For a business in any industry, the competitive landscape is bigger than ever, and the effective management of business operations is crucial, with the accounts payable (AP) being no exception.
AP is widely known as being a tedious and costly business department. Within this department, mistakes are often found due to the amount of number punching involved. Therefore, ensuring that your AP department is as efficient and reliable as possible is essential.
In this blog post, we will explore some practical strategies to improve your accounts payable process and optimise your financial operations.
What is an Accounts Payable (AP) Process?
The accounts payable (AP) process is the management and payment of invoices and bills owed by a company to its suppliers. Because of this, it is a critical component of the financial operations of any organisation.
The accounts payable process involves tracking and paying invoices, managing vendor relationships, and ensuring timely and accurate financial transactions. However, the AP process is something that many organisations struggle with, which can lead to inefficiencies, errors, strained vendor relationships, and missed opportunities for growth.
How to improve the Accounts Payable process?
1. Automate Your AP Process
One of the most effective ways to streamline your accounts payable process is through automation. By implementing an AP automation software, such as Pegasus Opera, you can significantly reduce manual data entry, improve accuracy, and speed up payment cycles.
Automation tools can easily capture invoice data, match it with purchase orders and receipts, and route it for approval. This eliminates the need for paper-based processes and minimises any human error.
2. Centralise Vendor Management
Having a centralised vendor database is essential for efficient accounts payable management, and will provide staff with a comprehensive vendor master file that includes vendor contact information, payment terms, and historical transaction data. This centralised data then provides AP staff with easy access to vendor details, allows them to track payment histories, and negotiate better terms.
To avoid any inconsistencies and mistakes, it’s always important to regularly review and update vendor records to ensure accuracy, avoid duplicate entries, and eliminate outdated information. A focused vendor management system will also enable better communication amongst suppliers which will lead to improved payment terms.
3. Implement Strong Internal Fraud Controls
In recent years, invoice fraud has risen significantly and avoiding it has become a key focus for businesses.
To prevent fraud and mitigate any risks, it is crucial that your business has established, robust internal controls within your AP process. You can achieve this stringent security through job allocation, and assign different individuals to invoice approval, payment processing, and vendor management. You should also implement a clear and documented authorisation strategy that outlines the approval hierarchy and expenditure limits. Regularly review any access rights and permissions to ensure that only authorised personnel can change vendor information or process payments.
By implementing these controls, you can minimise the chances of fraudulent activities and protect your organisation’s financial integrity.
4. Embrace Electronic Invoicing
Transitioning from paper-based invoices to electronic invoicing offers numerous benefits. Electronic invoices can be seamlessly integrated into your AP automation system which will reduce the processing time and any errors associated with manual data entry.
This will also enable faster invoice approvals and provide real-time alerts to any outstanding payments, reducing the risk of late payments. Electronic invoicing also an extremely sustainable solution by reducing paper waste, which helps to support environmentally friendly practices.
5. Regularly Reconcile and Analyse AP Data
Maintaining accurate and up-to-date AP records is essential for effective financial management. Regularly reconcile your accounts payable data with the general ledger to identify any discrepancies or errors. Further, implementing monthly or quarterly AP aging analysis to monitor outstanding payments and prioritise those that require attention.
You should also analyse your current vendor payment terms and negotiate discounts for early payments or long-term relationships. By leveraging the insights gained from your AP data, you can make informed decisions, optimise your business cash flow, and identify areas for process improvement.
Why should businesses automate their Accounts Payable processes?
Streamlining your accounts payable process is vital for enhancing financial efficiency and maintaining healthy vendor relationships. By embracing automation, as well as other useful strategies you can update your operations, reduce costs, and mitigate risks.
AP Automation for Opera 3 SQL SE
At DCS, we are thrilled to announce that this Summer, our award-winning partner Pegasus are introducing an Accounts Payable (AP) Automation and Invoice Data Capture functionality to Opera 3 SQL SE. This function will provide users with a simple way of capturing and processing invoices, giving them complete visibility to process invoices quickly and make smart budgeting decisions.
Other benefits of this new function include:
- Reduced approval time
- Stronger vendor relationships
- Greater AP security
Get in touch
If you’d like to discuss Opera’s brand-new AP functionality with a member of our team, you can email us at [email protected], or fill out a contact form here. A member of our team will be happy to help!