Your accounts payable department is integral to everything your business does. AP departments are responsible for tracking what’s owed to suppliers and making sure payments are approved and processed. To have an accurate balance sheet, the information maintained by accounts payable has to, in turn, be accurate.
AP departments also make sure relationships with suppliers are maintained, and they keep records for cash forecasting and the optimization of working capital. Your AP department is also one of your first lines of defense against errors and fraud.
With those important factors in mind, what best practices should you adopt in your business as far as your AP department?
Use An End-to-End Automated Solution
Make the job of your AP department easier and promote efficiency and accuracy with the use of an automated solution like DataServ. Benefits of automating your AP department include digitized data with a high accuracy rate and touchless processes customized to your business needs.
An automated solution offers a high level of security, reduced risk of human error, and you can go paperless.
Go Over Your Data Regularly
The idea of using an automated solution then feeds into this next best practice, which is going over your data regularly. Set intervals to review all AP data. Having an automated AP solution will create the visibility you need so you can watch your cash flow and make strategic, data-driven decisions.
With reporting and analytics, along with improving cash flow, you can reduce fraud and identify bottlenecks in your processes. You can also ensure compliance with an audit trail and monitor the value of your invoices and payments.
When you have centralized visibility into your data, you can then set objectives for improvement and measure how well you meet those.
Strengthen Supplier Relationships
One of the best things you can do for the long-term success of your business is make supplier relationships your priority. You want to keep your suppliers happy and you also want to have leverage to renegotiate prices and terms when relevant.
The way you manage AP is going to help you in this area.
If you don’t have a strong relationship with your suppliers, it’s going to be difficult to have a business that operates smoothly and efficiently.
If you need something quickly or at the last minute, or maybe have to delay a payment, you want your position with the supplier to be as good as it can be.
In general, when you don’t need anything, just make sure that you’re paying your vendors on time as much as you can. By having a strong AP department, you’re better equipped to do this.
Again, when you have a good relationship, you can regularly evaluate whether or not you should renegotiate your terms.
Renegotiating your terms can save you money and ensure that everything is meeting the current needs of your business.
Identify Potential Discounts
When you automate your AP process, then you’re going to be making more on-time payments, and you might end up being able to identify early payment discounts as a result. Even if your vendors don’t advertise them, don’t be afraid to ask.
Some creditors will also reduce your interest rates if you make payments in-full and on-time over a certain period of time.
You’re going to save money by simply not having to pay as much interest or pay late payment fees when you organize your AP processes.
Go Paperless
Whenever possible, modern and agile businesses work toward being paperless as much as they can. If you can receive electronic bills, you don’t have to wait to receive them. Your AP team has less to do with a paperless system, and the risk of things like lost invoices is reduced.
Ask your suppliers to email invoices whenever they can. When you receive paper invoices, scan them and upload them to make sure everything is in the same place.
Set up online payments for your regular vendors when possible. A tech support company may be able to help you with this.
Limit Access and Set Controls
To reduce both fraud and errors, you want limited access and strict controls guiding your entire AP process.
You want to be able to track any activity back to the person who initiated it, and the fewer people have access, the easier that is.
Finally, if a dispute ever does arrive, make sure that you track it and ensure there’s resolution. That will help you keep track of funds more effectively. If there is an issue where you feel like you were overcharged and then you go ahead and make that payment, you may not be able to dispute it later on.