Managing Accounts Payable

Jun 6, 2023 by Kelsey Banerjee

Managing accounts payable (AP) in today's landscape is more challenging than ever. Streamlining cash flow is crucial for efficient AP management, and manual processes slow operations and waste resources. By optimizing your AP workflow with innovative payment solutions, you can empower your team, strengthen relationships, and drive business growth.

Managing accounts payable (AP) efficiently takes more effort and resources than ever. In an era of uncertainty and supply chain shortages, AP staff are on the front line of maintaining positive relationships with suppliers and vendors.

The AP team works efficiently when supported by a well-oiled accounts receivable process. But when payments don't come in on time, the payable team sometimes has to get creative.

Before we dive into how streamlining cash flow makes managing accounts payable a cinch, let's do a deep dive into how AP works today.


The Role of Accounts Payable Today

AP teams are essential to day-to-day operations and do more than fulfill invoices. For example, the accounts payable department requires its professionals to handle accounting software, pay invoices, and remain vigilant for fraud attempts. Furthermore, the AP departments can find savings through an early payment discount and vendor credit, making AP management a strategic asset.

But the accounts payable process, if conducted manually, can hinder the AP staff, slow operations, and waste resources.


The Accounts Payable Process

The AP process appears straightforward: AP management receives an invoice from a vendor, approves it, authorizes payment, and records the transaction. But in reality, each step can become more complex depending on the vendor's payment system and the AP team's limitations. So before we dig in too deep, let's look at the general accounts payable process.

  1. Manually capture and log invoice data in your ERP system or spreadsheet.
  2. Review and approve invoices.
  3. Get relevant signatures.
  4. Print paper checks.
  5. Authorize payments.
  6. Process each payment individually.
  7. Send receipts or notifications to vendors.
  8. Record payment in your ERP or spreadsheet.
  9. File invoices.
  10. Reconcile relevant credit card or bank account statements.

However, to ensure timely payment and the ability to leverage an early payment discount, AP professionals often have to manage which vendors to pay first. In the case of a cash flow crunch or a late payment, AP management must also decide which payments can be delayed and maintain a positive relationship with the vendor or supplier.

But these aren't the only considerations that go into AP management. Another significant issue is preventing and identifying fraud.


Accounts Payable Management and Preventing Fraud

Expense fraud alone causes businesses up to $2.8 billion per year. And in 2019, the AFP Payments Fraud and Control Survey found that 82% of companies were susceptible to fraud.

But technology could disincentivize potential fraud cases and catch more instances of intentional and accidental fraud. For example, organizations requiring employees to send receipts through a digital solution are 68% less likely to experience fraud than asking employees to give receipts to an AP team manually.

However, carefully curating internal controls and performing regular audits can deter and prevent fraud. The accounts payable team is often tasked with regularly reviewing expense approvals in an internal audit. Audits can reveal potential weak points in the payable system, including data entry errors, duplicate payments, and poor vendor classification.

In particular, ensuring that proper payable system controls are in place can also help avoid errors and theft. Some examples of controls include:

  • Purchase order approval
  • Two or three-way matching
  • Automated flagging for duplicate payments
  • Record after approval or verify the invoice for accuracy before final approval
  • Segregating user roles
  • Tracking check numbers
  • Verifying and auditing vendor data

Automation is often the most efficient way of managing ever-growing lists of data and expenses. A proper AP automation platform should be able to capture and store receipts, provide end-to-end visibility, and generate expense reports for fast approval, among other core features. While training remains essential, an automated accounts payable workflow can reduce the time required to process invoices, often by 80%.


4 Tips for an Effective Accounts Payable Workflow

Fine-tuning your payable workflow is about more than implementing accounting software. A strategic approach to reviewing your AP process can help you reduce fraud, capture early payment discounts, and strengthen supplier relationships.


Refine Invoicing

Invoicing is the core of the AP process. How long it takes to process a vendor's invoice determines if you can leverage discounts and meet supplier payment terms on time. But invoicing doesn't begin with the AP department. Accounts receivables' role in invoicing and payment processing provides the cash flow for AP to fulfill invoices. As a result, it's essential to collaborate with the AR team to map out the entire invoicing process. Once you review both sides of the invoicing equation, it'll be easier to optimize your accounts payable operations.


Automate the Accounting Workflow

A manual process for accounting causes a significant number of challenges and inefficiencies. In a recent survey, financial professionals reported that manual processes results in lost documents, compliance breaches, and lost productivity. Automation nearly eliminates human error while allowing you to accelerate and scale both your AP and AR workflows. Meanwhile, you can save time and money in processing costs and time spent on corrections.


Give Suppliers and Customers More Control

Self-service supplier portals can help you to build trust with your suppliers while reducing your workload. On the AP side, a portal can keep vendors updated on their order status, billing schedule, and estimated delivery. For the AR team, having a payment portal where customers can easily and efficiently submit payments is better.


Centralize Bookkeeping

Using an ERP with accounts payable and accounts receivable integrations ensure that the entire payable cycle is standardized. In addition, a centralized location for both AP and AR makes it possible to measure success more accurately and keep track of key documentation.


Streamline Cash Flow with Paystand

Outside of AP automation, another way to support your staff is through supporting accounts receivables. After all, when payments come in on time or early, the AP team has more time and resources to maintain vendor relationships, review invoices, get signatures, and send vendor payments.

At Paystand, we specialize in helping reduce the cost and waiting period for payments. Forget paper checks and traditional lockboxes—we use a blockchain platform to verify all real-time payments and provide enhanced analytics to AR teams. Through our accessible payment portal, clients can fulfill invoices in minutes with the payment option they choose, including ACH, bank-to-bank transfers, eCheck, and payment cards.

Through automating accounts receivable, your accounts payable team gets the cash flow they need to make strategic decisions and foster growth. And your client's AP team will likely enjoy the frictionless experience.

Ready to accelerate payment collections and support your AP team? Read how to use automated payment services to boost your cash flow and reduce DSO on our blog.