In the traditional sense, Accounts Payable (AP) has been long seen as a key finance function that focuses on optimising the cash flow by ensuring that suppliers are paid as late as possible. However, over the years, business owners have come to realise that delaying the payables process can often result in slower delivery times and hampered supplier relationships.
The competitive nature of the modern business landscape has forced companies to go back to the drawing board and adopt a more strategic approach towards their key finance functions. The foundations of a well-managed accounts payable function can be laid by identifying, adopting & enforcing some basic strategies that ensure seamless working capital management. Let’s look at the top five actions that can help you optimise your accounts payable process:
The first and the most basic step in the journey towards achieving optimisation is to understand the company’s AP operation inside out. An in-depth insight into the process can help identify the purchasing, approval & payment framework followed by the organisation. Objectively mapping out the entire workflow can also go a long way in identifying process flaws and devising plans to improve on the shortcomings.
A detailed study of the function also contributes significantly to understanding the overall management activities. This information can be further used to clearly define & delegate responsibility for different aspects of the process. Such managerial workflows can also help prevent discount losses & late bill payments.
In the new-age business scenario, technology can play a key role in determining the success or failure of your overall optimisation plans. While many businesses often underestimate the scope of technology, AP automation can directly affect the company’s cash flow & payment turnaround times. Introducing intelligent automation to an organisation’s AP function can help:
The global accounts payable automation market is expected to be worth $3.1 Billion by 2024. – Markets & Markets Global Forecast Report
In addition to the above-mentioned benefits, AP automation also frees up onshore teams of laborious, low-value AP tasks, allowing them to focus on core business activities and drive growth.
AP teams working for businesses dealing with multiple suppliers often end up spending a big chunk of their time in frequent follow-ups aimed at gathering and consolidating information. In such scenarios, automation & AI can play a key role in simplifying and streamlining the cycle of supplier selection, onboarding and management.
Setting up a dedicated vendor portal should be an important element of any optimisation project as it can prove to be beneficial in more than one way. In addition to serving as the constant bridge between both parties, a vendor portal also allows suppliers to track the inventory, order status, delivery status and incoming payments.
On the other hand, a manual, paper-based supplier contract management process can hurt businesses as well. Implementing a paperless AP process facilitates real-time performance analysis and timely contract reviews. In addition, streamlining contract management also lets the on-ground AP teams to stay on top of discount opportunities arising out of early payments.
Many finance teams often end up auditing their invoices months after they’ve been paid. This exposes the AP function to potential frauds and human errors such as duplicate payments. Matching of invoices raised against subsequent Purchase Orders (POs) is often considered to be the most critical aspect of any AP function and therefore, optimising it becomes equally important.
81% of companies were targets of payments fraud in the year 2019. – 2020 AFP Payments Fraud and Control Survey
Companies, especially those dealing with multiple/high-volume suppliers, must implement a solid framework wherein a PO is raised for every order. This PO can then be used to match & track with the corresponding invoice right up to the point that the payment is completed. Implementing automation can play a key role in further optimising this process. The use of technology in PO-Invoice matching can help:
Keeping a constant check on the current accounts payable balances can help businesses meet both immediate as well as long-term optimisation targets. Real-time collection, maintenance and utilisation of financial data ensures up-to-date financial reporting, leading to greater process transparency.
“What gets measured gets improved.” – Peter Drucker (Management Expert & Author)
In order to fully utilise the potential of financial data and take their reporting activities to the next level, many business owners often team up with seasoned accounts payable outsourcing partners. In addition to introducing a team of data experts to the business, outsourcing financial reporting can also help streamline payment tracking, invoice validation & billing accuracy.
QX is a leading finance & accounting outsourcing service provider with rich experience in optimising accounts payable for clients across industries. Over the last decade and a half, we have worked with some of the most recognised businesses in the world – improving their payables process by leveraging best practices, process excellence & intelligent automation.
Our unique partnership approach allows us to better understand your specific business needs & devise customised solutions. To learn more about how QX can help you in meeting your optimisation goals, contact us now.GET IN TOUCH