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.
Bill Details
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.
Process payments
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.
Invoices are crucial pieces of documents for any existing business. These documents elaborate on all the necessary payment details you need to pay to your suppliers and form an important part of your accounts payable department. Also, invoices are the proof of your company expenditures that later is included in calculations during audits.
Therefore, ensuring that your invoices are correct, well-managed and organized, and well-tracked is an important part of the accounts payable process. Thankfully, because of Accounts Payable Automation, managing and keeping track of your invoices has become extremely convenient and efficient. Yet, there are a few things that you should always check and make sure are correct. One of those factors is the type of information that your Accounts Payable Automation should include in your vendor invoices.
Therefore, in this article, we will take a thorough look at the kind of information that your vendor invoice should contain so that you have the right kind of information to support your transactions.
Basic invoice information that must be included in a Vendor Invoice
There are particular specifics that every vendor invoice must include. Therefore, make sure that you set this information up while you are setting up your Accounts Payable Automation. Let us go over them, one by one.
Heading specifying Invoice
The first and very important part is the header of the invoice, specified as ‘Invoice.’ Though it may seem very insignificant, this header will quickly help you differentiate an invoice from other types of notes, including credit notes, quotes, or receipts.
Unique Invoice Identification Number
Your AP automation must have a unique invoice identification numbering system. This will help you give a unique ID to every invoice you receive, which can help you keep records and track them when needed. Therefore, instead of having to look through several invoices, you can simply search your database with the unique ID and be able to find an invoice.
Company name and address
Your invoice should carry the name, address, and contact information of your company. These pieces of information are vital for all documents. Therefore, ensure that you have fed these data to your AP automation so that they appear on every invoice.
Date of invoice and supply
The next information that your AP automation must include in all invoices is the date the invoice was issued and the date when the goods and services were provided (known as supply date). These are mandatory and will help you keep better records. Also, please note that the date the invoice and the goods and services were issued might not be the same. Your AP automation should be set up so that it can automatically date the invoices accordingly.
List of items
Next, the most important piece of information for any invoice to have is a proper list of all the goods and services provided. The items should be listed properly (numerically) and separately. Each item should have a clear description to ensure that it is identified properly.
Total Payable Amount (including discounts and taxes)
Along with the list of items, the next important thing is the total amount payable. The amount for each item should be listed alongside the items. The total sum of the amount payable should be listed properly beneath them. You need to feed your AP automation system with the right format for listing and pricing the items. Other things that should be included under this category are:
Discounts (if any)
Applicable Taxes
A complete breakdown of the amount charged if additional charges exist
Payment terms and method
Other things that you must include in an invoice are the terms of payment and payment methods. Terms of payment refer to all the conditions under which both parties involved have agreed to make the transaction of goods and services for a decided amount. It also includes the payment schedule or due dates.
The next thing to be mentioned is the payment methods. It is necessary to mention the agreed mode of payment and the subsequent details. For example, if the amount is to be paid through bank transfer, the invoice must contain the bank details.
Conclusion
Invoices are an important device in the entire buying and purchase cycle of a business. Not only does it give you a proper idea of the goods and services bought, but it also helps you keep track of your purchases and expenditures. For bookkeeping and the amounts payable department, invoices are important and should be properly listed and managed.
With AP automation, you can easily keep track of all your invoices along with managing and organizing for record purposes. With smart AI and automation, your AP automation can help you create the perfect invoices without any laborious efforts. Therefore, keep in mind this basic information about what should be included in an invoice and format your AP automation accordingly.
The economy has stepped into the era of digitalization, where every factor now has an undeniable influence by the latest technologies. Due to this, businesses around the globe have been able to make impeccable progress, quickly adopting an entire ecosystem that effectively eliminates all taxing and repetitive actions. This allows businesses to focus solely on important business activities, thus increasing productivity and profitability.
African Professional Chartered Accountant Woman Doing Tax
There are numerous business aids and tools in the market right now that have made this reality possible. Among them is the AP automation technology. For businesses who are yet to discover this business tool and everything about it, this article will surely be a great help. We will take a look at what this business aid is and who it is for.
What is AP automation?
First, to understand who can use it and how we need to clear our concept of what an AP automation or Accounts Payable automation is. For businesses, proper management of funds and accounts is absolutely necessary. It is important to have a clear idea and data on where your funds are coming from and where they are being used. With digitalization and tools such systems such as AP automation, taking care of such activities has become extremely convenient.
AP automation, therefore, is a process that helps to digitize all activities related to accounts payable processes. It eliminates any manual activities, thus reducing monotony risks and increasing efficiency and productivity. It has been a ground-breaking innovation for the business world that has allowed companies to manage their invoices and other accounts payable factors in a much more profitable way.
