Accounts payable, while a back-office function, is a key factor in business efficiency, yet many small businesses struggle because the accounts payable process all too often affects the businesses ability to accurately forecast and manage cash flow.
Without an effective accounts payable process, small businesses ability to process invoices in a timely manner is hampered and with that so is the ability to take advantage of discounts, longer or shorter payment terms and volume rebates. All too often accounts payable issues arise when small businesses:
- Rely too heavily on manual processes for approvals, invoice recording and payments;
- Incorrectly load information into system;
- Don’t generate purchase orders for each new order;
- Do not accurately confirm that deliveries match orders or contracts;
- Do not have systems in place to prevent late payments, under or over payments, duplicate payments or missed payments;
- Do not take advantage of early payment discounts.
With these issues in mind, the Australasian Shared Services Association Accounts Payable Benchmark Study (2014) found that the average cost of processing an invoice is $7.19. When compared to the cost for the top performers which is $1.45 per invoice, you can see there is definitely benefits for small businesses to improve their accounts payable process to save time and money in the long run.
The study found that the characteristics of the top performers included:
- Automation enabled top performers to achieve invoice processing throughput close to or exceeding world class standard.
- Technology usage enable participants to achieve almost double the efficiency of those with manual processes.
- High proportion of overall accounts payable sat within shared services area
- Purchase orders were supported by business process and technology
- Centralised receipt of invoices, electronic invoices, and electronic workflow contributed to the overall efficiency and effectiveness.
To streamline the accounts payable process and take advantage of the opportunities and benefits it provides, each business must generate its own approach, however there are best practice guidelines that can help along the way:
- Centralising the accounts payable processes and reporting via a shared service environment.
This not only ensures all staff adhere to common practices and standards, it also enables staff for to measure performance against business metrics and streamlines the process so that you can achieve more in less time and with less manual resources.
- Creating a paperless processing environment
By moving toward a paperless processing environment, and enabling electronic communication with vendors, businesses can gain significant functionality advantages and savings through available discounts or rebates. Depending on the level of automation you select you may be able to automatically generate purchase orders, electronically validate and accept invoices, track goods and pay invoice. You may even be able to scan invoices automatically, track delivery receipts and resolve discrepancies electronically rather than with manual follow-up.
- Establishing more robust governance practices
Having robust governance practices in place can reduce the risk of manual error and increase internal controls around accounts payable processing. The process will also be strengthened by defining the level of management authority required to make certain purchases
- Setting up supplier portals
Setting up supplier portals make the invoice approval process more transparent as they are able to electronically track the status of orders, delivery schedules, potential product shortages and payments received. This not only cuts down on the time spent by staff responding to enquiries, it also cuts down on manual errors, improving order accuracy.
- Workflow management and imaging
Workflow management can help you streamline processes, identify and resolve system bottlenecks and manage all aspects of an in-house invoice scanning and documentation archival system.
An accounts payable solution for you
Colourworks understands each business is different which is why Colourworks custom build automated account payable solutions to your needs.
Through its innovative product Autofile, Colourworks can automate key business processes so that you can spend more time working on your business, than in your business.
Head to Colourworks Automated Accounts Payable Solution to find out more about Colourworks custom built business process automation technology, including a fact sheet, broschure and enquiry form.