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Everything You Need To Know About Accounts Payable Process

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Payable

The profitability and operations of your entire company are impacted by the accounts payable process (AP) function, which is a crucial business activity. Fundamentally speaking, it is the total sum that your company owes suppliers and vendors for the items and services that it has acquired. This sum appears as a liability on the balance sheet and affects the cash flow health of your company.

What is the procedure for accounts payable?

The AP process pays vendors and suppliers for the goods and services the company has purchased. Depending on the size and type of the organization, AP departments may do other tasks in addition to handling incoming bills and invoices. Although the complexity and duration of each phase may vary from firm to company, the AP process may be broken down into four steps. The actions are:

  • obtaining the bill
  • examining the bill
  • accept the invoice
  • paying vendors or suppliers

Why is the administration of accounts payable crucial?

Despite being classified as a back office function, accounts payable is a crucial corporate procedure. An AP department’s ability to effectively and timely manage the procure-to-pay cycle determines its effectiveness and productivity.

A properly run AP department guarantees:

  • Long-term company advantages from solid relationships with suppliers and providers
  • Delivery of goods and services that keeps the firm operating without interruption
  • No late payments, which could result in fees or other costs.
  • Tracking all payments and invoices systematically to prevent missing or double payments
  • Improved control over the company’s financial flow
  • Lower likelihood of fraud

What difficulties do accounts payable face?

However, difficulties AP departments encounter prohibit them from streamlining their procedures. Additionally, AP managers are under pressure to turn their departments from cost to profit centers while doing more with less.

The issues that AP specialists frequently encounter include:

  • Far too much paper

With 50% of all invoices received as paper documents, AP is one of the departments with the highest paper usage. Sorting, compiling, and processing paper data robs your employees of time they could use for more valuable duties.

  • Manually entering data

Data entry errors and lost documents may result from the lengthy manual input of data by AP teams from various sources and formats.

  • Arduous approval procedure 

Depending on the payment amount, there may be a number of steps and levels of approval. Most bills also require authorization from stakeholders outside of the AP department. The cycle time can lengthen, particularly if approvers need help accessing approval workflows.

  • Inadequate visibility 

The blind spot created by paper-based and manual processes makes it difficult for AP teams to monitor the company’s cash flow effectively. It is more challenging to monitor the company’s financial health and raises the danger of late payments if you need to know what stage each invoice is in.

How to make the accounts payable procedure more efficient

Several best practices help streamline the accounts payable process from beginning to end and address the problems that prevent AP teams from being effective.

 

On a single platform, centralize and automate all crucial AP documentation. This makes end-to-end AP automation possible with the capacity to gather, integrate, measure, process, store and access essential AP information.

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