Accounts payable involves a lot of challenges like providing payment approvals on-time, budgetary restrictions, ensuring policy compliances and keeping the accounting systems up-to-date. Organizations reach a saturation level where manually processing all these become increasingly tedious and difficult to maintain. Failing to properly manage accounts payable can seriously affect a business. CFOs who do not develop an effective control their accounts payable strategy can severely limit their company’s liquidity, leaving them with insufficient cash on hand when they have narrow windows to seize fleeting opportunities.
An automated accounts payable system is a great way to overcome these issues and increase effective communication & employee productivity.
In order to control your accounts payable, first, we need to understand the bottleneck involved in the manual process of accounts payable.
How Does The Manual Accounts Payable Process Work?
Manual processes are very much time-consuming and are prone to costly errors. It requires high attention to detail and an increase in volume can overload a manual accounts payable process, resulting in compliance issues, invoice matching errors, an error during month-end book closures.
- The accounts payable process begins when the invoice is received by the finance department for any goods or services that are delivered.
- After receiving these invoices they are verified against the goods or service that is delivered.
- Upon receiving the confirmation about the same from the respective department, the payment for the invoice has to be approved.
- Before processing the payment, the finance team checks whether the invoice is under the organization financial compliance and other policies.
- Next, the invoices are manually typed into an accounting system, and a physical copy is maintained for auditing purposes.
- After all the above mentioned is completed, the payment is then processed to the vendor.
If a simple manual error in any of the above-mentioned process occurs, there will be a huge delay to process the payment and that’s when issues begin to snowball and vendor relationships deteriorate.
How Does The Automated Accounts Payable Process Work?
Automated accounts payable system can create a simpler process, more accurate, and highly efficient. It helps in reducing the business payment cycle, governs the financial policies, automates the approval mechanisms and the record is stored in a digital archive and make the entire process paperless.
When the invoice is received, the system checks each line item against the purchase order and receiving information to be sure that the goods and services ordered are the same as the items received and billed. If an error is found, an alert is sent to the accounts payable department for verification. Automated emails can be set up to remind for the pending approval, processing payments thereby avoiding the delay. Automatic three-way matching can take place against the purchase orders to invoices to verified delivery slips, and thus keeping your accounting systems up-to-date.
A budget tells us what we can’t afford, but it doesn’t keep us from buying it
How To Control Accounts Payable?
- Automate Repetitive Tasks – Tasks, like approving the purchase orders, making payment against the invoices, are very laborious and consumes more time of finance teams. Automating these tasks by setting up email notifications for any pending approval, processing payments, matching invoices against purchase orders, etc., can significantly increase the productivity and give them ample amount of time to focus on more important tasks.
- Vendor Portals – Leverage the power of FinlyFinance and empower your vendors to use the system effectively. Finly’s vendor portal enables your vendors to submit & track quote instead of emailing, communicate instantly with the purchasing team, and receive automated payments. Avail discounts by setting up rate contracts, track statuses of deliveries in a single workflow.
- Avoid Fraudulent Errors: With an automated accounts payable system, you can minimize fraudulent money transfers, theft, or costly errors. Add additional security layers by scheduling a one-time set up of recurring payments, requiring more than one person to authorize a payment, email or SMS notifications for every payment made, etc. will help reduce the risk factor involved in payments.
- Establish Governance & Compliance – Setup advanced approval hierarchies and multi-stage approval workflow to process any purchase orders or invoices. Implement robust protocols and accounts payable procedures to categorize and automatically approve certain types of requests made by specified people to streamline the approval process.
- Audit Trails – Get the complete transaction details when purchase orders are processed. In FinlyFinance, all the events are recorded that occurred in the execution of any purchase order or payment transaction and get instant access to complete budget and spend details.
- Automatic Reconciliations – Any purchase order raised through Finly’s automated E-Procurement system, is automatically mapped against the invoice received. Multiple other data points such as the delivery of the product, payments & E-Way Bill are auto-mapped against the purchase order.
The benefits that CFOs can see after moving to FinlyFinance are the improved accounts payable governance, streamlined processes, total control on budget spend, increased productivity, effective communication, and collaboration, faster invoice processing, and the minimized risks associated with routine invoice payments. This yields to a better relationship with vendors by allowing them for preferred service and better deals.