It is normal for people to want to jump the gun when it comes to improving the pain points of their businesses. Before anyone makes any large decisions, it’s better to take a step back and realize what sort of problems you want to solve within your business. It’s easy to evaluate what your company needs at a high level. It’s easy to say a buzzword like “communication” or “efficiency”, but how do you plan on reaching those goals. Today we’re going to break down the Accounts Payable workflow and process and identify the weak points within it.
Before we get into the actual process of your accounts payable, we need to understand the flow within it. If you work in accounts payable, you know you have to focus on the upstream and downstream workflows.
The upstream workflow refers to the process of procurement. This involves going out and finding reliable suppliers for your business. The upstream workflow also involves building strong relationships with third parties to create contracts that help both parties.
The downstream workflow involves anything after your business buys something. This means the accounts payable section of your office has to confirm the receipt of goods, relevant vendor invoices, and ensure they have proper documentation and authorization for the payments. The downstream flow of someone’s business is often their weak point. An unorganized business and accounts payable can be susceptible to slow business and poor vendor relations. It’s important to understand your AP process before you try to optimize it.
Understanding your Accounts Payable workflow is essential to your business. If your business has sloppy bookkeeping, you might incur penalties for late-payments and have an inaccurate account of the standing of your business. We’re going to walk through the key components of the AP workflow and how an Accounts Payable automation system can help.
Creating a table of vendors to track your accounts
It’s important to create a detailed list of all your vendors with the payment terms (Net 10, 30, and 60) attached to their names. Most businesses must keep this up to date and detailed, but if you’re a young business you need to make sure you set a strong foundation for how you handle your transactions.
When you get an invoice from a vendor, you need to go in and manually reconcile the bill for accuracy. Make sure that all the products on the invoice have been received and are in good condition. It is important to ensure that the products or services were completed to 100 percent accuracy for any invoices received. Once you’ve ensured accuracy, you can begin entering in the invoice information into your ledger accounts. You can also enter all accounts payable for your business and approve the bills as you review them.
It is important to stay up to date and constantly check up on your table of accounts to know when your payments are due. When you are aware of your payment status, you must choose a method a payment method. Some of the options include writing a check, credit card, or electronic payment methods. Whatever method you use, you should notify the vendor that the payment has been made.
Stay consistent with your methods and delivery
It is important to create a schedule that best fits your companies needs for accounts payable. Keep yourself up to date to avoid paying late fees by staying on a consistent schedule.
While this system may work, it is easily prone to error and takes up valuable time. Manual data entry costs you valuable time for your business that can be spent on financial planning and strategy. Your AP automation system can automatically reconcile your purchase and invoice numbers to ensure total accuracy when making payments. If two payments don’t add up, there is a double payment, or your payment is almost due, your system will raise a red flag and you’ll be notified. Good thing the future of business is here with Accounts Payable automation. If you’ve been able to identify these pain points in your business, then you can get rid of the headaches that long-lasting manual tasks have been giving you.
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