How to simplify accounts payable process for your business?
To simplify your business’s accounts payable process, implement automation software to streamline tasks. This streamlining can include automating processes to digitize invoices, set up automatic approvals, track payments, and centralize data for easy access.
You should also be regularly reviewing account statements to catch errors early. This approach will save you time, reduce inaccuracy, and improve your business’s efficiency.
What is accounts payable?
Accounts payable refers to the money your business owes to suppliers and vendors for goods and services received.
Accounts payable are usually managed by the finance department or their own dedicated AP department, who work with other departments in order to ensure that purchase orders are issued, invoices are tracked, and receipts are properly documented for later reconciliation.
It is the primary set of payments your business makes. In the accounts payable process, you track, verify, and pay the invoices efficiently to ensure timely payments and maintain strong vendor relationships, which further helps you control your business’s cash flow.
Why is accounts payable important for businesses?
Accounts payable are critical for your business as they ensure that you manage your financial obligations to your vendors. This helps you control expenses and optimize financial planning.
Timely payments also help to avoid disruptions in your supply chain, since unpaid vendor dues can lead to a suspension of goods and services.
An efficient accounts payable process supports your business’s creditworthiness and operational reliability, making it easier to negotiate better terms with vendors and sustain a healthy financial position.
A well-tracked accounts payable process also ensures your payments are reconciled efficiently, which prevents auditing issues and helps detect vendor fraud.
What is accounts payable process?
The accounts payable process involves several key steps for managing your business’s payments to suppliers.
Traditionally, your AP team receives and manually verifies invoices and records them in your accounting system. The team then further matches them with purchase orders and delivery receipts for accuracy. After verification, the team schedules payments based on agreed-upon terms.
Finally, the AP team processes and issues the payments, keeping detailed records and maintaining documentation. The process is fairly straightforward but can require multiple steps, particularly if it relies solely on manual tasks as well as human intervention. This means that the process also needs to be extremely airtight to prevent errors, which can become time-consuming.
Key components of accounts payable process
Purchase order (PO) issuance
In the accounts payable process, you start with issuing a Purchase Order (PO). This document outlines the details of the products or services you’re ordering, including quantities, prices, and delivery terms.
Your AP team generates the PO and sends it to the vendor, setting the foundation for accurate invoicing and payment.
Vendor issued invoice
After the delivery of goods or services, the vendor issues an invoice to the buyer—your business.
Your AP team then ensures that the invoice matches the agreed-upon terms and reflects accurate pricing and quantities. This is a good time for teams to catch errors, by comparing invoices to POs and goods/services delivered, done with an invoice review.
Invoice review
The team conducts a thorough review of the invoice, checking for discrepancies between the invoice, the PO, and the delivery receipts.
If there are physical goods or tangible services provided, then those are also matched. This step ensures that the amounts billed align with what you had ordered and received, preventing errors and potential disputes.
Manual bill recording
Your AP team enters the invoice details into your accounting system and updates records to reflect the outstanding amount.
The confirmation of accurate tracking of your liabilities helps your AP team facilitate efficient financial management. That being said, this is often treated as a manual process and requires high levels of data accuracy.
Payment execution
The final step in the accounts payable process is payment execution. You schedule and process payments according to the agreed terms, and also ensure that the payment method is feasible for both parties.
Your AP team issues payments and updates your records to reflect settled invoices, ensuring timely payments and maintaining strong vendor relationships.
Automated your accounts payable process with Volopay
Benefits of simplifying your accounts payable process
Faster payments and reduced waiting time
Simplifying your accounts payable process allows you to make faster payments and reduce waiting times, improving efficiency and vendor relationships.
Automation ensures invoices are processed quickly, leading to timely payments and avoiding late fees, which improves your cash flow management.
Reduced errors and fraud risk
By streamlining the process, you significantly reduce the risk of errors and fraud.
Computerization eliminates manual data entry mistakes and introduces checks and balances, ensuring accuracy and safeguarding your business against fraudulent activities. It also adds a degree of data security.
Strong vendor relationships
The simplification and automation of AP processes help you maintain strong vendor relationships.
Timely and accurate payments build trust and reliability, encouraging vendors to offer better terms and prioritize your orders, which is significant for operations. It also lets you avail of vendor-specific benefits.
Enhanced controls
Enhancing your accounts payable process gives you better control over transactions.
Digitized systems provide real-time visibility and tracking, ensuring that you can monitor the status of invoices and payments efficiently, reducing the chances of discrepancies. Spend controls aid in safeguarding company funds.
Streamlined workflows
Rationalizing the process and creating actionable steps improves overall workflow efficiency.
Automation integrates these steps, from invoice receipt to payment execution, reducing the time and effort required from your AP team and allowing them to focus on more strategic tasks.
Improved collaboration between purchasing and procurement departments
The simplification of AP processes fosters better collaboration between your purchasing and procurement departments.
Integrated systems ensure that both departments have access to the same information, facilitating seamless communication and coordination. Data can also be tracked and verified quickly and securely.
