Accounts Payable has always been (and still is!) considered a back office function of a company, when in fact its key to the company operating at all. What would happen if you didn’t pay your bills, you get a friendly reminder and then some not so friendly reminders, perhaps a bailiff visit or you could end up in court. And on top of that you lose goods/services and more importantly your reputation.

So why is it back office?

 

Lots of people consider this areas is not exciting, not stimulating enough, won’t keep you interested and is so boring you yawn at the thought, because well, its just an invoice. Well you couldn’t be more wrong, working in AP can be whatever you want it to be, you could be passing through getting a bit of experience, or you could stay and reach a manager level where you can have more of a say and even bring in your own innovations.

 

For me, I literally fell into an AP role, I wasn’t looking for it, wasn’t sure I wanted it, but felt I was obliged to apply for it and despite all my doubts, I’ve never looked back.

Here is my story…..

 

After being a PA for 8 years and managing a Director, there was no where else to go and since the PA to the Chief Executive wasn’t going anywhere, I asked for and was offered the opportunity to undertake some studying sponsored by my employer with the aim to see where else I could work within the organisation.

 

I did a Certificate in Management Studies with the Open University, I hadn’t studies with books in over 16 years, so it was very daunting. A CMS seemed to offer a range of topics and I was hoping it would bring out what my strengths were. I covered organisations and people along with marketing and finance. After 12 months of submitting assignments, attending tutorials at the weekends and exams, it was all over and I passed. My highest scores turned out to be for Finance and along with Marketing it was my favourite topic so I started looking for opportunities that I could use my skills on.

 

I was offered a secondment to move to be a Finance Officer for Facilities Management to oversee budgets for my Manager, facilities overseeing all buildings and offices for the organisation, including raising orders and paying invoices.

 

I made such a success in the role that I was offered the opportunity to take on more budgets for Housing Management and Directorate Management Team. From a few budgets I was now responsible for 3 key areas overseeing £5m worth of budgets and hundreds of orders and invoices.

 

As a next step I undertook the Diploma of Management Studies level with Greenwich School of Management and at the end of successfully completing this qualification, a Director encouraged me to apply for a newly created role in Finance as AP Manager, a newly created role in Finance to manage AP on behalf of the council.

 

In 2003 I took on the new role of AP Manager where No PO No Pay was being implemented across the organisation, along with centralising the receipt of AP invoices to a PO box address with an external contractor. The aim was to withdraw manual entry of invoices across business areas and mandating purchase orders for suppliers.

 

Early days progressing a pilot with 8 business areas was definitely challenging, it was a new venture for the contractor as well as the organisation, so a steep learning curve for everyone. I had to balance the relationship with business areas and supporting the contractor to manage the work in an effective manner. Great negotiation skills were definitely a benefit!

 

Keeping suppliers updated on progress was key to the success as well, if your invoice keeps getting rejected you do eventually get the message that it won’t get paid without that number.

 

It took around 12 months to move all the business areas to the new arrangement where manual entry was withdrawn; this resulted in 120,000+ invoices being managed centrally. There were of course areas of the business, which couldn’t be managed in this manner so this was taken into consideration too.

 

Reviewing invoice payment performance proved that only 55% of invoices were being paid on time, where the target was 95%. So, time for more exploring on why performance was low and what I found was PO’s were not being raised at the point of order (as the invoice date preceded the PO date), business areas were receiving their invoices directly (as they wanted to keep a copy), then raising a PO and posting the invoice to the PO Box address. Now what a way to avoid following procedure!

 

It took persuasion and negotiation to get business areas and suppliers to see the benefit of the new process, any new arrangement takes time, but with No PO No Pay being so innovative at the time, it was a challenge I was proud to succeed on, with payment performance moving up to 94% when the system bedded in.

 

Moving away from manual entry and paper invoices with No PO No Pay was just the beginning when I was asked to seek a contractor to support end to end electronic invoicing. Writing a specification (now that’s new!) was the first step of the procurement process to another very innovative arrangement to appoint a partner who had the technology. All of this whilst being promoted to Shared Services Manager now responsible for AP, AR and Cash Manager and 23 staff!

