As your business grows, the goods and services you use quickly expand. At this point, ensuring bills are paid both on time and accurately balloons into a significant, time-consuming task. Companies that just wing it and hope for the best leave themselves open to missed payments and additional fees, poor inventory management, potential tax problems, and even fraud.
The sensible option is to take a step back and develop a system for handling payment workflows. This includes a step-by-step process covering the entire workflow:
- Approval: Getting the go ahead from management before making the purchase.
- Ordering: Comparing and selecting the best vendor for your specific needs – often, this step requires writing a request for proposal (RFP).
- Receiving: Once the goods are delivered, you have to verify everything ordered has arrived and that it matches the agreed upon quality.
- Invoicing: Credit-based purchases mean receiving and extracting the relevant information (payment details, payment date, etc.) from the vendor’s invoice.
- Payment: Scheduling bills and sending the final payment to meet the deadline while also considering the company’s broader cash flow.
These five steps, multiplied by your total number of outgoings, quickly generate a significant workload, causing a headache for everyone involved. Thankfully, technology is here to help with online accounts payable software available to help manage, streamline, and automate payment workflows for several benefits.
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The benefits of streamlining payment workflows
The primary benefit is increasing the efficiency of the purchasing process, saving you both time and money. Removing redundancies and breaking down the payment workflow into only the necessary steps is an effective way of not spending more resources than you need to while also protecting against mistakes, missed payments, and fraud.
Beyond enhanced efficiency, streamlining payment workflows allows you to better manage your cash flow and find the best outcome for a given scenario. With agile, efficient processes in place, you can analyze potential accounts payable tradeoffs.
For example, you could do the cost-benefit analysis on taking advantage of early payment discounts vs. holding onto your funds for as long as possible for greater cash flow flexibility. You could dive deep into the different vendors to determine the best option based on quality, delivery time, cost, etc. Without the significant burden of lengthy administrative accounts payment work, you can focus on tasks that bring genuine value to the organization.
Finally, streamlining accounts payable processes with software leads to increased visibility. Businesses can track invoices, scheduled bills, and the status of payments in real-time from a single portal and provide access to relevant parties across the company.
This helps employees understand upcoming deliveries while helping management make better purchasing decisions based on all the information. It also enables you to communicate with your vendors, building long-term successful working relationships.
While the benefits are plain to see, what does streamlining payment workflows actually look like in practice? Listed below are five examples to inspire your future operations.
1. Standardize Your Accounts Payable Workflows
The first step is to standardize your payment workflows. You can’t combine or automate processes if the workflow is different every time you make a purchase. You need a structured system in place for accounts payable procedures covering each of the five steps listed above.
- How does a purchase get approved?
- Who verifies the delivery of goods?
- How do you handle a new invoice?
- What are the communications channels between the various parties involved?
These are all critical questions that need to be ingrained into your staff to streamline accounts payable processes.
2. Fast but safe approval
When a purchase needs to be made, you want to make the process as simple as possible. However, you also need approval from management and the accounts team to ensure it is necessary and budgeted for.
Accounts payable software is now available to help companies install simple and safe approval workflows. You can invite additional users to the platform setting up roles and permissions to control how each transaction is made.
For example, standard purchases can be fast-tracked to save time, while one-off or unusual purchases can be set to require additional steps. You can give heads of departments payment approval privileges up to a certain threshold and then implement further approval from management for higher-value purchases.
By controlling your purchases in this way, you can stay on top of your cash flow and verify each transaction’s validity without doing unnecessary work.
3. Automate extracting invoice details
When you receive an invoice, an employee has to extract the critical information and input it into another system (typically an accounts payable or accounting platform). With advanced software, it is now possible to automate this process.
Invoice capture scans invoices, identifying the fields needed to verify and pay any bills. All of the important information–vendor, payment details and date, the goods delivered, the invoice number, and more can now be automatically captured.
4. Unifying your payment methods
Paying invoices is often complicated due to different bills requiring different payment methods. You might pay your utilities by credit card, your rent via bank transfer, and your vendors by ACH. Thankfully it is now possible to unify all your bills with a single payment method using accounts payable software.
Even if a vendor doesn’t accept cards, accounts payable software can now take payment on your end using your preferred method and then send your vendor a check or an immediate direct deposit.
5. Integrate your accounts payable software with your accounting software
Accounts payable teams have to be in constant communication with the accounts department. By integrating accounts payable and accounting software, you can automatically keep track of your books, streamlining operations and reducing manual errors.
Reconcile the two systems to ensure there is a single source of truth regarding cash flow across your entire organization. Reduce manual work so you no longer have to do the same job twice: add vendors and make payments in your accounts payable platform, then watch as it automatically updates your books on your accounting platform.
Save time and money when you spend money
Streamlining payment workflows is the key to enhancing your workforce’s productivity while reducing errors or missed payments. With employees free from repetitive administrative tasks, they can instead focus on improving operations and finding new ways to bring value to the company.