2 min read
Reliable accounting practices are the cornerstone of long-term success in businesses, as well as being essential to meeting short-term goals. Many accountants have started to re-examine their internal accounting processes to see whether their management of the end to end process of accounts payable is as efficient as it could be. In this post, we’ll explain what is end to end process of accounts payable and identify some areas that could be holding you back.
What is end to end process of accounts payable?
Before you can increase efficiencies in your end to end process of accounts payable, you need to understand the accounts payable end to end process flow.
The accounts payable process includes a series of essential accounting steps that are needed to complete a purchase when an order is placed. There are three stages to the end to end process of accounts payable, which are as follows:
End to end accounts payable work commences the moment a business creates a purchase order (PO) to submit to a vendor. The PO should include several pieces of information, including the quantities of items or materials required, types of services to be used, the acknowledged prices, and the dates for fulfilment of the order. The PO is a contract between your business and a vendor that’s legally binding.
The receipt stage of the end to end process of accounts payable refers to the point at which companies receive their goods and services. Receipt solidifies the payment terms and deadlines for internal approval. On receipt of purchased items, the receiving company should make out a receiving report to guarantee all the requested items have arrived and confirm that they’re in suitable condition. Any damaged or missing goods will require a follow up with a demand for either replacements or credit.
The last stage of the end to end process of accounts payable is when the vendor’s invoice is received, which generally happens a short time after the goods have been delivered. On the invoice, the vendor lists the items they have delivered, the price per unit and the total cost. All this information should go into various parts of the AP system. But before the invoice is paid, the following step has to take place: the POs, receiving report and invoices have to be matched together.
This three-way-match isn’t automatic. If it was, it could lead to overpayments or even exposure to fraud. That’s why this stage of the accounts payable end to end process flow is one of the most important. If there are any deviations in the matching process, the accounts team needs to consider any exceptions generated during the receiving phase. Then, they need to decide whether further investigation or reconciliations are needed.
Once a three-way-match is approved, the final invoice amount can be verified for payment.
Problems with the end to end process of accounts payable
The invoice stage of the accounts payable end to end process flow can be inefficient for many companies, with invoices turning up in the wrong places or duplicates being wrongly issued. Missing information on invoices is another reason the process doesn’t always run smoothly.
Even with the best intentions when it comes to tracking and procurement, things can go awry with end to end accounts payable. Inflexible or outdated payment solutions can serve to hamper supplier relationships, as can manual reporting errors.
Accounts payable process flow automation
The chief goal of an accounts payable end to end process flow is to ensure that companies only pay legitimate and accurate invoices. It’s crucial to maintain complete accuracy in order to avoid losses and problems. This is where using an AP automation solution can help. With the right AP automation software in place, it’s possible to establish seamless internal controls. With an accounting system, the chances of paying fraudulent or inaccurate invoices is minimized, and the system will ensure all invoices are accounted for.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.