6 Best Practices in Accounts Payable

How to Streamline Every Important Aspect of Your AP Operation

In these times of global competition and tough economic circumstances, every organization needs to lower its operating costs and to streamline its operations.

And one of the best ways to do so is creating an efficient accounts payable (AP) operation. Inefficiencies cost money, they cost time and they cause a great deal of frustration.But after you adopt the best practices in this solution paper, your organization can quickly reap the following benefits:

• Reduce the costs of processing invoices by 25 to 50 percent
• Improve invoice processing efficiency and accuracy
• Reduce paper by up to 90 percent and virtually eliminate lost documents
• Gain greater financial control and visibility
• Speed invoice payments to improve vendor relationships and to receive early pay discounts
• Resolve exceptions and discrepancies much faster, saving you time and money (and lots of aggravation)

We have identified six repeatable best practices that, when followed correctly, enable you to:

1. Get Rid of the Paper

   Paper is the bane of many organizations’ existence — and that’s not only true for the AP department. Paper must be collected, categorized, sorted, copied, routed, processed and then stored. And once it is stored it must be searched for.

2. Reduce Manual and Ad Hoc Processes

   Assuming you have decided to end your reliance on paper, the next best practice is to look at ways to reduce the number of manual and ad hoc processes.

   Start by walking through every step in your invoice-processing, exception-management and dispute- handling steps. Carefully map out every step. You will gain immediate benefits just from going through this exercise.

3. Handle Exceptions and Discrepancies in a Timely Manner

   Handling routine invoices is just one part of the AP department’s charter. It must also work with many incidental activities like handling exceptions, discrepancies and vendor disputes. These tasks are time-consuming and, if you are using manual or archaic processes, they can be very frustrating.

   The definition of what constitutes an invoice exception is entirely dependent upon your organization’s procedures.

   Some of the common definitions include:

   • No matching purchase order for an invoice
   • Invoice and P.O. totals don’t match within a specific tolerance range
   • An invoice sent from a vendor that isn’t listed in your Master Vendor List
   • Gain greater financial control and visibility

4. Gain Incremental Value

   Unfortunately, organizations often attempt to completely change their AP systems in one fell swoop.

   Remember the question: How do you eat an elephant?

   Answer: One bite at a time.

   How do we apply this “one bite at a time” concept to AP? An on-demand solution where price is determined by a subscription model really helps in this regard.

   Your department won’t feel compelled to implement all features because you never had to justify the huge up-front cost of a typical on-premises solution.

   First, take a look at this list of the major functions of a complete AP Automation system:

   • Receive, index and digitally capture invoices
   • Store and retrieve invoices and related documents
   • Automate and speed invoice approval and related processes

5. Measure and Benchmark Performance

   There is a saying that “What you can’t measure, you can’t improve.”

   We have talked about the benefits of automating your payables processes, but unless you can quantify them, you will not have a basis for sharing the improvement and benefits of the solution. You’ll want to measure the:

   • Fully loaded cost per invoice paid
   • Processing time per invoice and percent paid on time
   • Time per clerk spent on managing disputes and discrepancies

6. Say NO to Managing Technology and YES to Managing the AP Process

   Large companies with big budgets have traditionally adopted technology to address the above issues and have gained significant benefits.

   However, if you work for a small- or medium-sized company, or if you work in a resource-constrained division of a large company, you have probably been left out.