Best strategies for optimizing accounts payable in 2021

Does your business have a process in place for dealing with vendor invoices? Is your accounts payable process as efficient as it could be? As a vital component of cash flow management, it’s a process worth optimizing. Here are a few common accounts payable problems that arise within a business, along with strategies to improve your workflow.

Problems with accounts payable

When accounts payable processes are running smoothly, the department hums quietly in the background of your business with little fuss. Suppliers are paid in a timely manner and invoices are archived. But when problems crop up, it can take a major toll on your cash flow.

Common issues and inefficiencies include:

• Paper invoicing takes too long to process

• Late payments risk vendor relationships

• Supplier payment terms are too costly

• Data falls through the cracks without verification

Accounts payable optimization strategies

Accounts payable automation cuts down on the busywork and frees up working capital for a smoother, more efficient cash flow. Here are the best strategies to optimize your processes.

1. Automate accounts payable procedures.

Digitizing your accounts payable process is one of the simplest ways to optimize the department. With automation, you can deliver faster payments with no need for manual processing. This in turn leads to a healthier cash flow, with all cash movement tracked automatically. Accounts payable automation also generates financial reports for easier analysis, while reducing processing costs.

2. Set up a supplier portal.

You can make accounts payable procedures easier for your suppliers as well by setting up a central portal. This type of digital system allows suppliers to submit and track invoices, manage deliveries and verify that orders have been received. By giving access to individuals beyond the accounts payable department, it also creates an additional layer of oversight for faster processing times.

3. Use object character recognition.

Businesses that need to digitize paperwork often find that the process takes far longer than expected. After scanning an image of each document, the data included must still be manually entered into your database. Optimize this process with object character recognition (OCR), a process that both scans and retrieves document data. The data is automatically entered into your database, reducing manual errors and processing times.

4. Create logical workflows.

While accounts payable automation takes most of the guesswork out of payment processing, it’s still important to agree on workflows. Creating workflows ensures that the department knows how to deal with different types of payment situations. Here are a few of the details that should be determined in your workflows:

• How to share and input data

• What to do when receiving an invoice

• The process for invoice approval

• The process for late supplier delivery

• What to do if suppliers aren’t meeting contract terms

• Payment terms and discounts

With established processes in place for managing these types of payment issues, businesses can prevent slowdowns in working capital due to processing errors and delays. Furthermore, workflows should be reviewed periodically to ensure they still make sense as your business grows.

5. Use real-time financial reporting.

As invoices are submitted and payments processed, they need to make their way into the business’s financial statements. Look for an accounts payable automation solution that offers a real-time reporting feature. The best software automatically updates accounts payable balances to reflect the current status. They’ll also validate invoices and ensure purchase orders are accurate.

6. When in doubt, outsource.

While automation takes most of the guesswork out of these optimization strategies, it’s not always possible for smaller businesses to set up an in-house portal. Fortunately, there are many third-party accounts payable automation solutions to choose from. With outsourcing, you can get assistance for everything from creating workflows to digitizing financial records.

By following a few of these strategies, you’ll be able to streamline your accounts payable procedures for optimal cash flow.

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.