AP automation manages three elements of business payments:
Receiving invoices
AP automation allows a business to easily receive invoices and turn them into digital data. The invoices may be electrical or paper-based. For electrical invoices, the system will use methods such as PDF invoicing, EDI/B2B connections, or receiving the receipts through a supply portal. For paper-based invoices, the system will scan the receipt and store it online.
Approval and Workflow management
Once the system receives the receipts, it either matches them to the goods or variables purchased or automatically sends them to the department in charge for approval. Once the receipts are approved, the system passes the receipts to the accounting system to make the necessary payments.
Storage and auditing
Lastly, once the payments are made, the system ensures that all the receipts are properly stored for reviewing and auditing purposes. It also keeps track of all the activity and status related to the receipts for better management. With digital storage, it is also easier to manage and organize the receipts for quick access.
All these are done completely digitally with any manual input, so there is no confusion or scopes of errors or mistakes. It seamlessly integrates with existing software and programs of the company to effortlessly exchange information without any hassle.
How can it help your business?
Technology has already helped the business industry (and various other industries around the globe) grow and flourish in numerous ways. AP automation is just another example of such aid. To put it into words, here is how AP automation can help a business:
Saves time and effort
By now, we have a clear understanding of how AP automation is great at saving your time and efforts. The whole system is automated and does not depend on human interference. Thus, your employees need not waste their time doing redundant activities, saving them that time and effort. This extra time could then be used for some other, more important business activity.
Enhances efficiency
Automating the system means the system knows what to do and does so systematically. Also, with its integration capability, it helps in increasing efficiency as there are no provisions for any mistakes and errors. Also, due to the automation, the system can immediately pick out mistakes such as additional charges or duplicate invoices.
Cost-effective
AP automation can help companies save a significant amount of expenditure expenses. With AP automation, companies can cut down on labor costs, storage costs, invoice production and postage costs, and so. In short, AP automation is a great long-term investment for a business.
Conclusion
All things considered, AP automation is perfect for all kinds of businesses that have a large number of suppliers and vendors. This system is the perfect aid for employees such as accountants, managers, clerks, AP managers, and any employee-related to the financial and accounts department.
With its high-end technological support, AP automation is the business aid that all businesses can benefit from. It reduces efforts, increases efficiency and productivity while eliminating chances of human error. It also helps maintain transparent transactions, thus preventing any chances of fraud or other criminal activities.
In conclusion, AP automation is an example of what technology has to offer. It is a must-have for businesses that look forward to an innovative and optimum future.
Managing business expenses is a crucial job for employees, and that is what the accounts payable department deals with. Anything that is purchased by the company is directed towards the accounts payable department. Here, the invoices are put into records, approved, and directed to the respective department for payment.
stack of files and documents, on a messy desktop
Accounts payable keeps track of all company expenditures and keeps archives for reviewing and auditing purposes. Therefore, for a company to operate competently, it needs to develop and maintain proper accounts payable processes to continue business activities.
An important part of this process is report building. In this article, we shall discuss report building in accounts payable and everything else you might need to know about it.
Report building for accounts payable
Report building is tracking all expenditures and funds used after a fixed time. The reason why report building is such an important task is that it gives you a transparent view of the expenditure standings and credibility of your company.
The need for proper tracking and report building arises from the necessity to make sure that all your suppliers are paid on time and that your company does not have any dues. As accounts payable deals with any expenditure and use of funds by the company, despite the mode of payment, cause, or nature of the transaction, generating reports for it can give you a proper insight into the expenditure behavior of your company. It also helps in reviewing budget and expenditure strategies, management of cash flow, verification of bill payments, as well as providing reports for auditing.
Companies need to work to put together a well-established process that can track and generate proper reports. Although the period for report generation may depend from company to company, the usual tenure is for a month. However, developing the proper report-building process is the main point of concern.
Building reports — the traditional method vs. modern approach
There are various types of reports out there that you can use and reap the benefits of. However, before that, you first need to come up with a way to generate the reports in the first place. Previously, when there were no digital aids, these reports were done manually. The hurdle was, it would take too long and require too much effort just to come up with one report. After all, the processes would involve manually going through invoices and relevant data to compile the report. So, even if it was done once in a few months, it would take a long time to prepare for it.
However, the situation has changed drastically over the last few years, thanks to the advancement of technology. Now, the entire AP process can be automated. This includes receiving invoices, collecting data, approval of said invoices, storing and archiving them, and even resolving them. All of these steps are done with the help of smart technology and AI and do not require any human interference.
The same applies to report building. Employees need not go through weeks of materials and data to compile a report. Instead, the system itself can compile data into a report for you at a scheduled time.
As a preparation, you only need to set the automation for the reports, and the rest can be done by the system. This method is quicker and more efficient. Also, unlike the traditional method, which is prone to human errors, this method eliminates any room for error while ensuring accurate data.