Improved leverage with vendors
An efficient process within your AP department improves your leverage with vendors.
When you consistently pay on time, you are in a better position to negotiate favorable terms, discounts, and extended credit lines, benefiting your business’s financial health and operational flexibility.
What are the challenges faced in manual accounts payable process flow?
Missing/lost vendor invoices
You often face the challenge of missing or losing vendor invoices, while manually handling the accounts payable process.
Paper invoices can easily be misplaced, leading to payment delays and strained vendor relationships. This issue makes it difficult to maintain accurate financial records.
Time-consuming
The manual accounts payable process is incredibly time-consuming. You and your AP team spend a significant amount of time receiving, verifying, and recording invoices.
This time could be better spent on strategic activities that add value to your business.
Too much paperwork
Manual processes generate a lot of paperwork. You must handle, store, and manage physical documents, which can quickly become overwhelming.
This excessive paperwork complicates the process and increases the risk of errors and inefficiencies.
Manual data entry
Manual data entry is prone to errors. In the accounts payable process, your team manually enters invoice details into your accounting system.
Human errors can lead to incorrect payments, discrepancies, and the need for time-consuming corrections.
Difficulty in tracking
Tracking invoices and payments manually can be challenging.
You may struggle to maintain a clear overview of outstanding invoices and payment statuses, or even if the delivery and invoice terms match POs. This lack of visibility can hinder effective cash flow management.
Delay in payments/fees
Manual accounts payable process flows can lead to payment delays.
Missing invoices, manual data entry errors, and slow processing times can result in late payments and incurred fees. These delays can damage vendor relationships and increase your business costs.
How to simplify accounts payable process
Simplifying your accounts payable process can save your business time, reduce errors, and improve vendor relationships.
By adopting modern solutions and best practices, you can transform a traditionally cumbersome task into a streamlined, efficient operation. This will make sure your business operations are scalable, as your teams shift their focus to strategic growth.
1. Automating accounts payable process
Automate your accounts payable process to eliminate manual tasks and reduce errors. Automation software can handle invoice management to cut down on manual documentation storage. Data entry tasks can be digitized to prevent redundancies and errors.
Automated or pre-approved payment scheduling ensures timely and accurate payments. By using such workflows, you ensure that invoices are processed quickly and accurately, which can simplify the AP process by multiple time-consuming steps.
2. Centralizing invoice processing
Centralize your invoice processing to enhance control and visibility. By consolidating invoice management in one location, you can streamline communication and ensure consistency in handling invoices.
This centralization allows you to track all invoices in real time, making it easier to manage outstanding payments and avoid late fees. Centralizing the invoicing process also makes sure that all departments involved in procurement—are on the same page.
3. Integrating accounts payable software
By connecting your accounts payable software with your accounting and procurement systems, you can ensure seamless data flow and reduce the need for manual data entry. This integration enhances accuracy and provides a comprehensive view of your financial operations.
An integrated tech stack can also facilitate order renewals (which can help create accurate budget forecasting), comparative analyses on where money is spent, as well as smoother reconciliation.
4. Optimizing invoice management
Establish guidelines for invoice submission, approval workflows, and payment schedules. By standardizing these processes, you can reduce delays and ensure that invoices are processed consistently and efficiently.
Also, regularly review and update your procedures to adapt to changing business needs. It’s also important to make sure that these processes are documented and your employees are trained well so that efficiency isn’t hindered by lack of training or communication.
5. Establishing paperless invoicing
Paperless invoicing reduces clutter and improves efficiency. Encourage your vendors to submit invoices electronically, and use digital tools like an electronic accounts payable system to manage these documents.
Implementing a paperless invoicing process reduces the risk of lost or misplaced invoices and makes it easier to store and retrieve records. It also supports your sustainability efforts by reducing paper usage. OCR-enabled accounts payable software can help digitize existing paper invoices, helping the transition to a paperless process.
Looking to automate accounts payable for your business?
How can automation help optimize AP process?
Automating your accounts payable process frees up your AP team from the drudgery of countless paper checks and instead allows them to pursue other crucial financial goals instead!
Although it might feel a little difficult adjusting to the digitized version of the AP process, here are some of the reasons why accounts payable automation can be your new best friend:
Foster vendor relationships
AP automation can allow for faster payments to your vendors.
By digitizing and automated filing of your invoices, it can simplify the process of invoice submission and payment for everyone involved!
Freeing up the cash flow
With accounts payable automation, the company can save significant time and money that frees up the cash flow for faster payment of these short-term debts.
The invoice process is streamlined instead of scattered all over the place in the form of paper trails and overflowing email inboxes.
Protect yourself against fraud
When the accounts payable invoice approval process goes through multiple unauthorized channels due to manual processing chaos, it can put your company at risk for fraud and embezzlement.
With an automated accounts payable process in place, you can limit who has access to invoice approval and payment release and can quickly identify invoice fraud before it’s paid.
