Keeping track of your business finances is an essential part of building and maintaining your business success. With automated processes that make tracking your accounts faster and more accurate, it’s essential that you understand the importance of covering all your financial movements using skilled staff and the most up-to-date software.
What are accounts payable?
In accounting, Accounts Payable (AP) is all the money owed to suppliers for their delivered services and goods. For good business relationships and accurate financial records, you need to have a dedicated accounts payable sector to look after the key functions and processes.
What are the key functions of accounts payable?
It’s easy to make the mistake of dismissing accounts payable as nothing more than paying invoices. In truth, it is far more valuable to your business than that. There are four key functions that work to strengthen your business:
Invoice verification: Verifying invoice details against purchase orders.
Invoice reception and categorisation: Processing invoices and assigning expenses into the correct category.
Data capture and coding: Recording invoices and applying codes that organise company spending.
Routing: Sending invoices to the appropriate sector or stakeholder for approval before payment.
What is the accounts payable process?
The accounts payable process is in place to provide a structure and system for handling bills and invoices from start to finish. Typical steps within the process include:
Invoice capture
When invoices come in they need to be recorded and logged. This can be using a manual or digital capture that records the vendor details, line items, amounts as well as invoice numbers and codes. The aim is to be able to search and find any previously received invoice by inputting known details into a search bar.
Invoice approval
Before payments are made they need to be signed off by a team manager or director.
Payment authorisation
Only certain members of staff will have authorisation to payment accounts. There is a set procedure for how this is completed including payment dates and payment types.
Payment execution
The invoice is paid and a remittance is sent to the vendor with payment details. Now completed, the invoice is closed.
Accounts payable optimisation
Its important accounts payable optimization is maintained to get the fastest and most accurate results, especially for manual entries that can be tedious and prone to human error. Technology is making optimisation and efficiency better than ever, but you need a skilled AP officer to keep it running smoothly.
What does an accounts payable officer do?
An accounts payable officer is in charge of the administrative, clerical and financial side of the AP system. They look after each invoice, taking it through the steps to payment or review.
What are the challenges of managing accounts payable?
There are a number of challenges that need to be faced when managing accounts payable.
Removing paper and manual effort
Manual handling leads to less efficiency and a greater risk of human error. It also makes transitioning to new systems or meeting new regulations difficult.
Enhancing security and fighting fraud
As systems move online fraud is becoming a bigger threat. Scams are highly sophisticated and more frequent. Protecting your business from fraud as well as security threats is essential for keeping finances and data secure.
Improving the efficiency of data management
When AP records are kept accurately you gain increased efficiency as records are easy to access and reconcile. Automation can assist with this allowing more data to be stored faster, and in real time with minimal staff.
Paying vendors on time
In order to have a good relationship with suppliers you need to have accounts paid on time. This will involve having a well-organised cash flow to balance out your outstanding payments.
Bolstering the value of accounts payable
When fewer manual hours are needed and errors are minimal, AP becomes more valuable to a company. Using automatic systems they can enable staff to invest time in strategic initiatives.
Every aspect of business is changing and evolving with technology and accounts payable is no exception. There are incredible software and system offers coming onto the market every day to improve AP handling. Contact a fully certified bookkeeper for a tailor-made solution