How to Manage Accounts Payable Effectively

CalendarJune 15, 2023

How to Manage Accounts Payable Effectively

Efficient accounts payable (AP) processes require careful management to ensure timely payments, accurate records, and budget adherence. Effective AP management improves cash flow and reduces the risk of errors or fraud. As industries across the globe move away from manual workflows, companies must remove paper-based processes and consider AP automation as a necessary solution for business growth.

Make Sure the AP Process Is Clear and Streamlined

The first step in successfully managing AP is establishing a straightforward process. Every step of the AP workflow, including receiving invoices, verifying their accuracy, obtaining approval, and issuing payments, should be fully understood by the AP team. A clear strategy will help reduce errors and delays, but it’s worth noting that facilitating this management while depending on manual workflows is often time consuming and costly.

AP software makes managing AP much easier. Automation can reduce employee workloads by automating all data entry, invoice matching, and payment processing tasks. AP automation also provides real-time visibility into a company’s AP status, making tracking invoice approvals and payments significantly more manageable.

Take the time to outline your current AP process and evaluate where your inefficiencies are. This will highlight tasks that can be easily handled by a comprehensive software solution, and can show you how much time your AP team will gain just by offloading their manual work.

Set Up Terms With Vendors

Payment terms outline when a payment is due and any discounts available for early payments. Favorable payment terms that are also fair to suppliers are the best-case scenario when setting up terms. These terms also help cash flow management, which enables you to align payments with current cash flow to ensure timely supplier transactions.

The chances for errors, late payments, and missed discounts all increase when setting up payment terms manually. Without automation, someone at the company is responsible for aligning payments with cash flow management and checking to ensure on-time payments. In an automated AP system, those tasks are all done automatically, and employees can match them to ensure they are running correctly.

Monitor Accounts Regularly and Report on Results

Companies can apply the same logic for payment terms to account monitoring. AP monitoring is how a company can ensure the correct processing of invoices and on-time payments. Monitoring can look like reviewing AP reports, such as aging and payment history reports, or setting up alerts for invoices approaching their due date.

As with other manual processes, manual AP monitoring is prone to errors and inconsistencies. Human error can lead to incorrect data entry, misplaced invoices, and missed payments. Suddenly, AP employees are left with a high level of responsibility when they lack the automated checks and balances that come with AP automation.

So while companies can monitor accounts manually, it’s not always the best option for those looking to reduce costs and avoid risk. Instead, companies can offload that risk to an AP automation provider like Corpay and work with a team of in-house experts who ensure real-time, reliable monitoring of AP.

The Next Steps for AP Management

With these basic steps, companies can evaluatehow to set up AP for their benefit. By understanding the need to outline the AP process, set up terms, monitor accounts, and report on the results, it’s easier to pinpoint how manual hours can overwhelm an already-complex workflow.

The time-consuming and labor-intensive nature of manual processes is just the start. Manual workflows also include the heightened potential for errors, limited visibility, and a lack of security. An automated AP system is the first step in overcoming these common challenges as it can seamlessly reduce errors, increase efficiency, and lower costs.

Contact our in-house experts at Corpay to discuss your current AP setup and how it can evolve to benefit your business today.