Top 7 accounts payable trends for 2023
Accounts payable will be transformed beyond recognition. BPOs will provide more services, accountants will focus on the big picture, and automation tools will enable payables departments to become leaner and more efficient.
Accounts payable is the bookkeeping entry filled when a company receives products and services on credit from a vendor that must be paid back within a short period. The accounts payable balance is the sum of all the outstanding amounts due to suppliers or vendors showed on the company's balance sheet. Three essential documents form the basics of accounts payable.
1. Purchase order (PO)
2. Goods receipt or receiving support
3. Vendor or supplier invoice
1. Receiving invoice
2. Reviewing invoice
3. Approving invoice
4. Paying vendors or suppliers
AP is a critical figure in the balance sheet of any company or enterprise. Over a prior period, if the AP of a company increases, it means the company is purchasing more services or items on credit. If the AP of a company decreases, the company is paying on dues of its prior period at a rate faster than buying new goods or services on credit.
The future of AP strongly relies on the advancement in technology and the use of automated tools in business growth and development.
As technology takes over all aspects of life, businesses are also getting automated using modern technology and digital tools. Accounts payable automation uses digital tools and techniques rather than operating the AP process manually. AP automation works on three approaches.
1. Receiving electronic invoices
2. Matching and workflow
3. Electronic archival and audit
A whole host of benefits can be achieved through AP automation. Accounts payable software makes the processing of the invoice efficient with faster approvals. Along with cost optimization and increased accuracy, it also provides built-in compliance that makes the whole system fully transparent, tacking down the common risks and preventing the system from additional charges, duplicate invoices, or any other fraud instances.
Virtual cards are designed as a secure alternative to check payments and ACH. Most B2B vendors accepting credit card payments will shift to receive virtual card payments. Creating a card leads to generating a single-use card number within seconds. These numbers are designed to make secure and specific payments within authorized limits. Fraudulent transactions are prevented as these cards are "locked down" to a specific amount and a maximum credit limit for each payment within a time limit that provides the best level of payment security.
Virtual payments are an evolution in accounts payable. Virtual cards solve the problem that vendors or suppliers face with the risks of using credit cards, checks, and ACH payment methods, by generating single-use numbers specified for each transaction. Vendors appreciate virtual payments as it reduces their efforts in collecting the payments and prevents fraudulent transactions.
Accounts payable teams experience several advantages in dealing with virtual payments.
- Secure, fraud-proof, and traceable payments.
- Optimized payment processing cost.
- Earning rebates on AP and generating revenue.
- Removing the hassles of writing and mailing paper checks.
- Improve AP invoice and cash management process.
E-invoicing or electronic invoicing is a form of electronic billing which includes purchase orders, debit notes, remittance slips, credit notes, and payment terms and instructions. It is the trade of invoices between vendors and buyers in an electronic format.
E-invoicing and online billing management help suppliers make faster amendments and revisions to their records. Other advantages of an e-invoicing system include optimized expenses leading to more immediate delivery, reduced printing costs, and quicker options for transactions.
In an average organization, there is a 20% higher cost rate of processing invoices with low levels of automation than in organizations with high levels of automation. The future of accounts payable highly relies upon the software developers and tech companies and how they integrate data science into the mix.
Companies and enterprises are becoming savvy in digital transformation and adaptation of technology. By turning to digitization, accounts payable have a chance to boost operations and functioning. An excellent way to support the AP's success is to adopt accounts payable software. Depending on your business situation, the software could include solutions in functional areas such as accounting, payments, taxes, payroll, and AP invoices.
In the accounts payable process, there is a lot of structured data to be used for the machine learning process. AI can intelligently route AP invoices based on coding, keywords, and supplier information. Cost allocation can remove redundant manual invoicing systems by automatically coding supplier invoices using complex suggestions and historical patterns for cost allocation. It will catalyze the entire accounts payable process and engage the staff to pay attention to more critical and value-added tasks.
Accounts payable reporting is an ongoing process of recording and tracking expenditures of the whole business by a company to ensure accurate financial data. Accounts payable reporting covers utility payments, rent or mortgage, cash expenses, and overall cost of business.
Every report is time-sensitive that runs within an AP system. The periods change depending upon the frequency of the debts that a small business owner's debts and their cash flow management system. AP also includes one-time payments. These payments are made for the purchase of assets, including things like
- Replacement and maintenance parts
- Advertising fees
Having all your numbers consolidated into a single system provides the flexibility to access deeper insights to make the reporting more transparent. There is an added level of transparency when the processing payments are through the AP system instead of a bank account, making it a lot easier to reconcile later.
It is always a focused goal of any accounting or finance department to shorten the wait time of fulfillments on accounts payables. As being economically crunched by the Covid-19 crisis, companies are trying to bounce back financially, so this objective might be challenging. However, if applied effectively, digital tools and techniques can help a company's financial management system.
With inflation seeing a high rise in recent years due to the pandemic and other factors, many businesses have been feeling the weight of it. Cash flow management becomes even more important to ensure you don’t run into any cash flow problems.
Automated cash flow management tools will be essential to get much-needed analytics of your accounts payable. With automation, you can not only figure out which high costs to offset but also analyze which suppliers you can make early payments with to get discounts. Save money with automated cash flow management tools.
1. Manual processing consumes a significant amount of time.
2. Vendor management issues and missing the purchase receipts.
3. It is hard to keep track of expenses if the business is situated in multiple locations.
4. Manual data entry can lead to imprecise payments, miscalculation, and transaction errors.
5. Losing track of supplier invoices and due dates in common when dealing with numerous suppliers.
- Maintaining digital entries and designing an efficient workflow.
- Verifying the supplier's reliability and their payment approval process.
- Keeping track of purchasing orders and matching them with vendor's invoices.
- Replacing the manually managed accounts payable process with accounting software to enhance productivity and eradicate the manual entry errors.