Accounts payable (AP) isn’t the most exciting part of your business. In fact, it’s usually one of the last things you think of when you are looking to expand, enhance customer services, or boost sales. However, optimizing it with a few inventory management tools can bolster your relationships with vendors, help you to avoid late payment fees, and even give you access to discounts.
How inefficient AP practices are hampering you.
When AP is not running at top capacity, you are missing out. Your poor practices may be resulting in overdue payments that will eventually erode your relationships with suppliers. By contrast, paying your invoices in advance might give you rewards in the form of discounts that add up over time. If you’re ready to take your accounts payable systems to the next level, try some of the following suggestions.
1. Take a hard look at your current AP situation.
It’s time to scope out your current AP practices to learn where you are falling short. Answer the following questions.
- Are your processes still manual, or have you automated your systems with inventory management tools furnished by your merchant service provider?
- Is your staff devoting too much time to processing invoices?
- Are you prevaricating with vendors about when they will be getting paid?
- Are vendors starting to compromise on the quality of their services because your payments are late?
- Is your invoice processing scattered across locations or otherwise decentralized?
After this honest assessment, you will have a better idea of how to proceed.
2. Ensure that your AP processes are current.
After reviewing what you are doing right now and identifying inefficiencies, it’s time to ask what you can do to improve. One possibility is to upgrade your present equipment and processes to be in line with what is working well today. Alternatively, you may choose to out-source AP to a third-party vendor who has the innovative equipment and resources for the task.
3. Develop a best AP practices document for your staff and suppliers to follow.
Create and distribute a set of policies that clearly outlines to whom your suppliers should send their invoices and what information the bills should contain. This document should also specify what procedures should be followed when the invoices arrive. Rank invoices according to priority and due date, labeling each accordingly. Doing so will please your creditors, streamline operations and lower staff frustration.
4. Accept electronic invoices.
With automated AP processes, accuracy is enhanced and human errors are minimized, helping to ensure that suppliers are paid on time with little added effort on your part.
5. Determine when you will pay invoices.
This can either be done in batches according to due dates, or it can occur on set days of the month. Furthermore, decide how you will pay: using ACH, paper checks, credit cards to make online payments, etc.
6. Adopt an automated AP system.
Accounts payable is notorious for its repetitive tasks, making it perfect for automation. Once your cloud-based automated system is in place, you will discover that you will no longer misplace paper invoices, can expedite authorizations and will be able to manage your payments from anywhere.
7. Eliminate manual data entry.
Once you implement an enterprise resource planning (ERP) system with AP automation, you can use it to capture invoice data, sync it with your accounting software, and check it for accuracy. For those few tasks that still need to be done by hand, intentionally delegate them to certain responsible staff members.
8. Keep a secure archive of all invoices.
There will be times when you need to review and act upon bills that were paid in the past. Therefore, it is important to maintain this record on paper or digitally. Doing so with automated AP software makes the information available to anyone who needs it across your organization and keeps the data secure in its off-site servers.
When your AP is streamlined and runs smoothly, the overall health of your company is bolstered. Take steps to improve and modernize your practices today for stronger finances, happier staff, and satisfied vendors.
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