Is Your Accounts Payable Workflow Driving Growth or Killing It?

Is Your Accounts Payable Workflow Driving Growth or Killing It?

The accounts payable workflow is often a necessary but tedious process rife with inefficiencies that leave companies at risk of payment errors and even fraud.

Growing and scaling your company is all but impossible when a complex AP process slows down payments and muddies your accounts.

However complex your current AP system is, revamping it might feel like a Herculean task. But an inefficient AP process isn’t just a headache; it may be restricting business growth, leaving the company open to fraud, and reducing profits.

Why Is Accounts Payable So Important for Organizations?

Maintaining a smooth accounts payable process is critical for future growth. The accounts payable process is designed to help control spending and keep your business on top of debts by ensuring invoices are paid on time and to the correct vendors.

When done well, your team looks professional to clients and potential customers and avoids late fees that can eat up profits.

There are several less obvious ways an efficient accounts payable workflow can impact a business’s success.

Prevent Overpayment

When the AP process is overly complicated or lacks checks and balances, it can result in overpayments. This leaves your business without access to critical cash flow required to pay vendors, expand marketing efforts, or even make payroll.

Whether overpayments are honest mistakes or attempts at fraud, the results are the same. In addition to reducing late fees, preventing overpayments is critical to maintaining a positive cash flow and reducing cash shortages.

Improves Credit Score

A business’ payment history indicates the likelihood that the company will successfully repay its debts. This is important to both vendors and financial institutions your business interacts with every day.

A streamlined, organized AP process reduces late payments, which can improve your creditworthiness. When it comes time to take out a business loan, open a business credit card, or find a new vendor, your credit score can make a huge difference in whether you can obtain funding and capitalize on low interest rates.

Reduces Financial Fraud Liability

AP fraud is a growing issue for businesses across the board. In 2018, 82% of organizations were victims of attempted or actual fraud, according to the AFP Payments Fraud and Control Survey. Even companies like Google and Facebook are falling victim to fraud schemes. The two companies erroneously paid $123 million to the wrong account after a scam artist duped them into sending payments to the wrong account.

When the AP process is well-organized and has a system of internal controls, then fraudsters have fewer loopholes to exploit. Reducing fraud is critical to the long term success of your business because it can result in the loss of hundreds of thousands of dollars.

Reduces Financial Fraud Liability

Maintain Positive Vendor Relationships

Businesses rely on vendors to deliver supplies on time and provide critical services. If a company misses a payment, that vendor may no longer be willing to work with you or be less willing to offer a discount on a larger order.

Keeping vendors happy can be critical to the future growth of your business. When your AP process is efficient and smooth, vendors don’t have to worry about fighting to get invoices approved and paid.

Streamlines Audit Completion

Audits aren’t fun, but they are something every company has to deal with. The accounts payable department can be vital to streamlining the audit process by maintaining organized records. This can prevent weeks or months spent slogging through physical paperwork or managing invoices from different systems. All data is stored in the same place in the same format, making the audit process more straightforward.

Increases Profitability

When your AP process is streamlined, your business pays its bills on time, which can eliminate late fees and delayed orders. It can also help you build better relationships with vendors, as mentioned above.

Positive relationships with vendors can result in discounts on future orders, which can impact profitability. Even just a small percentage off a large order can have a significant impact on your profit margin.

Additionally, a smooth AP process requires fewer people and less time to run. Lowering expenses increases profitability and allows staff to focus on tasks more closely tied to profits, such as sales or marketing.

5 Tips for Streamlining Your Accounts Payable Workflow

For many businesses, managing the accounts payable process is an overwhelming task. This is often a result of an inefficient system and a commitment to doing things “the way they have always been done.”

But, is the process hopeless? Is your business stuck with an overly complex, inefficient system? Most businesses would never accept this level of inefficiency in another department, so why should it be acceptable in AP?

Here are five ways to streamline your accounts payable workflow and increase profits at the same time.

1. Reduce Redundancies

Centralize your invoice process to one location and standardize invoices to reduce mistakes and make it easier for payments to be processed. Establish a routine and train employees to stick to the process. Question whether specific tasks are necessary and eliminate steps that bring no value to the process. Leverage technology solutions, such as AP automation, to reduce redundant steps.

2. Pay Attention to Patterns

Do you have yearly or quarterly payments that occur on a predictable schedule? Does a certain vendor generally bill on the 15th of the month? Paying attention to these patterns can help you anticipate large payments and make it easier to notice when things are amiss. For example, if a vendor is suddenly billing for three times their normal amount, then it’s time to investigate why there was a change in pattern.

3. Create a Check and Balance Process

Accounting fraud is often easy to catch; if you know where to look. But even innocent mistakes can wreak havoc on a business, costing your company thousands of dollars. A check and balance process can reduce these errors and lower your risk of fraud. Spot check payments regularly and consider separating who is responsible for writing checks and authorizing payments.

Create a Check and Balance Process

4. Delegate Tasks Where Possible

For most companies, managing the accounts payable workflow is a time-consuming task. If executives or business owners are responsible for this process, it can take time away from other responsibilities. Once the process is streamlined, offload less-critical tasks to a trusted employee, accountant, or a third-party tool. This will give critical employees more time to focus on growing the business.

5. Automate the Accounts Payable Process Where Possible

Much of the AP process is tedious; verifying vendor information, capturing invoices, checking for duplicate invoices, and PO matching. An automated accounts processing tool can reduce the amount of time and paperwork involved, allowing your AP process to run smoother and use fewer resources. All files are easy to locate, which simplifies the audit process.

Manual vs Automated Accounts Payable Workflow

For most businesses, the AP process starts with an invoice. The AP department manually gathers invoices, often sent in via email, fax, email, and even snail mail. Then they are physically handed to an AP team member, who scans or manually enters the invoice into your accounting system.

Manual vs Automated Accounts Payable Workflow

Then, the invoice must be authorized, often by multiple parties, delivery must be verified for physical goods, payment must be sent out on time, and the expense must be deducted from your business’ account.

When done manually, it is a complex, time-consuming process. An automated accounts payable tool, like Stampli, can significantly reduce errors and free up personnel to focus on revenue-generating tasks.

Here are several additional benefits to using an automated AP tool.

Reduce Paperwork: When the AP process is handled manually, it requires a great deal of paperwork. An automated system handles everything electronically, which decreases the chances of invoices getting misplaced, and reduces errors from manual data entry.

Automated Invoice Capturing: An automated AP system can capture invoices from email, then uses AI machine learning to extract data and input codes. All your invoices are stored in one place for 7 years and in the same format.

Organize Communications: Getting approval for payments helps many companies reduce fraud or mispayments. However, gaining approval often requires back and forth communication that can take days. An automated AP solution stores all communications in one place–on the invoice. Centralizing communications makes it easier for anyone to see the status of an invoice and reduces approval times by sending out reminders to specific users so they can approve or add additional information as needed.

Detect Fraud: An automated AP solution can see patterns humans might miss. They can review and confirm vendor names and account numbers, detect duplicate invoices, and detect other red flags that may indicate fraud. Because the system learns how you work, it becomes better equipped to detect trends over time.

Accounts Payable Automation Can Propel Your Business Forward

When it comes to business growth, many businesses focus on sales and funding. The truth is, your accounts payable workflow could be holding you back by consuming valuable resources you could be spending elsewhere.

An automated accounts payable solution like Stampli can drastically reduce AP inefficiencies and free up resources so you can focus on better serving your customers.

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