 

Twenty months later and 80% of our suppliers had been onboarded to a unique stand alone Procure to Pay supplier portal, no more paper or scanned invoices – we went paperless. And as an organisation we were first too, even some 20 years later I still see organisations just about to implement No PO No Pay!

What an achievement to be recognised by the Adam Smith Awards with Treasury Today to be Highly Commended, now there’s an achievement that I will always remember.

Added extras when moving to an electronic process allowed other improvements to be implemented as well.

 

  •  Auto approval of purchase orders up to £500 and auto approval of the invoice too! Analysis of data showed that 47% of invoices received were for £500 or less, but the total of all of these invoices were valued at under 2% of the total annual budget – in effect too much time was spent on lower value invoices when the focus should be on higher.
  • Review of past AP data where manual input was undertaken resulted in being able to recoup duplicate payments to supplier at around £3m over a 5 year period. Duplicate invoice numbers, added characters, dots, dashes all to bypass the system saying the invoice was already there.
  •  Cash refunds in partnership with the Post Office, where a customer for a one off refund doesn’t need to be created in the system, resulting in a turnaround from request to payment down to 10 days from over 30 days originally.

All innovations that helps make the process quicker and in turn then saves the organisation money and create a great relationship with suppliers, who were now clambering to work with us.

My next role was the pivotal in taking the biggest step of my career.

The organisation decided to work in partnership with 5 others to partner and create a single platform where all 6 would operate for HR, Procurement and Finance. I was asked to lead for AP in my organisation (on top of my day to day role at first), which was a huge opportunity and I knew it would need a lot of extra time, but I couldn’t miss out. And I didn’t, so much so that I was soon putting myself forward to manage all of the 6 stakeholders in the partnership and moved to the project full time.

I worked non stop to gather everyone’s requirements, I influenced others to the benefits of the way my organisation worked to ensure I didn’t allow our process to fall back and also took on some potential new processes that would future the system. It took around 15 months but I was relieved when at go live my organisation hadn’t fallen back. So business as usual was the order of the day and it was finally time to move on.

After 24 years and 9 months, I left my organisation to go it alone, but that’s where another story begins for me and I’ve never looked back.

In summary you have to use a lot of skills to be able to manage such a key area of any organisation; you need to be able to analyse data, see what it tells you, what you think you can change on your own or where you need others to help.

Bigger changes may require you to go to the marketplace to see what it has to offer, keep up to date with what the market officer’s, not everything would be suitable for your requirements, but some will.

Use your influence and persuade others even at the most senior level to be able to progress a change, make sure you have all the data you need to prove your concept and you then need to celebrate your successes when they happen (or go back and try again!).

All in all AP offers such exciting opportunities and I hope you can see this too!

Giuliana Quadernucci – Director – Account on Time Ltd

With AP Appreciation Week finished for another year, we are taking the time to reflect on what was a successful and thought-provoking five days.

Last Tuesday, we were joined by over 100 Accounts Payable and P2P professionals in Oxford for one of our biggest events of the year, the AP & P2P Forum. Over the course of the day, we were led by special guest panels in identifying the barriers we face within the community, how technology can be used to tackle those obstacles, and what we can expect for the future.

 

As the scene was set for the first panel of the day, the audience quickly identified an often fraught relationship between Accounts Payable departments and P2P as a reoccurring barrier. Steered by the session host Philip Spence, each panellist was able to describe how they have been able to work alongside their procurement teams and finance departments, developing a working relationship and ensuring communication. Sometimes it is about winning hearts and minds to ensure that relationships can thrive’.

 

For the second panel of the day, Max Kent of PSL led the debate on ‘The Ostrich Effect’, avoiding change and technology to the detriment of a business. Many attendees revealed that resistance to the ‘new’ usually stemmed from fear of job security, with anxiety that automated technology reduced workloads and the necessity for staff. With a refreshing take on a common problem, delegates revealed how they had successfully overcome this. By communicating the benefits of new systems and highlighting how reduced manual work could allow for more time analyising and improving processes, they were able to effectively implement new systems with the support of their staff. Echoing similar sentiments to the first panel, it highlighted how communication was once again essential, whether between teams or internally.