Also, with modern software, there are different types of in-built report systems. This means you need not even prepare the automaton as they already exist. The major few reports are as follows:
AP Aging Report
Reports on invoices that are about to be due soon or are past their due dates
History of Payment Report
Reports on all payment transactions for a specified period
Voucher Activity Report
Reports on payment vouchers over a specified period
AP Trial Balance
Reports on all vendor payments and any subsequent errors
Reconciliation of Accounts
Reports on all transactions related to company debt
Conclusion
A good report should be able to give you all the necessary data accurately and effectively without costing you time, effort, or funds. As accounts payable is an important department of your business and a source of important business data, you need to ensure that there is a good process of report building in place here.
However, with the traditional method of manual reporting, you would end up investing too much time and effort with no guarantee of accurate data. Therefore, the best solution here is to adopt AP automation. AP automation comes with a great many benefits, of which report building is one prominent advantage. Henceforth, you will not have to worry about setting a special team just for making reports every time because the system will do it all for you.
Technology has a fair influence on just about everything around us. Businesses especially have seen immense changes and development in the recent few years, thanks to the overwhelming impact of technology.
Automating accounting processes in the digital age
This has helped businesses and industries gain years of advancement. One of the biggest examples is all the digital transformations that companies are going through. It has helped businesses adapt faster, more efficiently and improved business practices and habits. One such influence includes automation in the accounts department. In this article, we will take our time to understand digital transformations in account payable processes and the subsequent changes they brought along.
Is Automation of AP processes a good development?
Anyone associated with the finance and accounts field would be aware of how arduous the accounts payable processes can be. Not only are they time-consuming, repetitive, and labor-intensive, but they are also prone to frequent errors. Manually handling such processes requires special care and yet requires quick actions, which makes it even more of a difficult job to execute.
However, with the introduction of technology and automation, such factors are quickly dismissed. AP or Accounts Payable automation allows all kinds of accounts payable processes to be completely automated without the need for human or manual interference. The system automates every action at amazing speed. Thus, it helps reduce time, effort and also almost completely reduces any chances of errors.
Therefore, overall, yes, automation of AP processes is an excellent digital transformation that contributes to the betterment and development of businesses. This is precisely the reason why more and more companies are quickly adapting this digital transformation to reap the best benefits that it offers.
How has digital transformation improved AP processes?
Now that we know that digital transformation in the AP process is indeed a good development, let us now understand how exactly the processes have improved.
Ease in importing of data
One of the most exhaustive tasks in the accounts payable process is manually documenting and capturing data from invoices. The process itself was long and arduous and included a greater risk of errors and misplaced information.
With AP automation, such worries are no longer a concern for businesses. AP automation provides two great solutions for data entry for the AP process:
For physical invoices
AP automation allows easy integration with tools such as OCR (Optical Character Recognition) tools that allow easy reading of data from physical invoices and making the relevant data entry. However, the OCR technology is still developing further, which promises better and more accurate data reading and entry.
For electronic invoices
The other, more convenient solution is the usage of electronic invoices. As industries keep progressing, almost everything is getting an electronic alter ego, and the same applies to invoices. These invoices transfer directly from the supplier’s devices to the businesses’ systems. It does not include the hassle of data entry and does not require any manual intervention. This solution cust down chances of error almost entirely.
Reduced error and misplaced invoices
Manual and traditional AP processes bore a heavy risk of losing, misplacing, and overlooking invoices. With an overwhelming number of invoices, it would always be a great headache for employees to keep track of every single invoice without misplacing them.
However, with AP automation, the number of invoices means close to nothing. The system effectively deals with each invoice without misplacing them. Also, this reduces the chance of fraud and deception.
Proper records of cash flow
A business needs to be able to know and keep track of every percent of its funds. A clear record of cash flow, investments, and expenditures help businesses get a clear understanding of where it stands financially. With AP automation, keeping track of such variables becomes easier and convenient.
AP automation allows you to keep and archive all invoices for auditing and reviewing purposes. Having to do it manually is not only a hassle but also would involve additional responsibilities such as document storage and management and bear risks of losing them. However, with digital and cloud storage and management, such factors are eliminated.
Increased satisfaction among employees
Lastly, AP automation allows for optimum usage of human resources. With traditional means, a good number of employees were constantly buried under the redundant job of data entry, approval of invoices, and so on.
However, with the automation of the AP process, the employees are relieved of such monotonous activities. With that, the company can make better use of its employees by involving them in projects that are of high priority.
Conclusion
Digital transformation has brought forward some amazing developments in the business sectors, and AP automation is, without a doubt, one of the greatest among them. It has enabled companies to have a better financial and AP infrastructure that is quicker, efficient, and highly secure than traditional means.
