If you’re running a business or the finances of a business, chances are you have a process in place for sending payments to vendors for supplies, services, etc. This is part of every business’s accounts payable workflow or accounts payable process. It’s also one of the final steps in the purchase-to-pay cycle.
The life cycle looks something like this: the accounts payable department receives, verifies, and routes an invoice for approval, then they send payment. While this process seems simple, poorly handling it can lead to many problems and issues within a company.
Here at Accounting Seed, we often work with customers to help streamline this process and make it more efficient. Here are some actions every business owner or accountant can take to improve their vendor payments process.
Set Up Vendor Payment Schedules
Research shows that one in twelve businesses don’t monitor their payment processes at all. In addition, forty-seven percent of companies pay one in ten invoices late. On top of that, only five percent of businesses can assert they always pay on time.
Consider making early payments if there is a discount. Also, make sure your recurring vendor payments are made the same day and time each month. In short, if you time your payments cash stays in your business longer and enhances overall cash flow.
Keep Your Vendor Relations In Good Order
A good working relationship with your vendors can actually help you manage your company’s cash flow. For instance, if you establish good and open communication with your vendor, he or she might be more inclined to help you out out in the long run. This allows for issues to be resolved or even prevented – on both sides. To sum up, vendors who get paid on time are more likely to return the favor with on-time delivery of goods and future discount considerations.
Automate Your Accounts Payable Processes
Organizations who automate their AP workflow speed up invoice processing and ensure vendors get paid accurately and on-time. The old fashioned, manual invoice process can present challenges to staff and cause delays in the entire payment process. Implementing automation practices for accepting and storing invoices can help improve company exposure and efficiency.
With an automated accounts payable process, vendors will be paid accurately and on time. This secures healthy vendor relationships and a future supply chain. Businesses can also identify tactics to further support cost savings and efficiency in the pay cycle by leveraging the data in the AP automation solution.
Accuracy is vital to any business operation, especially your cash flow. Most importantly, make a good practice of updating your accounts every day with an automated account payables process within your accounting software.
Electronic Payments with ACH
Initiating electronic payments with e-payment solutions such as Automated Clearing House (ACH) provides lower overhead costs for the company as a whole. It also provides better security. Likewise, automatic and electronic debits and credits greatly improves the accuracy of your books. This is achieved by limiting the number of people who come into contact with your information.
Centralize Accounts Payable Processing and Financial Reporting
Centralizing accounts payable processing and financial reporting across the enterprise through a shared environment like SalesForce can streamline workflows. It can also reinforce quality accounting practices. Above all, this enables your team to accomplish more in a quicker timeframe and with fewer resources. This ultimately reduces costs and saves the company money.
Systemize Accounting and Reporting Processes
Before you can actively manage payables, you need assurance that your accounting reports are up-to-date. You also need to check that your financial records fairly reflect current accounts payable balances. Without this data, many businesses lack insight into the amount and the timeliness of when they pay their suppliers.
Improving real-time reporting capabilities by automating reconciliations and ensuring they remain current strengthen your accounting and reporting process. Reach out to one of our account executives today to learn more. If you have any questions on how to improve your accounts payable process, check out our FAQs section or request a demo of our automated online accounting software.