Accounts Payable Automation Best Practices
AP automation is the answer to disorganized, error-prone, and redundant AP processes. Read on and find out how you can streamline your AP system.
If you want to make your supplier invoice payment process more straightforward, feel free to reach out and seek assistance from Spenmo.
But, tracking your transactions with your suppliers can be challenging at times. You may come to your office one day and see piles of invoices on your tables. Fortunately, you have a competent and efficient accounting team. But in time, you will have to scale up your process to keep up with the fast-paced market.
With that in mind, let’s look at the supplier invoice payment processes. Moreso, we will discuss some ways and tools to help you improve your workflow.
Supplier or vendor invoices are sales invoices issued for goods or services procured. The recipient of supplier invoices also gives invoices to its customers. For the sake of a clear distinction, let us put this on a company level. When we say vendors or suppliers, we refer to the suppliers of goods or services used for production.
In supplier invoices, goods and services are listed and itemised. It includes other charges, such as sales tax and shipping fees billed to the recipient. After the subtotal, taxes and other charges are added to compute the total amount.
Like most inventory transactions, suppliers may extend a credit agreement to the customers. It usually indicates invoice payment terms and methods. Suppliers may send a month-end statement for all outstanding transactions in that month for more organised payment terms. But, it must indicate that no invoices will be issued after the month-end statement. The recipient records credit agreements with suppliers on accounts payable.
Before, invoice recording and issuance were primarily done in writing. But with spreadsheets, you will only have to input the items and prices. It helps create multiple copies for the supplier and recipient. Now, software-generated invoices are available and used by most suppliers. With these, searching and sorting transactions and dates are easier.
Supplier invoice processing involves the tracking and payment of invoices. It is a complete cycle that begins with the receipt and approval and ends with invoice payment. Everything must be recorded on the general ledger because it is a crucial for making timely payments and assessing your cash flow. As such, it ensures an orderly stream of inventories and services. More so, you can prevent problems with your suppliers or any action against your business.
Fortunately, technological advancements make it easier for you to track everything. Most companies now have automated systems for their invoice processing. They receive invoices as electronic invoices or documents attached to emails. These contain all information you need, from the items and prices to payment terms. You must scan it into your accounting system before it gets approved and paid.
With that, invoice processing and recording of transactions are faster and more organised. It helps avoid missed or overpayments, protecting your finances. There is a workflow you must follow to ensure organised invoice processing.
Here are the basic steps in the invoice processing workflow.
1. Invoice Receipt
The process starts once you receive the invoice manually or electronically. You must first check the itemised goods and services with the accounting department. Once verified, you must check the billed amount to the original purchase order. In case of discrepancies, you must inform the supplier to resolve the issue immediately.
2. Invoice Approval
Once the issue has been settled, you can route the invoice for approval according to company policies. You can approve it immediately if there are no discrepancies upon checking.
3. Invoice Payment
After the verification and approval, it is now ready for payment. You have to pay it based on the terms and conditions agreed upon with the supplier. You may pay it in advance if you want. Doing so will let you avail of discounts or perks if there are any. For instance, suppliers may give a 5% discount if you pay for your order within a week.
Here are the basic steps in processing an invoice for payment.
Often, supplies and raw materials are procured on a credit agreement. These are accounted as part of accounts payable. For this reason, it is a must that you keep track of your inventories and accounts payable. Keeping your purchase orders is crucial in settling discrepancies in invoice payments.
Remember that accounts payable has a significant impact on your working capital. That is why even a slight mistake and delay in payments can jeopardise your business. Despite scaling up processes, accounts payable processes can be tiring at times. Here are some challenges that the accounts payable department may encounter.
It can be hard to keep track of supplier invoices at times, written or electronic. The burden doubles during peak seasons. Imagine how harder it is for those still engaging in manual processes. As such, there is a chance of losing track and paying on time. You can ask the supplier to resend the invoice. But, you will have a big problem if you are not aware of missing invoices.
