Email: Telephone: 01798 861189

How to optimise accounts payable the easy way

by Anna Koussertari

For many years, businesses have viewed accounts payable as a routine but necessary back-office task. Invoices come in and, eventually, money goes out of the company bank account.

However, that old way of looking at it negates the importance of cash flow and expenses. You’d prefer the process to be as inexpensive and accurate as possible.

Even if you have a great team, failing to put the right system in place could get you in trouble. It’ll be costly to administer your accounts payable, and you run the risk of irritating your suppliers. Fortunately, there are a number of solutions. Optimising your accounts payable is easier than you think. Here’s what you need to do.

Maintain accurate supplier information

Suppliers don’t always stay in the same location, year after year – they move around. Companies can change their premises.

For your business, this could be an issue. If a supplier doesn’t notify you of a change of location, you may start sending your payments to the wrong place. And if that happens, it can lead to failed payments, penalties and deteriorating relationships with your partners.

To combat this, regularly update your supplier information list. Additionally, use supplier portals for payments, if they are offered. Avoid cheques in the mail.

Put a dispute resolution system in place

There will be times when your AP department gets into disputes with vendors and suppliers. This is an inevitable part of business, so it is critical that you have resolution systems in place ahead of time. You need to resolve issues quickly to maintain good standing.

If possible, implement an automated approvals process that you can integrate directly with your enterprise resource planning (ERP) software. This way, you make sure that your pre-approved purchase orders go through, leaving any remaining orders to your accounts payable team to manually approve.

The more you streamline disputes, the better the relationship will be between you and your suppliers. Tracking issues can also help you identify suppliers who may not be playing by the rules, allowing you to evaluate them over time and, if necessary, choose another vendor supplier.

Standardise your payment terms

While negotiating different payment terms with various providers might seem like an advantage, it often creates large administrative overheads that cut into your budget. There are severe challenges that arise when you have to deal with a large number of vendors who all have their own approaches.

To deal with this, standardise your payment terms and look for suppliers who are willing to accommodate them. Prevent ad hoc negotiations and just explain to your partners that this is how you do things. This way, you can cut costs and potentially improve your cash flow.

Define clear access controls

While having more people in your firm about to access your accounts payable can seem like a great idea, it can also lead to more mistakes. Errors and duplicate entries are much more likely to appear when there is more than one member of AP staff managing each transaction.

If you are operating a cloud-based model and want to include multiple stakeholders in the process, look for software that flags duplication. Don’t rely on manual systems to tell you that you’ve already paid an invoice. Also, get training from the Accounts Payable Association so that your team can manage this kind of process.

Prevent fraud

Whenever companies transact, there is an opportunity for fraud. Though rare in the B2B environment, it does happen. Vendors struggling with their own cash flow might charge you extra for services that you did not receive or ask for.

There are also external fraud issues. Cybercriminals, for instance, could pose as a supplier and demand payment from you using counterfeited invoices.

The good news is that accounts payable approvals tracking can help this. These scan invoices and look for any discrepancies that might indicate fraudulent activity, flagging them for manual review if necessary.

Measure efficiency

Relatively few corporate AP teams actually measure their efficiency using key performance indicators (KPIs). They view their tasks as necessary and procedural, not something that’s subject to improvement.

But, of course, that’s not the case. There are plenty of KPIs that teams can use to assess how well they are running their operations. These include:

  • Cost per invoice
  • Accuracy of payments ratio
  • Percentage of payments paid on time
  • Early payment discount rate
  • Time spent handling supplier disputes

In many cases, you can automate the collection of these statistics. It simply requires using the right software.

Improve your workflow

You might have the best accounts payable team in the world, but if their workflow is out of sync, they’ll struggle to operate cost-effectively. Take a look at your current workflows and ask whether there are any bottlenecks or issues. Centralise your reporting across your organisation and put it into a standard format so that people can readily understand it.

If your company has more than one purchasing location, it helps if you can send all invoices to a central location. Companies operating manual processing should look for ways to limit the number of cheque runs they make to once per fortnight.

Prioritise invoices

Lastly, not all invoices have the same level of priority. While you have months to pay some, you might only have days to pay others.

That’s why it is so important to prioritise. Failing to do so could lead to relationship issues with suppliers and vendors. It could also result in late payment fees.

Naturally, AP departments can sometimes find it hard to make payments on time, particularly if they have thousands of invoices arriving at different locations each week.

The trick here is to have a three-step process. The first is to arrange the invoices into high, medium and low priorities. The next is to check that the goods or services meet your quality control criteria. (You don’t want to pay an invoice until you’ve verified that they meet your standards). The final step is to pay invoices in an order of priority, taking into account things like early payment discounts.

Again, you can automate many of these tasks with software. It reviews invoices as they arrive, showing you when payment is due and potential discounts available.


Join our Community 

It's important to us that you have your say, and we want to hear from you. Join the AP Community and deepen your understanding of our hot topics raised by industry experts, influencers or AP delegates like you, interact on an ongoing basis on our platform, ask and answer questions and share information, we have provided the platform you have the voice, send us any hot topics or news article to and have your say.


Subscribe to all the latest APA news and information

Request a Call Back

Should you wish a member of the AP team to call you back, please click below.

Call Back