 

Throwing it back to earlier days in his career, automation expert Jethro Elvin of Basware shared an interesting example of how fostering positive relationships was paramount. Explaining his time spent visiting suppliers, Jethro recalled working alongside the Mersey River with factory workers, filling Jammie Dodgers with hungry wasps swarming around. Being able to understand the processes of these workers, and the problems they faced, helped Jethro to  develop a stronger working relationship with that supplier. Almost 20 years later, Jethro remains a strong advocate for putting yourself in another’s shoes.

 

Our special guest speaker spoke of his experience becoming a World Champion and Olympic athlete twice-over, providing attendees with the drive to conquer their dreams. . To change our perception of success into a reality, we must consider all that we need to achieve and the steps required to get there. The inspiring session questioned, ‘How can we instigate our own success, and how can we facilitate our own cycle of change?’

 

So, what can we take home from the AP Forum?

As AP teams across the country celebrated each other and their profession during AP Appreciation Week, it is clearer than ever that the drive to change and elevate our profession is there. But how can we facilitate this change ourselves?

The AP Forum provided some essential take-home messages, that we can champion ourselves, and with perseverance, we can create our own cycle of change. So why not give the following a try and see where it can take you?

 

Communicating

Whether we are liaising with suppliers and customers, working with other departments or speaking to team members, ensuring we communicate effectively is essential for developing positive working relationships. Taking the time to get to know one another personally and professionally can help us sympathise with one another and adapt to a more cooperative way of working.

 

Learning and Developing

Recognising our limitations at work can sometimes be the hardest challenge, however, learning from our mistakes and working on our weaknesses can often have the biggest positive impact. With the launch of software such as ACT, which enables AP teams to analyse where there is room for improvement and then tailor their training accordingly, it is now easier than ever to develop professionally and streamline a department.

 

Inspiring

For the last session of the day at the AP and P2P Forum, the discussion moved to the future of Accounts Payable and the workforce of tomorrow. Inspiring the next generation of AP professionals and instilling them with the same passion for the industry is essential for continuing the progress we have made as a collective. By encouraging more newcomers to consider Accounts Payable as a long-term career in which they can progress, we can help to continue raising the standards and perception of the industry. 

What is the impact of treating accounts payable as a silo function within an organisation?

We’re exploring the importance of engaging with key internal and external stakeholders, including suppliers, business operations, procurement, and the wider finance community.
Let’s break down the barriers and foster collaborative relationships for a stronger, more efficient financial ecosystem.

The Impact of Accounts Payable as a Silo Function

Accounts Payable is often seen as an isolated department focused solely on processing invoices and making payments. However, this silo mentality can have several negative consequences on the overall efficiency and effectiveness of an organisation:

1. Missed Opportunities for Cost Savings: When Accounts Payable operates independently, it may miss out on identifying potential cost-saving opportunities in supplier contracts and payment terms. Collaborating with procurement and finance teams can lead to more favourable arrangements and improved cash flow.

2. Lack of Transparency: Siloed functions can lead to a lack of transparency and communication between departments. This can result in delayed invoice processing, disputes with suppliers, and ultimately harm business relationships.

3. Increased Errors and Fraud Risks: A lack of integration with other departments may increase the likelihood of errors and fraud. Engaging with stakeholders ensures multiple sets of eyes on financial processes, mitigating risks.

Engaging with Key Internal Stakeholders

1. Procurement Collaboration: Establish a regular feedback loop between Accounts Payable and Procurement teams. By involving AP in the procurement process, they can provide insights on supplier payment preferences and help negotiate better terms.

2. Business Operations Integration: Work closely with business operations teams to understand their requirements for timely payments. Regular meetings can help identify recurring issues and improve the invoice approval workflow.

