Efficient Accounts Payable management is vital for the smooth functioning of any business, small, medium or large. As a pillar of general accounting department, Accounts Payable department is expected to oversee all the payment obligations of the business entity save payroll, making it crucial for financial stability and reputation of the business entity.
Three major functions of Accounts Payable:
While large businesses set-up a dedicated accounts payable department, smell and medium businesses have their team of accounting professional who multitask payables, receivables and other accounting functions, to get the payments flowing on a timely basis to ensure smooth and stable financial environment. No matter the size of business every AP professional functions can be divided into three major categories:
Vendor payments: Flow of supplies, goods and services are directly related to the timely payment made to the vendors. But it is not as easy as it seems, as the business grows the complexity of invoice processing and payment grows many times over, even more, if the business adheres to manual processing and payments. AP department organizes the entire vendor information and details: contacts, payment terms, tax information within the database and ensures payment process is smooth while keeping the working capital requirements in mind.
Internal expenses & business travel reimbursements: All the internal business expenses from luncheon meetings to postal charges and other miscellaneous expenses will be tracked, processed and taken care by the Accounts Payable department. This also includes business travel management responsibilities with respect to airline, car or other transportation facilities made for business purposes. The AP department processes the funds needed for the travel and other expenses based on the requirements and settles the amount based on the receipt and manual log reports for reimbursements.
Financial reporting: Net come statement, cash flow statement and balance sheet together give a complete financial picture of a business which is key for strategic planning in business management. An efficiently-run Accounts Payable with its up-to-date record of all expenses, cash-flow tracking and management plays a key role in financial reporting that gauge the financial position and performance of a business.
However not every AP process works efficiently and accurately owing to a multitude of problems in the way the whole AP system is built. Even businesses who have a solid AP process in place still resort to extending the deadlines to maximize the cash flow which can be detrimental. An AP process must be efficiently streamlined to make sure the management captures the right opportunities to efficiently manage the working capital as per the requirement. Here are a few tips that can help you streamline and improve your AP process:
- Set-up a centralized AP processing and reporting: Having centralized processing and reporting for all the staff members from the time the invoice is received to paid and reported brings organisation and efficiency into the process. It not only ensures easy adoption and adherence to standard practices and measures but also helps in gauging their performance according to the KPI.
- Vendor selection & Master data: Set-up a preferred list of suppliers to avoid maverick buying options and ensure proper negotiation. Keeping scorecard for vendors based on their quality of delivery can provide an opportunity to negotiate better terms when possible. Once the purchase and pricing terms are finalised, it is important to maintain master data with all the necessary details of the agreements to avoid payment inaccuracies.
- Maintain supplier portals: Supplier portals that help suppliers automatically track the order status, schedule of their delivery and processed payments can not only minimize the errors but also reduces the time spent, improves accuracy and organize the entire process.
- Go paperless and embrace automation: Automating the AP Process accelerates the payment process and avoids late payments. With today’s automated systems you can communicate with the vendors and get everything done in less time. From generating purchase orders, validating, accepting, approving and payment of invoices, the entire system can be fast-tracked with minimized accounting errors.
Given AP plays a critical role in working capital optimization, every business must fortify their AP process to ensure maximized cash flow. Being one of the best back-office accounting firms in the business, Outsourced Bookkeeping has helped hundreds of business improve their cash flow and working capital management the working capital with robust Accounts Payable Services. If you are a small and medium business looking to leverage the benefits of an efficient AP process you can outsource your requirements to our expert team of accountants and dedicated AP professionals here: https://outsourcedbookeeping.com/
