If you’re like many accounting professionals, you’re feeling increased pressure to do things smarter, faster, and better than ever before – not to mention the pressure to save your organization money!
But, where do you begin? Well the answer is simple Accounts Payable! By processing invoices with a minimum of staff and a rock solid system of checks and balances you can cut your processing cost, not to mention the money you will save by triple checking the accuracy of the bills you receive.
How a company manages its accounts payable processing affects two important business matters: cash flow and supplier relationships.
3 Quick Tips
Accounts payable needs to be a routine. The same process happens over and over. It’s worth it to find small efficiency gains in accounts payable because the savings will quickly multiply.
- Work with your vendors. The big companies all have instructions about what they expect from their suppliers. Smaller companies may not have that much negotiating power, but they can still talk to their suppliers and determine the best processes for both companies.
- Be very clear about who does what. The processes for purchasing and approval need to be written down so that if any of your staff are away, someone else can slide into the accounts payable role quickly and easily. That includes having samples of the approvers’ initials/signatures for easy reference
- Don’t cherry pick who to pay. You want the payments process to be quick and smooth, as automatic as possible. You don’t want an employee to have to go through the list of outstanding invoices deciding which to pay and which to delay. If your vendor’s payment terms are 30 days, but you routinely pay at 45, then enter 45 as the payment terms in your system. If you have a dispute with a vendor, resolve it quickly or suspend the vendor rather than having to remember not to pay that invoice on each payment run.
To avoid paying for your vendors mistakes, implement a three-way matching process on all your payables, especially those related to inventory. The three-way part refers to the three documents involved in accounts payable:
- The purchase order
- The packing slip
- The invoice
Before any invoice is paid, these three documents should be matched line by line – for quantity, price, and description — to ensure you ordered and received what you paid for. Only then should your bill be approved. This will ensure that you don’t pay a fraudulent bill, you don’t pay for out-of-stock that didn’t ship and that you paid the correct price you agreed to in the first place.