3. Finance Team Synergy: Foster collaboration between Accounts Payable and the wider finance community, such as the General Ledger and Treasury teams. This collaboration enhances visibility into financial data and ensures accurate cash flow management.
Strengthening Relationships with External Stakeholders

· Supplier Engagement: Engage with suppliers beyond payment-related matters. Building strong relationships can lead to more flexible payment terms, early payment discounts, and a steady supply of goods and services.

· Clear Communication: Maintain an open line of communication with suppliers to address payment concerns promptly. Being transparent about payment timelines and any potential delays fosters trust and reliability.

Breaking Down Silos – The Way Forward

 

1. Cross-Departmental Meetings: Organise regular meetings involving representatives from different departments, including Accounts Payable. Encourage discussion on challenges and opportunities to promote a culture of collaboration.

2. Technology and Integration: Invest in integrated financial systems that connect Accounts Payable with other departments. Shared access to data ensures real-time information exchange and reduces duplication of efforts.

3. Training and Skill Development: Offer training programs to Accounts Payable teams, enabling them to understand the broader financial landscape. This empowers them to contribute meaningfully in cross-functional discussions.

By breaking down the silo mentality and actively engaging with key stakeholders, Accounts Payable can become a strategic player within the organisation. A collaborative approach not only enhances financial processes but also strengthens relationships with suppliers and fosters a more unified and efficient finance community.

Let’s embrace this change together and pave the way for a more interconnected and successful organization.

Have you ever wondered if your accounts payable processes are prepared for a recession?

 

Nothing is certain about the UK economy at present, but with the Bank of England warning of a recession looming, businesses need to be prepared.

 

When there’s uncertainty in the economy, business owners need to take stock of their assets and control whatever they can to weather the impending storm.

This means ensuring your AP processes are efficient. Streamline your internal operations, so everything will run as smoothly as possible under challenging circumstances. Accounts payable is a good place to start when you’re assessing your company and preparing to tighten your belt financially.

Managing accounts payable during a recession

 

One thing you must avoid during an economic crisis is disruptions in your supply chain. Businesses all over the UK will be doing their best to attract and retain customers who are strapped for cash and facing their own challenges.

Even when your own income may have dipped, the timing of payments to suppliers remains fundamental to running your business. Cashflow issues shouldn’t mean you are keeping a vendor waiting for payment.

Managing your accounts payable system efficiently means discovering the right balance when it comes to paying invoices and keeping your business well-stocked. You must have transparent communication with suppliers and a complete understanding of cash flow.

You also need the ability to streamline and improve AP processes that aren’t working, rather than settling into a familiar routine with potential blips. Turning a blind eye to issues because you feel you have enough to deal with already isn’t the way forward.

Your accounts payable processes will fuel your business and help you to move forward in a time of great economic uncertainty. Get it right now and it will become a key driving force to surviving the recession.

Understand cash flow

Get a complete view of your business’s cash flow by first focusing on the basics. Run a fresh projection on your estimated income and expenditure. Estimating how much cash you expect to flow in and out of your company during the changing economic climate is the first thing you should do.

Consider the size, sustainability and general health of your business. Consider whether there are any possibilities for growth, or whether it will be a case of survival, rather than expansion.

A new projection might bring about small, but vital, changes in your operations. It may lead you to revisit your strategic plans and adjust your approach accordingly to take into account a potential recession looming.

 

Using the appropriate accounting software can help business leaders to keep on top of cash flow by having accurate and timely information at their fingertips.

Surveys have revealed almost 70% of employees believe their company CEO has made important decisions based on information that isn’t accurate and up-to-date. This is a shocking number at any time, but in particular during a period when the nation is suffering an economic downturn.

During times of great turmoil, having an accurate, complete picture of your business’s cash flow is crucial to forecast and plan effectively.

 

Clear and proactive communication

Communication and relationships are vital to the success of any company, whether there is a recession or not. When you’re making changes and revenue is at risk, communicating in a clear and transparent way with your suppliers and contractors is the key to maintaining good relationships.