Let’s admit it. Processes involving manual data entry are slower and more prone to errors. It contributes to inefficiency and payment errors. More so, it is hard to maintain manual records. Imagine coming to the office with piles of invoices on your table.
You must keep the original purchase orders. It will help you verify suppliers’ items and prices listed on the invoice payment. You can check if there are discrepancies and settle issues with suppliers. Missing purchase orders are a problem for the accounts payable team. Losing these can lead to more cash outflows due to double and unauthorised purchases.
Before, finance teams mostly wrote invoices on paper. With the help of technological advancements, invoices moved to spreadsheets. Yet, they are still prone to errors since they involve manual entry.
Now, companies are using software-generated invoices. So, below are some reasons to automate supplier invoices as early as now.
Automating invoice payment for suppliers improves the invoice payment workflow. Aside from inefficiencies, manual invoice processes are subject to more risks and errors. Lost or wrongly filed invoices can lead to wasted time tracking them down. Automation can eliminate many tedious steps.
More so, risks and errors are averted. It allows easy flows of documents through the accounts payable processes without delays. It also allows the digital routing of invoices for a quick review and approval in only a few clicks.
Late payments mar your business reputation and vendor relationships. Worse, suppliers may take action against your business. With AP automation, you can keep an eye on invoices. Also, you can have a clear view of your cash flow, particularly working capital. Timely payments can give you discounts and perks from your suppliers.
Labour accounts for more than half of your accounts payable cost, including the receipt and issuance of invoices and rectifying payment errors. Keep in mind that manual processes require more work. With automation, you will incur lower labour costs and less time with data entry.
Automation software helps generate transactions, including invoices, anytime you want. It helps you prevent missing documents. It can make auditing less tedious. Moreso, you can easily find discrepancies, if there are any.
Save some time and resources on your supplier invoice payment process with the help of accounting automation software from Spenmo. Book a demo today.
With automation software, companies can manage accounts payable digitally. Accounting teams can focus on more crucial tasks than sorting for missing invoices. Its functionality includes standardised coding and automated approval. There are dashboards where you can see which suppliers have been paid and not. You can see the status of invoices, whether they are for approval or payment.
Some automation software works directly with ERP platforms and b2b payment software. As such, you can maintain accurate and timely payments. Moreso, it expedites financial processes, including AP processes, and improves cash management.
Top 3 Reasons to Pay Your Suppliers on Time | |
Reason 1: Have better relationships with suppliers and vendors | Paying on time builds better relationships with suppliers. With that, suppliers will ensure your satisfaction and improve their service. |
Reason 2: Enhance your financial reputation | Paying suppliers on time means you gain their trust. You can introduce more flexible payment terms and credit to improve your cash flow when you have their confidence. |
Reason 3: Save money from late payment charges | When you pay on time, you avoid late charges. More so, you can avail of discounts and perks if there are any. |
Keeping track of your invoices and purchase orders is crucial for your business. But, it can be challenging during peak seasons. Manual processes can be confusing and tedious, but invoice automation software can do everything in the wink of an eye. Also, it eliminates or at least reduces risks and errors. You can ensure accurate and timely invoice payments.
Hence, automating your invoice payments reduces costs and improves efficiency. It also avoids any reputational harm or action against your business. To know more about it, feel free to reach out and seek assistance from Spenmo.
The cost centre manager approves supplier invoice payments.
Customers send a purchase order to suppliers to track the purchasing process. Meanwhile, an invoice corresponds to the official payment request by suppliers.
Suppliers send invoices before payment. In contrast, official receipts are sent after the payment.
AP automation is the answer to disorganized, error-prone, and redundant AP processes. Read on and find out how you can streamline your AP system.
AP department drowning in paperwork and manual invoice reconciliation tasks? Find out how accounts payable process automation can solve this problem.
Learning how to record your accounts payable is crucial for better financial management. Discover more about it by contacting Spenmo today.
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