{"id":17581,"date":"2023-01-09T07:45:43","date_gmt":"2023-01-09T07:45:43","guid":{"rendered":"https:\/\/envoice.eu\/?p=17581"},"modified":"2024-01-31T12:00:31","modified_gmt":"2024-01-31T12:00:31","slug":"accounts-payable-management-how-to-do-it-effectively","status":"publish","type":"post","link":"https:\/\/envoice.eu\/en\/blog\/accounts-payable-management-how-to-do-it-effectively\/","title":{"rendered":"Accounts Payable Management – How to Do it Effectively"},"content":{"rendered":"

Introduction<\/span><\/h2>\n

As a qualified accountant, you spent years studying to practice your craft. Finally, you achieved your dream.\u00a0 You have your own accounting firm and work hard to keep your client’s financial records organized and accurate.\u00a0<\/span><\/p>\n

But lately, no matter how hard you and your team work, the accounts payable process<\/a> is challenging your resources. You are bombarded with invoice processing, verification, duplicate invoice, errors and payments.\u00a0\u00a0<\/span><\/p>\n

Managing accounts payable feels like a constant cycle of worry and stress, straining your team\u2019s resources.\u00a0 You\u2019re left wondering how you can break free from this cycle without letting go of customers.<\/span><\/p>\n

But there is a solution.<\/span><\/i><\/p>\n

With automation tools and a centralized platform, you can eliminate the need for manual data entry,<\/strong> reduce errors, and gain greater visibility and control. Keep reading, and within a short period of time, you can achieve peace of mind and efficiency by using a fully automated AP system.<\/span><\/p>\n

Typical Accounts Management Process<\/span><\/h2>\n

A typical accounts payable process has the following steps:\u00a0<\/span><\/p>\n

    \n
  1. Receiving and verifying invoices from vendors and suppliers<\/span><\/li>\n
  2. Entering invoices into a accounts payable management system<\/span><\/li>\n
  3. Approval of invoices after verification against a purchase order<\/span><\/li>\n
  4. Issuing payments to vendors and suppliers<\/span><\/li>\n
  5. Dealing with errors and queries generated by the process<\/span><\/li>\n<\/ol>\n

    As much as 50% of businesses report that the AP Process is handled manually, resulting in increased workload and high error rates. <\/span>[1]<\/span><\/p>\n

    Effective accounts payable management includes understanding the points at which the manual process lets you down. As an accountant, you have first-hand experience with the pitfalls associated with these points.\u00a0 Examining them will give you insight into <\/span>the value of automating the entire accounts payable process.<\/b><\/p>\n

    \"An
    Source: Pexels<\/figcaption><\/figure>\n

    Pain Points in the Accounts Payable Process<\/span><\/h2>\n

    –<\/span> Manual data entry<\/span><\/h3>\n

    This function is usually assigned to entry-level accounting clerks or data capturers.\u00a0 Doing this for 8 hours a day takes time and serious concentration.\u00a0 It is also the most disliked function of the accounts payable team, according to surveys conducted by Sage.\u00a0<\/span><\/p>\n

    The labor costs associated with function can mount up, as the typical solution to solving a growing number of invoices is also to increase the number of clerks.\u00a0 This has not been the most effective solution to date.\u00a0 <\/span>The cost of an AP clerk to process invoices is, on average, $9-12 per invoice. With automation, you can reduce this to $3 an invoice<\/b>.<\/span><\/p>\n

    –<\/span> Error-prone processes<\/span><\/h3>\n

    When a process relies on manual input of information and physical movement of data from team member to team member, it is bound to increase errors and you lose the visibility and tracking that you need over the accounts payable system.<\/span><\/p>\n

    By using an automation system, you can <\/span>reduce errors by\u00a0 99%<\/b><\/a>.\u00a0<\/span><\/p>\n

    –<\/span> Late and duplicate payments<\/span><\/h3>\n

    Timely payments in the process are key to taking advantage of early payment discounts and avoiding late penalties.\u00a0 The use of accounting software has improved the processing of invoices, but not to the degree required by modern businesses.\u00a0\u00a0<\/span><\/p>\n

    Managing company cash flow is a desired objective in outsourcing the accounts payable process to any accounting firm.\u00a0 The cash flow can be severely affected by duplicate payments. As we will discover shortly, this is the <\/span>most critical reason to automate your AP process because it cuts down late and duplicate payments to zero!<\/b><\/p>\n

    –<\/span> Inefficient approval workflow<\/span><\/h3>\n

    Managing payments by having only approved authorisers is a best practice that has saved companies millions. However, this is also the process that causes the most bottlenecks.\u00a0 When the paperwork is left on a desk or in an in-tray, there is a chance of payments being delayed when the person becomes busy.\u00a0\u00a0<\/span><\/p>\n

    Follow-up involves returning to the person many times a day to check whether the authorizations have been completed.\u00a0 This is the perfect storm for oversight of payments.\u00a0<\/span><\/p>\n

    AP automation will set up an <\/span>automatic approval process<\/b> in the system.\u00a0 This means each person working on an invoice will only receive it when it needs action.\u00a0 Not only that, everyone can see via the system \u2018<\/span>Dashboard\u2019 <\/b>where the bottleneck is and prompts can be made to move the process along.\u00a0<\/span><\/p>\n

    –<\/span> Fraud and Audit Trails<\/span><\/h3>\n

    Manual invoice processes are easily manipulated and prone to errors and also fraud. In fact, it can take up to 14 months for a company with a large volume of monthly invoices to recognize a fraudulent invoice.<\/span><\/p>\n

    AP automation will track every touch point of the data and who handled the information, providing a <\/span>comprehensive view of transactions<\/b> and the actions taken to finalize them.\u00a0 Reports can be generated for <\/span>audit trails<\/b> and investigations.\u00a0<\/span><\/p>\n

    \"A
    Source: Pexels<\/figcaption><\/figure>\n

    –<\/span> Dispute resolution<\/span><\/h3>\n

    An effective payable management system requires allocating resources to track and finalize any disputes that arise.\u00a0 Answering vendor queries has its own frustrations and accounts payable staff often wish they could cut out the endless and often unnecessary queries.\u00a0 They recognize that they need a way for vendors to create appropriate invoices and also be able to track their own payments.<\/span><\/p>\n

    An AP automation system can provide a <\/span>supplier portal<\/b> that will allow vendor invoices to be tracked and changes to vendor contracts to be made online. The payoffs are:<\/span><\/p>\n