If you’re a business owner seeking constant improvement in your business operations, the Accounts Payable (AP) is an area that should gain special emphasis from your end. Though financial tools are moving their presence to cloud storage, there’s still a lot of financial planning required to ensure that the operations of your AP department are smooth enough to achieve higher productivity along with improved cost-efficiency.
Below are some of the top AP practices you should look forward to while running a business:
Paying for Original Invoices
Always make sure that the check is made out from the original invoice. That’s because, with copies, you always have the chance to make an error: you may end up paying for an undue or already paid invoice! If, by chance, you need to pay from a copy, refer to the original data in your records to check the due date, invoice number, product delivery, and monetary amount.
Adapting Smart Capture Technology
Even if you’ve hired an AP team to input invoice data into your systems, it may still be a time-consuming task. Instead, it’s better to use optical character recognition (OCR) technology – a smart capture technology that reads invoices and pre-populate relevant data fields automatically.
This way, your AP team doesn’t have to spend a lot of time in inputting invoices. If implementing OCR technology is the first option you aim to utilize in improving your AP processes, then there are various business software companies such as DataServ that specialize in this niche. Conduct a survey and finalize which software company offers the most feasible AP solution. If implemented the right way, you’re almost done.
Incorporating Automated Invoice ProcessingÂ
Besides inputting invoices into systems, there are other manual tasks that aren’t only trivial, they may increase your overall invoice processing cost too. But here’s a better way to cut such unnecessary costs down: incorporate an automated AP solution that enables payment approvers to complete the task even from their mobile phones. This automated system also ensures that duplicate invoices don’t interfere with carrying out payment approvals.
Ensuring Prompt Payment Processes
Using a centralized AP system helps you clear a large volume of invoices without any delay. Besides eliminating the extra burden on your AP team, these timely payment processes have reduced the need for untraceable, inefficient paper checks. And the best thing about prompt payments is that you don’t have to pay any penalty for late payments.
Considering Supplier Satisfaction
Even if you have a strong working relationship with your suppliers, the slightest error in payment tracking may strain it in no time. That’s why incorporating automated AP processes makes a lot of sense. To facilitate your suppliers, you can enable them to use automated portals through which they can easily follow up on their payment status without having the need to contact your AP team.
Creating a Foolproof Method for Invoice NumbersÂ
Even if more than one employee is working on entering invoices, you need to ensure if there is a predefined, standard pattern of numbering them. Otherwise, it will just be a separate set of numbering rules for every employee who enters the data. Furthermore, it’s impossible to keep track of all invoices.
Creating a Hierarchy
Employees responsible for data entry should be different from the ones who are authorized to work on generating and managing invoices. Besides this, the person responsible for signing the checks should be different. That’s because a lot of companies even require two signatures on a check if it exceeds a certain amount.
Creating a Route That Prevents Black Holes
You should route all your invoices via the AP department so that they can be checked, confirmed, and logged into the accounting system before being sent for approval. After approval, the invoice should be returned to the AP department for processing the payment check.
Welcome Letters
Create a vendor welcoming letter that includes the basics such as the address the invoices should be dispatched to, details of a contact person, other required details such as the W-9, ID number, etc. This way, you can have all the paper work out in one letter. Secondly, the vendors will appreciate being able to receive payments earlier.
The Bottom Line
As business practices evolve continuously, a lot has been improved in terms of managing Accounts Payable to an optimum level. Now that there are numerous advanced technology options available for small business owners, automating AP is considered a timely approach to creating and maintaining payment records.
Incorporating these modern business practices won’t only help maintain your company’s financial health but also maintain profitable relations with your vendors. What’s next? Automating your AP systems has become so feasible that it increases the chances of achieving a higher ROI.
Daniel Willis has been in business for many years and has certainly had to adapt to the times to make his business succeed. He writes about this in his articles aimed at small-medium sized businesses, sharing some of his tips and tricks for dealing with accounts, paperwork and more.