This is where accounts payable comes in, as keeping your finances up-to-date and estimating where there will be a potential rough patch will eliminate any nasty surprises.

The better your line of sight to AP processes, the more chance you have of keeping things on track internally. This will help keep your good relationship with partners and suppliers on track too.

Being proactive means communicating any economic changes that result in a change in your priorities or strategies to your suppliers right away. You must be open and transparent at all times, including communicating any changes to all stakeholders.

Be more accurate

While it’s natural for everyone to feel nervous during a recession, including your suppliers and partners, having accurate information about the state of your finances is vital. If you’re still working on a manual accounts payable system, your processes will be slower and there will be a greater chance of human error sneaking in along the way.

When there is a recession, you may be short-staffed in general, but won’t be able to take on any more staff due to financial constraints.

Any tedious manual approval processes will add additional work to already overstretched employees, at a time when they’re probably struggling with extra responsibilities to combat a shortfall in resources.

This can result in extra stress on your financial team in the accounts payable department. Any processing delays will also cause more stress for your suppliers and partners when manual processes cause delays in payments.

Having a streamlined and efficient automated AP system can eliminate delays and reduce stress for everyone.

Make savings where possible

When you process invoices manually, it tends to be more expensive in terms of employee hours worked. Research by Levvel Research has revealed the cost of manual processing is, on average, around £13 per invoice.

This covers the cost of labour throughout the whole process. It doesn’t take into account the potential for mistakes and the possibility some work may have to be done again due to human error. It also doesn’t cover the time spent on reconciliation.

Keeping a lid on costs is vital in today’s climate and processing invoices manually isn’t the most cost-effective way of running a business. Surprisingly, despite manual AP processes making less sense today, a staggering 86% of small businesses say they still have some manual processing elements to their accounts.

While we’re heading towards particularly challenging times today, if you take a proactive stance now and look at your accounts payable processes, you will have a better chance of easing the uncertainty and setting yourself on the right road to survive.

Businesses are facing huge challenges as a result of the troubled economy. Inflation has reached a 41-year high of 11.1% and the Bank of England is warning of a long recession looming.

 

As a result, businesses are increasingly automating their accounts payable process to increase efficiency going into 2023. Surveys have revealed CEOs’ main goals are digitisation, growth and efficiency. All three are directly connected in post-pandemic Britain as businesses streamline processes to utilise limited resources most effectively.

 

The current economic climate, combined with businesses still dealing with the impact of Covid, has led to the adoption of digital technologies speeding up by at least three years, according to research.

 

Read on to find out about the top accounts payable trends for 2023 that are aimed at preparing your AP team for survival in the mid-term and success in the longer term.

1. Paperless processing

 

In an era where digital transformation has been rapid, businesses are set to further replace time-consuming manual activities and paper documents with electronic accounts payable processes. Around 50% of organisations surveyed are already using Optical Character Recognition technology to read documents in the processing queue.

 

In addition, more than half of respondents are using an electronic invoice matching system to support AP processes. Only 15% of businesses are using artificial intelligence-based cognitive automation and 36% use rules-based robotic process automation on data-related tasks.

 

The indications are these numbers will increase in 2023, which is good news for the 50% of organisations that are still “pen-pushing” in the accounts department.

2. Changes in productivity and costs

 

The significant increase in process efficiency in accounts payable suggests the general cost of operations will be driven down in 2023. However, on a more cautious note, these savings are likely to be offset by rising labour costs and a general shortage of talent.

 

Digital accounts payable technology has become more affordable and accessible for companies of all sizes in recent years. Studies into invoice processing efficiency between 2019 and 2022 reveal that productivity has increased by an average of 7% during the past three years.

 

The data shows organisations across the board have become more efficient and productive since 2019. This is “almost certainly” down to the digital transformation, according to analysts.

 

The impact has been greater in low and medium-performing organisations. Processing efficiency increased by 28.6% and 16.6% respectively in these performer levels. This is because typically, these organisations use fewer employees to carry out the related transactional activity.

