While it’s easy to get motivated for accounts receivable, because that’s where the incoming revenue is, it’s not as fun to wrangle with the accounts payable process. However, AP is just as critical to the business, as it is the heart of managing relationships with vendors, service providers and contractors. It is also more prone to fraud than AR since crooked staff could create bogus invoices and get the firm to pay them.
Aside from fraud, the payables process can also suffer when not properly managed, and when using antiquated methods of keeping up with incoming bills. Here are several tips to help your firm better manage its payables processes, which can save time, reduce errors, prevent fraud, save money and even improve relationships with vendors and contractors.
Automate Your AP
The most effective way to improve your payables process is to implement a cloud-based accounting and firm management system that automates AP, while also integrating with other parts of the business. This way, when an invoice is received in paper format, it can be digitized and entered into the system, including with an image of the original. Digital invoices received can be automatically imported into the accounting and AP function.
Systems like BQE Core include smart processes that make it easy for management to drill down into vendor relationship records, invoice details, POs, which staff approved payments, payment histories, and other details, including whether the product, expense or service being paid for is related to a client so that the payment and details can be added to the firm’s invoice to that client. AI-enhanced systems like BQE also provide strong controls, including the ability to require approvals of invoices prior to payment, and setting of payment preferences, including when the bill will be paid automatically.
This should be part of the automation process because nothing derails an automated process like having to print something on paper. All incoming bills should be converted to electronic format so they can be more easily tracked, managed and audited. And as much as is possible, all payments should be made electronically through ACH, credit card, wire transfer or other processes. This also adds to the ability to track and reconcile payments and having payment functions performable online leads to a greater ability to...
Be Remote Ready
The pandemic taught firms and other businesses many important lessons about being prepared for business interruption, especially the need for remote access to firm technologies. While most firms were either somewhat prepared to go remote or were able to get up and running with some assistance, due to the use of cloud technologies already in place in their practices. However, core functions like AP and AR were not as easily converted to remote roles. This is because non-digital (mailed) client payments (AR) were sent to the physical office location. And check printing functions, particularly for MICR checks with security features like watermarks and heat-sensing images, generally were also only performed in the office and sometimes required more than one physical signature.
Moving to remote ready means reinforcing online security protocols and best practices, along with at least two staff members signing off on all payments. But other tips in this article can also reduce or eliminate most of the manual check printing and AP processes.
Have Strong Controls
Having an automated and paperless AP process can greatly reduce common problems with AP, including errors in data entry, lost bills, and slow processing. It can also help reduce fraud, but only when accompanied by strong controls in the workflow. While you likely trust your staff (or you wouldn’t have hired them), unfortunately sometimes a bad apple can slip into the bunch, or normally good people can fall into an addiction or compulsive behavior that leads to theft.
Save Money, Pay Early
Some vendors may offer discounts on their invoices if you pay early. For instance, most bills are due 30 or 45 days from the issue date of the invoice. If there is an early payment discount, the most common terms to look for on the invoice are 2%/10, which would mean that if you pay within 10 days, you can receive a 2%, or 2%/15, reflecting a 2% discount if paid within 15 days. Some vendors will offer discounts ranging from 1% to 5% or more.
Saving money is obviously ideal, as is avoiding penalties for late payments. The key to this is keeping up with deadlines, so having good alerts and reminders of when payables are due is important. As with almost all AP processes, finding a way to automate due-date management and reminders can be valuable, so check out the automated cloud management system from BQE.
Standardize Your Processes
Even if you make no other changes to your AP process, if you can ensure that there is a standardized way in which incoming invoices are handled, every step of the way, then you will have made progress. As soon as invoices and expenses come in, whether by mail, by email, by portal, or by expense report, they should be digitally stored, with reminders set up for the AP staff to ensure that they are paid, and careful ongoing review of aging reports, and periodic verification of vendor contact information.
And before a check or payment is approved, there should be a process to note who submitted the invoice, which two people (at least) approved payment and any associated vendor notes. Only then should the check or payment be authorized.
If all this sounds tedious, it’s because it is! Even though a standardized process can help in the management of payables, and can reduce error and increase controls, when the processes are still manual they are prone to mistakes and problems. So, join the 21st century and automate your accounts payable with a cloud-based, artificial intelligence-enabled, paperless system that streamlines everything.