5 Useful Tips for Effective Accounts Payable Management

Accounts payable operations are one of the most critical operations in any company. You have to make sure that your payments are made accurately and on time.

The volume and scope of managing payments can be vast, requiring you to manage and process plenty of invoices. There is a way to simplify and streamline the complex accounts payable processes that you have to manage on a day-to-day basis.

Top 5 Accounts Payable Management Tips

Here are five useful tips which can help you manage your accounts payable operations easily and successfully.

1. Make the Accounts Payable Process Simple

   It is easy to simplify the accounts payable process by taking some simple measures, such as -

   • Reducing the number of check runs to two in a month
   • Asking the respective department heads to approve the invoices and keeping the invoice backup ready before commencing the check run process
   • Informing the accounts payable team in advance of the cash disbursement limit (if any) so that the important bills are prioritized to be paid first
   • Enabling your accounts payable staff to make some non-critical payment decisions such as making partial payments or delaying the payment to a vendor who can wait for another month

2. Leverage Technology

   With the advent of technology, a lot of time-consuming manual tasks in the accounts payable function have become simple. By using such technology, many tasks can then be easily streamlined, such as -

   • Reduce simple errors like paying the wrong amount of money for an invoice or entering the wrong check number
   • Set up automated modules for accounts payable so that all your payment transactions take place smoothly
   • Using well-configured, high-quality accounting software for managing all the accounts payable transactions
   • Make sure your automated accounting system has terms dedicated for each vendor, such as Net 60, Net 40, etc. These terms are usually given by the vendors and are included in the final invoice
   • Run reports regularly so that you know what is in store for the next few days. There are chances that you could have missed a large action item coming your way had you done it the manual way. However, technology and automation help you run checks at regular intervals and alert you of any large check coming your way
   • Using laser-printed checks can help you easily update your accounts payable system and identify the paid and unpaid invoices, with the relevant check numbers on them

3. Deal with Accounts Payable Fraud

   There could be instances of fraud in the vastly complex accounts payable processes that a company has to deal with. However, there are ways in which this can be reduced to a considerable extent, such as -

   • Many times, "dummy" vendors are created in an accounts payable system. Payments are released to such fake vendors, who would not have provided any services to your company. To evade such a situation, make sure you set up system parameters in place which do not enable creation of new vendors without proper due diligence
   • If at all a new vendor has to be created in the system, then it should be done by giving full proof of the vendor's existence and the services provided by the vendor to your company
   • Make sure there are multiple levels of approval required to set up a new vendor in the accounts payable system. This will help eliminate the chances of fraud

4. Negotiate Vendor Terms

   At times, there is a need to revisit the payment terms for your vendors. This happens in scenarios when there is an emergency and you are unable to make payments to your vendors on time. Therefore, please ensure the following -

   • You negotiate with your vendors and reschedule the payment to another month in the future
   • If you have been dealing with your vendors for a long time, you build a trust factor with them, wherein they know that you will release their payments for sure, even if there is a delay. Negotiating with them and asking for some more time helps you ensure that your accounts payable function does not get affected adversely

5. Relook at the Role of the Chief Financial Officer (CFO)

   The CFO should not be expected to check the authenticity of an invoice. Therefore, do keep these steps in mind -

   • CFOs are busy people who may not always have the time to assemble all the checks and verify their accuracy
   • By automating your accounts payable processes, you can reduce the work of the CFO to merely checking the invoice amounts and signing for release of payments
   • Your accounts payable team should be able to leverage technology and make sure all the invoices which need to be cleared are assembled, as well as the checks for each of the invoices are printed and approved by the department heads, before being presented to the CFO for signature

9 Practical Ways to Streamline Accounts Payable Management

You must take a more strategic approach in simplifying accounts payable process requirements. Therefore, taking the following measures can help -

1. Centralize the task of processing accounts payable requests
2. Opt for a paperless system for accounts payable management. Also, automate every process with minimal manual intervention
3. Incorporate the cloud into your day to day activities. Most companies are opting to move their accounts payable systems to the cloud. As per a recent study by Goldman Sachs, the total spend on cloud computing infrastructure and platforms will grow at a 30% compound annual rate from 2013 through 2018
4. Make sure you follow robust practices in house so that accounts payable management is foolproof
5. Set up dedicated portals for each vendor so that their payments are clearly visible to them and it is easy for you to manage the payments for multiple vendors, without mixing them up
6. Create more workflows and approval points for a payment to be made. This helps reduce frauds and increase transparency
7. Get an analytics support system within the accounts payable management system which can provide real-time insights for informed decision-making
8. Know your suppliers and vendors well and meet them frequently
9. Record everything accurately with the correct time stamp

Outsource Accounts Payable Management to O2I

At O2I, our accounts payable services can help you streamline your payments. We follow proven accounts payable best practices to ensure you do not miss out on crucial payments. We believe in optimizing the payables in such a manner that you do not have to spend time on making payments to vendors, and can focus on more critical business operations. Besides, we also provide accounts payable management tips to our clients at regular intervals.

Contact us to outsource bespoke finance and accounting services to Outsource2india.