As Bob Dylan once sang, “The Times, They are a-Changin’,” and this continues to ring true for society, technology, and everything in between. It’s no secret that businesses are looking for ways to cut costs, increase efficiency, and boost output to get ahead of the competition. That’s become a broken record that drones on and on.
That said, in Accounts Payable, Dylan’s song could very well be the department’s anthem for its array of constant changes and generational gaps in development. Despite technology offering opportunities for progress, here we are, still entering numbers into an Excel spreadsheet and printing out reports.Let’s be real here: we’re not in 2004 anymore. In spreadsheets, human error is rife, which causes mistakes and forgotten deadlines. Your vendors feel neglected from the lack of interaction, and suddenly you’re 2 weeks behind on invoices. How do you dig yourself out of this ongoing process?
With innovations in automation, you can see incremental leaps in your employees’ productivity, with an increased ROI to boot! If you’re interested in getting out of the Accounting Stone Age, let’s explore how you can implement actionable changes and get paid faster:
#1: Identify Areas of Improvement
How can you fix what you have if you don’t know what the current state of your AP department is? Even if you don’t have long-standing performance stats (or the KPIs you’re looking for), you should list everything out from last year, or even last quarter.
Consider the following as starting points for improvement:
- Accounts Payable Turnover - How many times you pay off suppliers (keep in mind that, even if this number is high, that it’s not necessarily a good thing)
- Days Payable Outstanding - Number of days it takes the AP department to pay off suppliers/vendors (get an average, and see where you’d like to end up – this can help you see where resources are being allocated)
No one’s perfect – every business has areas that need TLC. Don’t be afraid to peel back the layers of your business and see what’s actually working, rather than taking it at face value and assuming that “everything’s okay.” Chances are, you’ve left something unturned. Find those sore spots that need work, because that’s your ammunition to show that things could, in fact, be much better.
#2: Eliminate Manual, Paper-Driven Processes
“Two-thirds of companies spend between 1 and 8 hours per week resolving AP processing issues.”
-PayStream’s 2016 Invoice Workflow Automation Report
Management may think their current paper-based process is working, but it’s akin to saying a horse and carriage works well on today’s interstates. You have potential to push the gas pedal to much faster speeds. No one should be manually entering data and crunching numbers – there’s software that can do that for you.
With AP process automation, you can digitize all of your invoices, lower processing costs, and ensure that no payment goes unresolved. This secures vendor relationships and improves day-to-day tasks, so your accounting department can zoom out and focus on what matters: balancing the books and serving as a trusted financial aid for you.
#3: Boost Vendor Communication
Your customers and vendors are, quite literally, the wheels that turn to bring your business success, and your AP department plays a key role in maintaining and fostering relationships with vendors you exchange payments with. By automating data entry tasks, your staff will have more time to streamline communication with vendors and establish an ongoing rapport.
Consider reaching out 5 days before a payment is due as a reminder (you can set up automated emails to go out to your vendors), and spend the extra time not in “get s%&t done” mode, but instead looking at numbers and making sure everything’s reconciled properly.
The Accounts Payable process is tricky, and it requires attention to detail, but the human element of business should remain a top priority.
#4: Construct a Standardized Accounts Payable Process
All of your efforts compiling data and evaluating your AP department will be for naught if you don’t simplify processes with workflow automation. This is a pivotal step where you break down every task that happens – approving an invoice and processing payments, for example – and establish what the definition of ready is for each document, as well as where it should go in each step of the process.
From start to finish, you should complete tasks the same way, every time.
Take this for an example for the entire AP process:
Step 1: A bill comes in. If it’s a paper bill, Richard scans it into an AP automation system and it’s auto-indexed to that client; if digital, Richard is sent an automated notification
Step 2: He processes the invoices for that day and routes them to Amy, the head of the department for approval – Amy is automatically notified with the same method
Step 4: She approves the invoice, and everything’s recorded within their document management software
Step 5: Richard compiles all the necessary AP liabilities and sends them out for payment, since the system makes sure he’s aware of what’s due
#5: Keep a Pulse on Your Finances
While it may be nice to “set it and forget it,” finances should always be kept up to date with the CEO. A systematic approach that provides access to reports is a necessary “CYA,” and it will inform the meetings you hold to discuss the current state of the books.
Your AP software makes it easy to pull reports of what happened and when, in terms of invoices going out, credits being paid, and taxes being filed. The easy auditability undoubtedly makes recordkeeping painless, and it helps keep everyone informed in the AP department and beyond.
The times are certainly a-changing, and it’s time your AP process does, too. Take a look at how AP automation can save your company hours of time and earn you a considerable ROI within a year or less!