Mastering the Art of AP Management: A Field Guide

Mastering the Art of AP Management: A Field Guide

Sometimes, the challenges of managing accounts payable might seem oversized for the output, but as finance professionals very well know, accounts payable is the unsung hero and backbone of operational success.

After all, accounts payable isn’t just about matching purchase orders, receipt reports, and invoices to pay bills. (If AP were simple, articles like this wouldn’t exist.) So often, accounts payable work winds up being less about accounting and more about navigating sometimes-complex company politics that dictate when payment can go out to vendors, or chasing approvals, with AP specialists winding up wishing it were easier to effect change.

That said, there is an easier path. Join us as we discuss how to push for new AP management tools, manage through the change to AP automation, and discover secrets to hitting critical business outcomes.

Recognizing Problems and Pushing for New AP Management Tools

Recognizing Problems and Pushing for New AP Management Tools

Any number of different problems can befall accounts payable management in the course of a given day. Awareness can make all the difference for surmounting these problems, as can better AP tools.

5 Common Accounts Payable Management Problems

Problems can arise at every stage throughout the procure-to-pay (P2P) process including where accounts payable becomes involved, which is typically from the time an invoice is received to post-payment and throughout audits. These problems include:

  • Delayed Payment: In a perfect world, funds would be available every time an accounts payable clerk entered an invoice into a system, allowing for quick and easy payment of invoices. If only it were so easy. But payment often gets delayed, both unintentionally though long invoice processing times and intentionally through deliberate waits to pay vendors for the sake of controlling cash flow.
  • Missed Early Payment Discounts: Companies generally get one of two invoice types: those payable upon receipt and those with payment terms, often 30, 60, or 90 days. The invoices with terms also come with small discounts, generally a few percentage points, that are attainable if the invoice is paid soon enough. For vendors, they can get their money quicker and spend less time chasing delinquent payments. Meanwhile, companies that process lots of invoices can start to see early payment savings multiply.
  • Fraud: Corrupt accounts payable employees can plague companies in both the public and private sector. But AP fraud occurs in other ways, too.

A Canadian city, Saskatoon discovered in August 2019 that it had lost $1.04 million to an account of someone posing as a construction employee. With the help of an external auditor, the city launched a subsequent investigation of the city’s accounts payable division.

“The investigation determined that there was no malicious intent by any city employee,” the report noted, according to a local newspaper, the Star-Phoenix. “However, the team did determine that the fraud was due to systemic failure primarily related to a lack of appropriate procedures or guidelines for employees in this area of the administration to follow.”

Meanwhile, officials in one New Mexico county acknowledged losing $447K, according to the Albuquerque Journal in February 2020, after scammers accessed a list of county vendors online, created a phony bank account, and submitted Automated Clearing House billing information that got the county to wire money.

  • Document Matching: In order to guard against fraud, accounts payable departments can employ a range of strategies, including three-way matching wherein purchase orders and receipt reports are matched with an invoice to prove that it is valid. However, done manually, this process can be mind-numbingly tedious and time-consuming.
  • Data Entry Mistakes: Sometimes, too, it doesn’t take fraud for accounts payable work to go sideways. Around 90 percent of spreadsheets contain errors, according to one study. One major reason for this: Accounts payable specialists often detest manual data entry and spend as little time on it as they can. Haste, as the saying goes, makes waste.

How to Push for Tools for Better AP Management

Thankfully, a wide range of tools and strategies can make for better AP management. These can include simplifying AP processes, reducing the involvement of senior company officials beyond verification signatures, and revisiting terms with vendors. Perhaps the best tool, though, is an end-to-end accounts payable automation system with payment flexibility, which can virtually solve many of the problems that plague accounting departments, from data entry to three-way matching to fraud monitoring — all the while providing the ability to pay by ACH, checks, or pay any way outside the system.

The question becomes how to push for tools that allow for better AP management. Companies can be reluctant to embrace change; they’ll stick to the internal status-quo, however illogical, part of the reason why AP remains paper-based for so many companies. But it doesn’t have to be this way. Perhaps the best way to get reluctant higher-ups onboard is to show them the value of AP automation: the quick implementation process, seamless integrations, and short return on investment.

Next, we’ll explore how to manage through the change.

Managing Through the Change to AP Automation

Managing Through the Change to AP Automation

It’d be great if businesses could shut down for however long they need to get a new accounts payable system up and running. Business (and life) rarely work this way, though. Managing change is like fixing the plane while flying it, where we work in both the present and towards the future. Here are some tips and strategies for managing through the change to AP automation.

Transition Challenges to Expect

Maybe the biggest challenge to await anyone overseeing a revamp of their accounts payable operations and software isn’t technological or financial. It’s not about allocating funds for systems, which are becoming more affordable by the year, particularly with the amount they can save businesses overtime. It’s not about having to do a massive internal build, as SaaS solutions like Stampli make accounts payable software ready to go from Day 1.

No, arguably the biggest transition challenge to anticipate when implementing new accounts payable software and AP management has to do with the employees who will work with it. However arcane the old accounting system or practices are, it’s the way things have been done, perhaps for a long time, at a company. Even if a new system will work dramatically better, it can be hard getting management and some employees to see the light.

Just look at how difficult it’s been for some businesses to get their sales reps to use Salesforce. “Sales people don’t like using it because they don’t see how using the system benefits them personally,” one director explained. So it can be with implementing new accounts payable software and advocating for better AP management.

Thus, it’s wise for accounting management to be armed with a wide range of strategies to ensure a smooth transition.

