10 Must-Follow Tips to Streamline Your Accounts Payable in 2023

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As a business grows over the years, managing accounts payable gets trickier. The process of manually sorting through and managing invoices can be time-consuming, and if not done right, it can be detrimental to your business. Optimizing AP processes is crucial to avoid bottlenecks in revenue generation and improve cash flow, thereby revamping your working capital. But how do you begin with streamlining your company’s AP processes? This blog post highlights the 10 best practices your AP department can implement to become a strategic partner to the executive team and a major asset to the business.

Evaluate Your Current AP Operations

The first step is to conduct an in-depth analysis and assess how your company has been handling accounts payable up until now. Have you been managing it manually? Are you receiving paper-based invoices from vendors or an electronic version? Are there any duplicate invoices?Keep a look out for the following warning signs to understand the effectiveness of your existing operations:

  • Accounting staff and managers who spend a long time processing invoices and getting approvals.
  • Decentralized invoice processing and payment distribution.
  • Work redundancies across different AP departments.
  • If vendors are kept in the dark about overdue payments and have no clarity about your 
  • Vendors raising concerns about delays in payments
  • Inconsistent AP processes throughout the organization

By mapping out their AP processes, companies can get an accurate view of what functions their AP software will have to handle while at the same time identifying potential gaps in their current accounts payable efficiency.

Create Specific Policies 

It’s no secret that every company has to handle invoices regularly. But regardless of the sum of the amount, it’s imperative to set specific guidelines for various transactions to avoid confusion when paying the bills. For instance, you can establish a policy that states every payment needs to be accompanied by a PO. You can create policies based on multiple factors, such as:

  • Category-specific 
  • Supplier specific
  • Project specific, 
  • Geography specific 

When the AP team adheres to the abovementioned principles, it speeds up and enhances the overall workflow between the members. 

Simplify the Process

Now that you have laid down the proper procedures, the next step is to follow through. During execution, it’s important to address certain aspects of the settlement process, such as:

  • How to capture payable inputs?
  • How to consider rebates and cashback?
  • How can you conduct compliance checks?
  • What is the method of payment?

Start by ensuring your suppliers know exactly to whom to send their invoices. And develop a process that clearly outlines exactly what procurement professionals or field approvers should do if they receive invoices from vendors (versus letting the invoices sit on their desks, gathering dust while suppliers wait to get paid). Inefficient invoice receipt practices are a great way to standardize your AP processing. For example, if vendor invoices are sent to individual departments and frequently get lost or misplaced, then have them flow into a central location instead.Determining when you will pay invoices sounds like a no-brainer, but it’s an important step to help set expectations for your vendors and your own company. Some of the more popular options include:Batch the payments according to the due date and pay multiple invoices that are due within certain timeframes simultaneously. Pick certain days of the month (for example: the 15th of every month) when you’ll pay invoices.When you effectively manage your accounts payable and make timely payments with zero hassles, it showcases clarity and helps you build a good relationship with trade partners. 

Centralize your data

The more complicated your workflow, the likelier you’ll make payment errors. Examine your existing workflows and identify any obstacles occurring in the approval process. It means centralizing and standardizing processing and reporting across the organization to reduce the margin of error. 

Archive Data Effectively 

The AP process doesn’t end when the invoices are paid. It also includes the post-payment archiving of data that can be retrieved, reviewed, and acted on (as needed) at a later date. Whether paper-based or digital, this historical record of all vendor bills that have been settled is a vital part of a company’s financial records.

Assess the Team Composition

Your business growth largely depends on the revenue you generate, so you must ensure that your accounts payable department comprises the right people who can get the job done. Typically, a person can handle up to 7000 invoices in a year without the help of software – assuming every single one conforms to expected standards and there are no errors. It’s unrealistic to have only the CFO supervise all the accounts payable, so the wise decision here is to analyze the number of transactions made in a financial year to understand how many employees are required in the department. 

Delegate duties the right way 

To prevent business fraud within your company, you must demonstrate separation of duties and internal controls within your AP process.Allow only certain employees to access the Master Vendor File, allowing you to address discrepancies quickly. Stringent internal AP review processes improve collaboration and reduce the risk of fraud. For example, if you’re still expecting to receive several paper invoices every month, select a specific point of contact for receiving, scanning, and inputting them into your AP system. That way, if an invoice is lost or a payment is issued late, the vendor will have one point of contact. You can also assign team members to other roles to distribute the AP responsibilities evenly and free everyone up to get more important work done.

Invest in AP Automation 

Nearly 55% of companies handle their AP processes manually, which is highly resource-intensive. Fortunately, accounting software can automate payments and other operations, reducing the burden on the accounting department. By moving to an automated system, companies:

  • Avoid losing paper invoices
  • Can expedite payment authorizations
  • Better organize their records
  • Can remit payments or take care of other AP tasks from anywhere (with a cloud-based system)

However, every business has unique objectives to fulfill when optimizing its accounts payable. Remember to pick the tool that best aligns with your company’s needs. Here are a few features you can look for:

  • Integration with multiple banks
  • Robust supplier portal 
  • OCR capturing
  • Integration with tax engines
  • Three-way matching/Four-way matching 
  • Security and fraud detection
  • Automates overall expense Management

Leveraging a feasible automated AP solution like Zapro can help you seamlessly track your corporate spending and fast-track payments. 

Track Invoice Disruptions and Resolve them Immediately

If a vendor issue surfaces where you were overcharged for a product or a discount wasn’t applied, and you approve the check without reviewing it – you burn a hole in your pocket. These discrepancies hurt cash flow and showcase negligent bookkeeping practices, which is harmful to your business.Keeping tabs on any inconsistencies in your invoices helps keep your cash flow intact, systemize your AP processes, keep the books in order, and maintain vendor relations.

Review Your Progress Regularly

As you continue to streamline your AP workflow, keep in mind to continually review the impact of your efforts. Consistent visibility into your company’s financials and the accounts payable data enables you to keep tabs on your cash flow and helps you take a more strategic approach to your decision-making. You can measure the following KPIs to gauge the progress you’ve made: 

  • Days payable outstanding (DPO).
  • Cost to process each invoice.
  • Invoices processed per employee
  • Average time to approve an invoice
  • Invoice cycle time

Wrapping it Up 

Following these 10 best practices and consistently improving your organization’s AP process will help you streamline the approval process, and eliminate late payments and fees, thereby ultimately giving you more control over your cash flow. However, if you want to achieve your goals quickly, leveraging paper-based and manual processes can deter you. Introducing an automated accounts payable solution is the right way to move your AP department to the next level.Zapro simplifies your AP workflow and promotes seamless communication with approvers, vendors, and other stakeholders involved in purchases. Book a demo with us today and modernize your accounts payable process!