10 Best Practices to Improve Your Accounts Payable Process in 2024

If you’re running a small business, you’re well aware that optimizing your business processes is essential for it to grow long-term. One of the key aspects you might be focusing on is accounts payable (AP). An efficient AP process ensures faster approvals on bills and invoices, allowing for better and healthier cash flow.

This guide will go through the ten best practices for accounts payable process improvement and what are the most common drawbacks in accounts payable today. We’ll also discuss how Envoice can help improve your accounts payable process using actionable steps.

Read this guide to know more.

10 Best Practices for Accounts Payable Process Improvement

Here are some of the best practices that you can follow to improve the accounts payable process of your business:

#1. Optimize the Accounts Payable Workflow

Streamlining the workflow on your AP team is one of the best ways to enhance accuracy and efficiency. This involves following a uniform procedure of tracking invoices when they’re filled and completely paid. You should also consider adjusting your AP processes, sorting invoice data more efficiently, and eliminating repetitive tasks like data entry.

How Envoice Can Help

When reassessing your AP process, you can use Envoice to do the following:

• Streamlined invoice management: Envoice can make your expense approval process more efficient and transparent by providing a clear audit trail and real-time status updates. It also ensures that all expenditures are reviewed and approved on time.
• Standardizing your AP system: Envoice helps you develop a clear and consistent AP process, ensuring that all team members are aligned with how invoices are processed, approved, and reimbursed and paid. This enhances overall business efficiency, reduces operational bottlenecks, and maintains high-quality standards.
• Establishing roles within your AP department: Our platform allows you to set roles and responsibilities for each team member through admin controls. This prevents unauthorized access to sensitive financial data and ensures each member only has access to the information they need.

#2. Minimize Manual Data Entry

Manual processes, such as data entry, are prone to human errors. These mistakes can cause delays in the AP process, including invoice processing and approval. It also takes away time that could have been spent on high-value activities.

How Envoice Can Help

As an accounts payable automation software, Envoice provides several solutions to eliminate mundane tasks like data entry:

• Intelligent data capture: Envoice uses optical character recognition (OCR) and artificial intelligence (AI) to automatically extract data from invoices and receipts. It also provides services like ExactExtract (backed by Human-in-the-loop review) for a fully automated and accurate data capture experience.
• Automated expense categorization: Our software improves your accounts payable process through an AI-driven recording tool (SmartRecord) that automates daily expense categorization tasks. This ensures more accurate financial reports and involves team members in effectively managing expenses.
• Effective document management: Envoice allows you to securely store your invoices, purchase orders, and other expense documents in encrypted data storage. This lets your accounts payable department seamlessly access and retrieve financial data anytime.

#3. Switch to Digital Invoices and Go Paperless

Transitioning to a digital invoicing system might seem daunting, especially if your AP process traditionally involves working with paper invoices and statements. However, it’s an efficient way of dealing with various monthly bills and payables. Paper invoices can also take up unnecessary filing space and be easily lost or damaged, leading to late payment fees and affecting supplier relationships.

How Envoice Can Help

You can easily use Envoice to digitize invoices and modernize the accounts payable process. Here’s how:

• Robust receipt capture: With Envoice, you can digitize and extract key data from receipts using SmartExtract and the Envoice mobile app. This enables you to process invoices efficiently, capture receipts on your smartphone, and eliminate data entry errors. Since receipts are stored digitally, you can pay bills quickly and take advantage of early payment discounts.
• Efficient document collection: Our platform allows you to upload paper invoices and other financial documents for processing in various ways, such as personalized email, importing from cloud storage, and using its mobile app. This lets you easily organize receipts, reduce clutter, and automate document handling.

#4. Evaluate Vendor Relationships

Having great vendor relationships is essential for improving the accounts payable process. It allows you to access discounts and favorable payment terms, leading to better financial flexibility and a healthy cash flow. To maintain vendor satisfaction, you must collaborate with them to improve your AP process and make payments more efficient, including their preferred payment forms and methods (e.g., digital payments vs. paper checks and bulk vs. separate invoice payments).

How Envoice Can Help

Envoice can assist in AP process improvement and maintaining strong vendor relationships by:

• Vendor payment tracking: Envoice lets you efficiently process vendor payments, allowing you to create a purchase order and upload it directly to your bank account. You can track real-time payments using our Wise integration and connecting your accounting system. This allows for secure payment processing and improved cash flow management.
• Streamlined invoice approvals: Envoice can help your AP department facilitate invoice approvals more efficiently through multi-level approvals. You can create automated workflows and automatically assign tasks to responsible team members, increasing efficiency and providing a clear audit trail in case of disputes.

#5. Keep the Accounts Payable Process Secure

Enhanced data security in your accounting or finance department is essential, especially for accounts payable systems. The first step in creating a secure environment for accounts payable data is by automating most processes and eliminating manual tasks. This reduces fraud, like stolen checks, counterfeit income and expense reports, and various scams.

