to efficiency. Establish clear, documented procedures for every step of the AP process, from invoice receipt to payment disbursement. This ensures everyone is on the same page and reduces the risk of errors or missed deadlines. Standardizing processes can save your organization time that could be spent on more important tasks. Additionally, when it comes to hiring new resources, a lot of time can be saved upfront due to structured procedures.
A well-defined workflow also makes it easier to identify bottlenecks and areas for improvement. To include the last point, automating standardized workflows can also be instrumental in saving time and resources for your organization.
Go Paperless
Digital document management has been around for some time now, and it’s time to accept it. Often touted as the number one way to improve accounts payable performance, going paperless is extremely helpful in modernizing an organization’s back office. Storing invoices and other AP documents electronically makes them easily accessible, searchable, and reduces the risk of lost or misplaced paperwork. This not only saves space but also streamlines the entire process.
Implement an Approval Workflow
A well-defined approval workflow ensures that invoices are reviewed and approved by the appropriate individuals before payment is processed. This helps prevent fraudulent invoices and ensures that payments are made only for legitimate expenses, saving time and other resources. Look for systems that offer customizable approval rules and automated notifications.
Define and Track Key Performance Indicators
You can’t improve what you don’t measure. Identify KPIs that are relevant to your AP process, such as:
- Invoice Processing Time: How long does it take to process an invoice from receipt to payment?
- Days Payable Outstanding: How long does it take your company to pay its invoices?
- Early Payment Discount Capture Rate: Are you taking advantage of available early payment discounts?
- Error Rate: How many invoices are processed with errors?
Tracking these KPIs will give you valuable insights into the performance of your AP department and help you identify areas for improvement. Once you have identified these areas, your organization can determine which methods will benefit your AP systems and team the most.
Leverage Technology
Modern AP technology can benefit your processes exponentially. From automated invoice processing and approval workflows to real-time reporting and analytics, the right tools can significantly improve efficiency and accuracy. There are many different available solutions, so take the time to determine which factors would be most helpful for your organization. Consider cloud-based solutions that offer integration with your existing accounting systems or technology that can be customized to fit your organization’s existing systems, language, and rules.
Learn More
At ICG, we understand the challenges businesses face in managing their AP processes. We specialize in creating customized accounts payable solutions and workflows that streamline operations, reduce costs, and improve overall performance. Our team of experts can help you identify your specific needs and implement the right technology to optimize your AP department.
Our cloud-based solutions are fully customizable, flexible, and can be fully integrated with any existing ERP. Contact us today to learn more about how we can help you transform your AP process or schedule your free demo.