3. Impact of the “Great Resignation”

 

The impact of the “Great Resignation” will continue to be felt in AP departments. It describes an economic phenomenon whereby employees are considering quitting their job.

 

It began early in 2021, in the immediate aftermath of the Covid-19 pandemic and lockdowns. Significant social and economic changes impacted people all over the world and thousands decided it was a good time for a career change. The main reasons included salary stagnation and the rising cost of living.

 

The latest figures show 40% of workers are considering resigning from their jobs. An increase in labour costs is being driven by the talent shortages and employee retention problems that have prevailed recently.

 

The Great Resignation has specifically impacted accounts payable costs, where salaries have increased by 20% for a senior AP clerk between 2019 and 2022 as companies strive to attract the best talent. Companies trying to get a handle on costs during the anticipated recession will be looking towards more automation to try and save money.

4. Better forward planning

Accounts Payable has already seen tremendous changes since 2019 in terms of costs, but because it is a key process for every business, it must work effectively. People tend not to notice AP when it’s working well, but if it stops working, they will certainly notice the difference and everyone will know about it.

According to research, only around 30% of digital transformations in the accounts payable department are completely successful. This is because many organisations are rushing into it without having formulated a clear idea of how it will work.

Those taking the plunge in 2023 must make sure they have the correct processes in place to make it work efficiently, saving the business money and making it more sustainable. Those who miss the mark may experience a negative impact until they get it right.

5. More businesses will be outsourcing

Research suggests there will be an increase in accounts payable outsourcing in 2023. Many successful financial organisations have started outsourcing as part of their operating model.

 

The Deloitte CFO Signals survey reveals 34% of finance executives have indicated they are likely to increase outsourcing over the next 12 months in their day-to-day operations.

 

A top outsourcing firm will do accounts payable transactions for a living. They can do more than just perform the tasks and provide the talent. They are also experts at optimising processes to ensure the highest levels of efficiency and productivity.

 

They are the experts in implementing digital technology, removing the risks from these initiatives. If you have outsourced your AP activities to a professional consultancy, they should guarantee the outcomes when it comes to the delivery of your expected cost savings and ROI.

 

When you achieve better results for your transactional activities through outsourcing, this should lower your costs and improve your operational efficiency. It will enable you to focus on the key digital transformation projects that are the core of your business.

 

The idea is to allocate the resources previously swallowed up in administrative tasks into other parts of the business. By working with a professional AP provider, you can also overcome challenges such as different time zones and geographic proximity, language barriers and communication challenges.

 

 

Conclusion

 

The Great Resignation and the digital transformation will continue to impact the world as we know it during 2023. Forward-thinking finance executives will overcome these challenges by incorporating digitisation and outsourcing into their operating model to solve talent shortages and labour costs.

Once you have improved operational performance and productivity, this will enable you to start working on the goals of growth, further digitisation and efficiency.

Accounts payable is an essential component of any small business’s accounting processes. Your business’s accounts payable department maintains a record of all the money you owe to suppliers and other creditors. A well-functioning accounts payable department will help you ensure that you pay any money you owe to other individuals or businesses as promptly as possible and in line with any payment arrangements, you might have with individual creditors.

 

For many small businesses, the accounts receivable department consists of a single person for whom accounting might be just one of several duties they perform. However, it’s never too early to start thinking about how your business will manage its accounts receivable. One person might be enough while your business is relatively small, but as it grows, so will your needs. By getting all your accounts receivable processes and policies in order now, you can save yourself a lot of trouble further down the line when you have more to manage. The tips below are all geared toward small businesses, but they will prove invaluable throughout your company’s growth journey.

1. Start automating

 

As a small business with relatively few accounts to keep track of, forking out cash for accounting software might seem like an unnecessary expense. However, even if you are doing just fine without it, there are still a couple of reasons it’s worth the cost.

