Managing your accounts payable processes is extremely important to make sure your business is in good standing with your vendors and to know your company’s exact financial situation.
You may already know that accounts payable refers to the money you owe to a vendor for goods or services. However, accounts payable processes encompass far more than just invoice tracking. We are going to define other key processes involved in accounts payable processing to highlight its importance in running a financially sound business.
Receiving Invoices: The First Step
Let’s start at the beginning of accounts payable processing: what happens when you receive an invoice?
After receiving the services or goods from your vendor, they will send you an invoice with details about the agreed payment. Your AP department can hit a snag right here, as not all vendors use the same type of billing documentation.
You could be getting them electronically, by paper, in different digital formats, or even by email or fax. In fact, some of the most popular invoice resources recommend a variety of types for your business.
You can try to convince your vendors to use the same invoice format, but the specific information each one needs for their personal records will vary.
This is where automation can be helpful, as your AP department is required to manually verify the invoice information and maintain each for financial records. This process is made easier when invoices can be tracked electronically through a system that catalogs and categorizes information from any invoice format.
Invoice Approval Process: Getting Ready to Pay
Once your financial department has sorted through the potentially confusing assortment of invoice documents, the next step is to get the invoice approved. If the invoice is missing information or has errors, your company may need to send it back for corrections.
Approving a paper invoice is often a waste of time, requiring the document to be physically signed and routed throughout the department. If your invoices are digital, you can implement an AP workflow automation tool to make routing easier and far more efficient.
Digital solutions offer your employees a way to quickly route information, communicate with vendors, and pay service providers, which is one of the many ways you can save money with automation.
Get Rid of your AP Filing Cabinets
Get rid of your filed paper copies in your AP department by using software to capture data and documents like invoices, PO’s, check requests, etc… Many automation tools even capture the data from the line item detail/remittance portion of the invoice and upload the information directly into a tracking system. Since many solutions are cloud-based, that data is available immediately.
Finding information about past invoices or vendor services is simplified using this method.
AP Business Process Outsourcing
A major takeaway here is that all of your AP processes can – and should – be automated through an electronic AP automation solution. By adopting AP automation software, your company can save both time and money.
How? Accounts payable business process outsourcing reduces the risk of errors, drastically lowers the labor cost of invoice processing, and provides regularly updated financial reports and audit information. Did you know some vendors offer early payment discounts? Using automation tools may lead to lower debt by taking advantage of these offers.
AP Processes Overview
Accounts payable processes span the entire life of an invoice payment: from receiving and cataloging different invoice formats to verifying data and submitting it for approval, all the way to meticulously tracking financial data.
Maintaining immaculate financial records is important in keeping your business running smoothly and your vendors happy. Everything that goes into AP can seem overwhelming, but luckily there are plenty of resources to help your department stay on track.