How Envoice Can Help

Envoice can assist in making the entire accounts payable process secure through:

• AI-assisted invoice processing: From filing to approval to final payment processing, Envoice secures accounts payable by making it an automated process. This reduces delays and opportunities for payment fraud and unauthorized spending brought on by manual processes.
• Secure document collection and archival: Envoice makes it easy to upload financial documents to the platform either through email, direct upload, other cloud storage platforms, or its mobile app. You can also use it to host documents securely through safe cloud storage with advanced encryption.
• User permissions: Our platform lets you assign roles and user-based access to ensure everyone has access to the necessary information. Envoice mitigates the risk of accounts payable fraud through audit trails and real-time updates on user actions.

#6. Avoid Duplicate Invoice Payments

Duplicate payments can lead to nonessential cash outflows, directly affecting your business’s financial health. Paper-based systems are most especially prone to incidents like these, especially in the case of missing invoices. However, you can prevent duplicate invoices from being issued by the accounts payable department if it adapts three-way matching, which involves verifying the invoice, goods receipt, and purchase order data.

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Automating your accounts payable process prevents you from paying the same invoice twice. Modern AI systems can flag anomalies and exceptions, enabling you to process invoices efficiently and accurately.

#7. Follow a Streamlined Invoice Approval Workflow

Most streamlined invoice approval workflows involve fundamental steps that an invoice undergoes before reaching approval and payment, making it efficient and secure. Having control over financial approvals supports compliance with your company’s internal policies and regulations, safeguarding its financial integrity.

How Envoice Can Help

As one of the more robust AP automation solutions, Envoice can help standardize invoice approvals through:

• Automated approvals: Envoice uses advanced AI for swift and transparent approvals by providing a clear audit trail, real-time status updates, and automatic delegation of approval responsibilities. This ensures fewer delays and all expenditures are reviewed and approved appropriately.
• Centralized communication: Our platform allows team members to send reminders to others and get real-time updates on all member actions, enhancing team efficiency and reducing miscommunication.

#8. Create KPIs for Measuring Accounts Payable Efficiency

Monitoring key process indicators (KPIs) is one of the best practices for AP automation. Besides providing you with key metrics, KPIs also let you check for accounts payable process improvements once they’re implemented. Below are some examples:

• Average processing costs of a single invoice
• Percent of early payment discounts received
• Invoice processing time
• Number of disputes from vendors
• Invoices per AP team member
• Error rate

#9. Set up Payment Reminders to Prevent Late Payments

Another way to improve accounts payable on your business is by scheduling calendar reminders for payment due dates. This is crucial if you have a busy accounts payable department that’s dealing with recurring and consistent payments. Automated payment reminders can be essential to maintain on-time payments and great vendor relationships.

Modern AP automation tools help you set up payment reminders that automatically sync to your device’s calendar application. Digital invoices also often come with payment reminders.

#10. Reconcile Accounts Regularly

It’s important for AP teams to have a regular schedule for account reconciliation, ensuring that all books match at the end of the day. This helps you flag issues and discrepancies that can be brought up in the future, including in external or internal accounts payable audits. To learn more, you can read our guide on how to reconcile accounts payable.

Common Drawbacks in the Accounts Payable Process

One of the most common drawbacks in various AP processes include:

Slow Processing

Accounts payable systems that rely on a paper-based, manual process lead to lengthy approval times and slow payments. Data entry and a lack of standardized protocols can cause pending financial documents to be shuffled between departments, causing delays. Falling behind in vendor payments can also cause issues like late fees, delayed delivery of goods, and lost early payment discounts.

Data Entry Errors

Human errors in data entry are among the most common problems in accounts payable. Since these mistakes are hard to locate, they can cause significant payment delays and be time-consuming. It can also affect vendor relationships and decrease financial performance.

Duplicate and Late Payments

Duplicate payments happen when an invoice is paid more than once. It can be caused by poor cost allocation, data entry mistakes, and failure to do two-way matching. Unnecessary cash outflows can also result in financial losses for your business.

In addition, late payments are caused by poor AP processes, missing invoices, and failed payment scheduling. It can result in late fees, damaged supplier relationships, and poor cash flow.

Unauthorized Purchases

Manual AP processes and inefficient administrator controls can lead to inappropriate purchases. It can happen in situations like unauthorized business credit card use, payment on fraudulent invoices, and successful purchases without an approved purchase order.

Final Thoughts

Improving the accounts payable processes for your business is tedious work. However, it can provide tremendous benefits, such as robust cash flow management, positive vendor relationships, and a better overall financial status. Eliminating manual processes, standardizing your AP system, and going paperless are ways to enhance your company’s accounts payable system.

In addition, using AP automation software, like Envoice, can help boost your accounts payable tasks. It offers automation tools that help increase productivity by automating repetitive processes, such as manual data entry. It can also facilitate multi-level approvals with real-status updates, ensuring that expenditures are approved efficiently.

Streamline your approval process today with Envoice. Enhance transparency and control over your finances with our robust approval features. Contact us now to implement secure approval workflows in your company!