Hassle-free auditing
AP automation allows you with document management and links all your necessary messages and information onto a single transaction so you can match the invoice with the receipt and the purchasing order effortlessly.
This kind of trackable and documented audit trail removes the complexity of extensive paperwork and ensures compliance with your filings.
How to implement accounts payable automation in your organization
1. Evaluate and review existing AP process
Start by evaluating and reviewing your current accounts payable process. Identify the pain points, inefficiencies, and areas prone to errors, and also hypothesize possible future errors.
Document your existing workflows to understand where automation can have the most impact and where improvements are needed. Overhauling the system also means incorporating existing tasks fruitfully.
2. Identify your business requirements
Your business requirements will guide you since an efficient process relies on customization based on unique needs. Consider factors such as the volume of invoices, types of invoices, and integration needs with existing systems.
Specific features like approval workflows, reporting, and fraud detection can benefit you if future business requirements demand it.
3. Create a presentation to propose the plan
This stage is key since it involves a mindset shift within the organization. Develop a compelling presentation to propose the automation plan to your stakeholders.
Highlight the benefits of automating the accounts payable process, such as time savings, error reduction, and improved vendor relationships. Use case studies to support your proposal and address concerns.
4. Involve all the stakeholders
Involve all relevant stakeholders in the decision-making process.
This includes your AP team, finance department, IT staff, and key executives, as well as procurement representatives from other departments (such as those in charge of SaaS or office purchases). Gather their input and address their concerns to ensure buy-in and smooth implementation.
5. Choose an accounts payable automation provider
Research and select accounts payable automation software that meets your business requirements. Look for a solution that integrates with your existing systems, offers robust features, and has a good reputation for customer support.
Compare different providers and choose the one that best fits your needs. Keep in mind that a user-friendly interface is necessary for company-wide implementation.
6. Create a plan for implementation
Develop a detailed plan for implementing the automation solution. Outline the steps involved, set a timeline, and allocate resources.
Consider a phased approach to minimize disruption to your operations, and also consider contingencies to prevent any kind of hindrance during implementation. Define key milestones and metrics to measure the success.
7. Training and testing
Train your AP team and other relevant staff on the new system. Provide comprehensive training to ensure they understand how to use the automation software effectively.
Conduct thorough testing of the accounts payable process to identify and resolve any issues before going live. This ensures a smooth transition and helps build confidence in the new system.
By following these steps, you can successfully implement accounts payable automation in your organization, leading to a more efficient, accurate, and streamlined process.
How Volopay helps improve your accounts payable invoice approval process?
Volopay transforms your accounts payable process by automating and optimizing payment workflows, bringing substantial advantages to your business.
With Volopay, you eliminate manual tasks and minimize errors through seamless accounting automation.
Centralizing invoice management becomes effortless, and integrating with existing systems enhances overall efficiency.
Volopay’s advanced features further allow you to streamline invoice processing, transition to paperless workflows, and expedite payments, all while fostering stronger vendor relationships.
The ability to plug into your accounting software also makes your accounting processes smoother.
By incorporating Volopay into your accounts payable process, you save valuable time, ensure precision, and elevate your business’s finances and operational excellence.
Approve invoices and automate payments with Volopay's all-in-one solution
FAQs
Volopay makes the invoice processing hassle-free and paper-free. Each invoice is uploaded as a PDF or JPG file and saved for as long as you need it. No more lost paper invoices, and no need to go hunting through your email inbox to find electronic copies. Which means faster review > faster approval > faster payments!
Early payment discounts are offered by vendors to maintain their cash flow, and in turn yours too! You can avail of this discount through Volopay. Simply allocate your cash for early payment, set your rate of return and Volopay will surface the offer to your supplier directly based on all your invoices.
The average small-to-mid sized company takes about 25-30 days to process a single invoice manually from receipt to payment. Automating your AP invoice approval process can see a stark difference of up to 18% fewer days in outstanding invoice payments i.e. around 5.5 days.
Getting started with Volopay is easy as ever! Simply go to our website and book a demo with us today to learn more about our streamlined accounts payable invoice process solution. Alternatively, click here to directly book a demo.
Simplifying your accounts payable process reduces manual tasks, minimizes errors, and speeds up payment cycles.
This efficiency lowers operational costs, prevents late fees, and allows you to take advantage of early payment discounts offered by vendors, ultimately contributing to significant cost savings for your business.
Volopay offers a comprehensive solution for your accounts payable process. It automates the entire invoice approval workflow, eliminates delays, and streamlines both domestic transfers and cross-border payments.
The platform integrates effortlessly with your existing accounting software like Xero, Netsuite, and Quickbooks, and provides a real-time, detailed dashboard for enhanced transparency and control.
Yes, Volopay provides valuable analytics and insights to help you optimize your accounts payable process.
The platform’s dashboard offers a holistic view of invoice processing in real-time, allowing you to set parameters such as expense categories and multi-level approvals.
This helps you make informed decisions, manage cash flow efficiently, and enhance overall financial planning for your business.
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