10 Tips for Ensuring a Smooth Transition to AP Automation

Stressed about how to manage through the change to an AP automation system? Here are 10 things to consider, and in the proper order, starting with four things before signing a contract.

  • Opt for SaaS over an expensive on-premise build: It used to be that companies that managed accounts payable with technology did so by developing proprietary systems which required intensive upkeep from internal IT staff, and due to SaaS cloud computing systems, became quickly outdated. Software-as-a-service has relegated those days to the dustbin of business history. Today, the next great system for a company lives in the cloud, waiting to be easily deployed.
  • Find the right vendor: Better AP management can be as much about finding the right solution as it can be about finding the right vendor, at least for your company. A good accounts payable vendor can break down the intricacies of their system, making it easy to understand, including how their system will or will not work with your processes and systems.
  • Don’t get locked into a long-term contract: SaaS solutions can and should be commit-to-it-as-you-go services. Any vendor pressuring a company into signing a long-term deal to use an accounts payable automation system is waving a huge red flag. Identify the systems that offer month-to-month subscriptions, because if they do, that likely means they are confident in their product given the fact they aren’t locking you in.

Next, do these three things during the implementation:

  • Work with your vendor to coordinate if IT will need to be involved: Service from your vendor shouldn’t stop as soon as they agree to sell your company an accounts payable automation solution. The right vendor will work a company’s IT staff on what will need to happen to get the new system implemented. Best of breed systems require absolutely no IT involvement, but you can fill them in with the details or invite IT to calls if necessary.
10 Tips for Ensuring a Smooth Transition to AP Automation
  • Keep your AP staff in the loop: Any accounts payable clerk who will use the new system should be kept aware on how soon they will be using the new AP system and how quickly things will change. As they will be living in the system day-to-day, it’s recommended to invite AP staff to the product demo calls.
  • Lean on the vendor for training support: Ensure AP automation vendors are available around the clock for hand-holding support and training no matter if it’s a new or existing user. At minimum, consider vendors with a help center with self-serve articles for how-to information and troubleshooting tips, but a dedicated customer success team to support your every need is still second to none.

Finally, here are three things to do once the new AP management system is up and running.

  • Be open to feedback: Getting to know a new AP management system for a company that’s accustomed to paper trays in accounting can be a sensitive subject, both for everyday workers and at the management-level who champion the change. Avoid being emotionally invested in feedback, but empathetic and an open ear to understanding their feedback. Reassure them the proper steps were taken to ensure their day-to-day will be easier with AP automation.
  • Be patient with staff: Some star employees will grasp the new system immediately. Most should be able to competently use it within a reasonable amount of time — if they don’t, that says more about the solution than the workforce, generally. Regardless, be patient as your team learns the new accounts payable system.
  • Be patient with yourself: A new accounts payable system is a powerful tool, capable of various tasks from using optical character recognition to scan invoices to using machine learning to analyze thousands of invoices for trends and possible fraud. Chances are, you won’t totally leverage the new system immediately. And that’s perfectly okay. It’ll still likely be a far better state of affairs for your AP operations than what was in place before.

How Change Management Factors into Good AP Automation

In a survey of over 500 executives by Forbes Insights and PMI, roughly 85 percent of respondents identified change management as being critical to their success.

“No longer can workers simply react to change in a highly competitive marketplace,” an article about the survey noted. “Rather, they must prepare for seismic shifts in the way they lead teams, manage projects and address ambiguities.”

Benefits of change management can include projects being more likely to finish on-budget and on-schedule, with higher employee morale.

Ongoing Strategies to Hit Critical AP Business Outcomes

Ongoing Strategies to Hit Critical AP Business Outcomes

Opting for a new AP automation system is of course a great first step in enacting better AP management and enjoying smoother accounting operations, on both the payables and receivables realms. But there’s more work to be done thereafter, with other recommended changes able to be more policy and procedure-based.

Here are a few things for accounting directors to do so that they hit critical business outcomes.

Communicate Better With Vendors

Checking how quickly and in what way vendors prefer payment for their goods and services can make accounts payable easier. It’s also possible to negotiate early payment discounts for those vendors who haven’t thought to offer them. Incentivize this by communicating that your company can pay bills sooner if it makes sense from a cash flow standpoint.

Pay Bills as Soon as Possible

When manual, invoice management processes can take upwards of a month for a single invoice, and it’s not always because companies lack automated systems that can quickly move through them. Often, slow remittance on invoices has to do with company culture that has to do with delaying payment as long as possible.

While it can be an understandable state of affairs, particularly in tough economic times, moving slowly on getting vendors paid can breed mistrust among them and cause companies to lose out on early payment discounts.

There are exceptions to this, of course. For example,if a company lacks the cash or credit to make early payment. “One overdraft fee could be greater than the early payment discount,” as one accountant notes.

Standardize Payment Practices Among Vendors

To create a premier brand reputation, there shouldn’t be differing standards for payments depending on who the vendor is. Giving the same treatment to every vendor and contractor ensures professionalism and also ensures that important payment deadlines don’t get missed. All the while, it builds brand credibility and reputation.

When in Doubt, Simplify

Accounts payable needn’t be overly complex. At the end of the day, it’s about paying bills on-time and keeping the lights on for a business. Better AP management through strategies like automation is a way to save time, money, and stress. If these things aren’t happening once a new solution is in place, something’s wrong.

Don’t procrastinate, automate. Discover Stampli’s advantage today.

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