Even without knowing what was charged or when the invoices are due, it can be challenging to recall who gave you an invoice. And it can be challenging to recall the penalty fees and how much they cost you on average each month if you end up being late on paying one of them. For these reasons, it’s essential to create an accounts payable system that is suitable for the needs and processes of your company.
Making large profits alone is insufficient for your company’s success; you also need to spend every penny wisely. You will lose more than just your revenue if you don’t. Therefore, handle your accounts payable with caution.
The manual handling of AP takes a lot of time because there are so many mistakes that can be made by humans. So it makes sense to depend on advanced AP management software. So it makes sense and is essential for the viability and expansion of your organization to adopt advanced technology for the appropriate management of accounts payable.
Here are eight tips to improve your account payable management and reduce errors in accounts payable.
Use an Advanced Invoice Program
One of the primary goals of any accounts payable system your business uses is to reduce human error. However, if you’re using a spreadsheet or any other outdated method, you are at risk of entering data from invoices incorrectly. Investing in online invoicing software that automates aspects of AP, such as importing new invoices and matching them against current ones, will put an end to these kinds of errors. Let technology manage everything for you rather than manually keeping track of everything.
An easy way to keep your accounts payable system organized is to use online invoice software. It enables you to optimize procedures and automate invoicing, reducing errors and speeding up staff members’ time for other, more crucial activities. Additionally, because workers can see exactly where their money is going each month, online billing software can reduce the risk of fraud. Automating accounts payable not only minimizes human error, but also provides a detailed audit trail in case processes ever need to be reviewed or changed.
To begin automating accounts payable, consider what duties staff could outsource or assign to others. Like, what about payroll? Are there any manual processes that could be replaced by automated ones?
Staying organized is the first step to reducing errors. There are various online invoicing software options available, but if you send invoices to vendors via email or Excel files, something could go wrong. For example, how do you know if a vendor has seen an invoice? How can you make sure a customer doesn’t pay twice if they unintentionally forward their invoice to various people at your business?
It might be challenging to ensure prompt and exact payments if you have hundreds or even thousands of invoices coming in each week or if your organization experiences fluctuations in invoice volume during certain seasons. Additionally, the invoice must be compared against the purchase order and the goods receipt (if applicable). You don’t want to submit an invoice for payment until you have confirmed that the service has been rendered or that the product has been received and matches the invoice.
Additionally, you want to be aware of the possibilities for early payment discounts that many suppliers provide. The approval process will go much more quickly due to AP automation, so you’ll be able to identify and capture early payment discounts.
Correctly Label Documents
It could be challenging to locate a file if its labels aren’t accurate. As a result, be cautious with how you name and label files. Include details like your customer name, invoice number, due date, and even your employee number when labeling documents. This will become check requests or account payable invoices so that you can quickly identify the person responsible for any errors with these payments (such as missing information or incorrect pricing).
Verify each entry to help prevent errors in accounts payable. The easiest solution to avoid errors is to double-check your calculation, which means having two staff, rather than just one, verify each payment. Employees in charge of various facets of accounts payable should approve each payment before it is made, which is another smart move. You may avoid certain expensive accounting errors and find problems early on by double-checking.
Setup Tags on Your Computer
A smart strategy to make sure you’re paying your bills on time and not skipping deadlines is to use automated tracking. You can track all of your accounts payable transactions from one location by setting up tags on your computer, making it much simpler to keep track of them all.
Make Frequent Backups of Your Files
It’s crucial to often back up the data on your computer to protect against data loss. We strongly advise storing a copy of your data on an external hard drive or USB flash drive that you can take with you if you need to work at another location because hard drives and other storage devices are unstable. Make sure at least one person is experienced in Excel and your accounting software. So they can check documents and numbers before sending them out for payment.
Proofread and Review
There are ways to reduce your probability of making a mistake, even though no set of methods can guarantee it. One method is to proofread your work and have a second set of eyes on reviewing it. Using a more automated method, such as computer software or cloud-based services, is an additional option. These also offer better documentation, which can make the future operation of your business’s accounts payable system function more smoothly.
By following these procedures and making continuous improvements to the AP process, you may speed up the approval procedure, get rid of late payments (and late fees), and eventually have more control over your cash flow. However, using paper and manual procedures would only make it harder for you to accomplish your goals. The best method to improve your account payable department and eventually achieve best-in-class status is to implementing accounts payable automation solution.
Once this is achieved, your AP staff will be better able to manage problems and devote time to more valuable things. That is how a back-office cost center becomes a source of income.