 

First and foremost, if you pick the right software now, you can end up with something that will stay with your business as it grows and serve you well long into the future. Most business accounting software today is available on a subscription basis and provided as a cloud-based SaaS. That means you can adjust your subscription as your business grows, adding new features and capabilities on an opt-in basis. It’s hard to overstate the value of this continuity and the potential long-term savings you could enjoy as a result.

 

Aside from the benefits of continuity, automated systems are more efficient and less error-prone than humans. Even a small mistake in your accounts receivable department can have big ramifications if it means that you’re late paying a supplier or, worse, you submit inaccurate data when you file your taxes. It’s easy to overlook the possibility of financial and other repercussions of errors that your staff make when they aren’t making any. Unfortunately, no one is perfect; someone in your accounts receivable team will make an error eventually. As the volume of invoices they have to process increases, so do the chances of human error rearing its ugly head. Introducing automated accounts payable processes now means you can keep your lifetime error rate as low as possible.

 

Finally, using software automation to manage your accounts payable will free up your staff and enable them to use their time more efficiently. Your entire business will benefit from the inevitable increases in productivity that will result.

2. Transition to a paperless workflow

Going paperless isn’t just about saving trees, although that is a fortunate side effect. Every paper invoice you process is costing you time and money, removing them from the equation will save both. Digital invoices are much quicker and easier to process, and they will help you get the maximum possible benefit from your new automated systems. Like automation, a paperless approach to your accounts payable processes will minimise or eliminate unnecessary work for your staff.

Not only is a digitised workflow more reliable and efficient, but it also means you can get rid of bulky filing cabinets and use other storage space more effectively. As your business grows, finding space for all the documents you need to retain for your records can present a serious logistical challenge.

3. Establish a regular auditing schedule

 

Using an automated digital workflow to process your accounts payable will go a long way to minimising the potential for errors, but no system is perfect. Remember, even a seemingly small mistake in your accounts payable can have much larger ramifications when it comes to your financial reporting, not to mention your day-to-day planning. One of the reasons accounts payable is so important is because it lets you see how much cash you have available to spend after you account for the portion of it you owe to your creditors. Errors in your accounts payable can give you a false picture of your current cash flow. It’s also important to spot errors as early as possible so you can determine whether they are a one-off occurrence or the result of improperly configured software.

 

Ideally, your workflow should include safeguards that prevent simple errors, like numbers being input incorrectly by a person. Good accounting software can alert you to any potentially fraudulent invoices and flag up anything suspicious for a manual review. However, these systems are designed to identify fraud; they won’t help you catch accidental errors.

 

Fortunately, while your business is still relatively small, it should be fairly simple to carry out regular account reconciliations, along with a more detailed annual audit. Many small business owners think this kind of accounting work is something for larger businesses with dedicated accounting teams. However, while a detailed audit of your company accounts might require a professional accountant, ensuring that your accounts payable are accurate is something that most business owners should be able to handle themselves. Most accounting software will include features designed to make it easier for you to do day-to-day auditing and reconciliation on your own so you can maintain an accurate picture of your current cash flow.

4. Prepare your team for growth

 

Even the healthiest and most successful small business will collapse under its own weight if it tries to expand too fast. The accounting processes and workflows that work just fine for small businesses won’t necessarily hold when the volume of trade is much higher. If you think your business is growing at a steady rate and an expansion in the near to mid-term looks likely, you should prepare your accounts payable team accordingly.

 

The Accounts Payable Association offers a range of courses and certifications that can not only provide your staff with the training they need to operate in line with prevailing industry best practices, but also enable your business to signal to future creditors that you take accounts payable seriously. Whether you’re approaching a new supplier or an investor, APA certification signals that yours is a business that stays on top of its accounts and settles debts reliably.

Cash flow is particularly important to small businesses and startups. An accurate and reliable system of monitoring accounts payable gives you a clear picture of your income and expenditure, enabling better business decisions to be made.

 

Accounts payable includes all of your company’s expenses, except for the payroll. This is why it’s important for SMEs to handle this vital component of your business’s finances efficiently.

What does accounts payable mean?

 

Accounts payable describes the bills that a business has to pay. Everything bar payroll falls under this category, making it a critical aspect of your business. As a new business, you may have to purchase items such as staff uniforms, office supplies, or cleaning services for your premises.

 

There are three basic steps to accounts payable: purchasing the goods or services, receiving your order, and paying your supplier. Once your business starts getting established, there will be ongoing regular expenses that will be dealt with by accounts payable.

 

The accuracy and completeness of any business’s financial statements depend on the accounts payable process. It will affect the business’s credit rating, cash position, and ongoing relationship with its suppliers.

 

This is why SMEs need to implement a dependable accounts payable system to produce the accurate financial information required to plan for the future. Putting it simply, without an accurate accounts payable system, your business could end up in trouble if you don’t keep up to date with your debts to suppliers.

What are some examples of accounts payable?

 

An example of accounts payable is cleaning services when your company hires an outside company to handle the cleaning of your business premises. This will be a regular service, so you will need to budget for the payments in your income and expenditure data. Sending regular payments to the vendor assures prompt and reliable service.

 

Staff uniforms are another example of accounts payable. If you commission another company to create your staff uniforms, this process can be set up through accounts payable. While there will be a one-off payment if you’re a new business, there will also be ongoing invoices when you hire a new employee or need to replace existing uniforms because they are becoming damaged with wear.

 

Office supplies are another key example of what accounts payable handles. Again, there will be a one-off purchase if you are a new startup or small business, with ongoing expenses for further office supplies on a regular basis.

 

Many companies buy office supplies in bulk to ensure they are never in a situation where they are running out of supplies. Buying in bulk can also help keep costs down. Accounts payable enables you to have automatic orders set up on your account. Base them on the average frequency when the vendors are used.

 

Finally, many businesses pay to have their waste and recyclable materials hauled away. These services are usually weekly and can also be budgeted into accounts payable.

 

Using accounts payable efficiently means all bills will be paid on time, you will have an effective system of query management in place and you will not end up in a situation where bills haven’t been paid and your credit is limited due to debts.

 

All of this is particularly important to a new business, as your reputation and creditworthiness are crucial to ensure you can purchase the supplies and services you need to keep your company afloat.

How do you track accounts payable?

 

Tracking accounts payable is something many small businesses do on a monthly basis. As the business grows, it’s commonplace to track finances on a weekly basis.

 

It is preferable to make it a weekly task to benefit from early payment discounts. Also, it’s easier to resolve any credits promptly as a result of inventory returns. Businesses should always keep a record of accounts payable in case there are any disputes over payments.

 

An automated accounts payable system is the preferred choice of many businesses. It utilises staff resources more efficiently when employees don’t have to input the data manually. In addition, an automated AP system can be more accurate, as it cuts out the risk of human error.

 

Tracking AP weekly reminds businesses of current and outstanding invoices. It also provides proof of expenditure when it’s time to complete your tax returns. You can keep the records manually or with the latest automated software.

Is accounts payable complicated?

 

While working with accounts payable requires attention to detail, it need not be a complicated process. Invoices should be checked and verified for accuracy and the billing date and payment date should be confirmed. If you carry out accounts payable manually, the figures must be entered accurately in the ledger.

 

If you use software, often it has the capability of uploading an invoice by scanning it, minimising the risks of entering incorrect data. As a new business, setting up your accounts payable and ensuring the process runs smoothly is the key to running your business efficiently.

 

You should always work from the original invoice when possible. For those that have been sent electronically, it is still necessary to check them for mistakes before you upload them onto your system. Some businesses print an email to keep in a physical filing system and then store the email in the relevant online folder too.

 

While each vendor will have its own system of invoicing, you should always assign the invoice number in your system in a consistent manner. Determine the method you’re going to use and stick to it to avoid confusion later.

 

Enter each invoice individually, including inputting multiple monthly invoices from every supplier separately. There are no shortcuts when it comes to invoices. When you do it properly, you will be able to track down one invoice quickly and easily in the event of a dispute.

 

Have an appropriate person check and approve each invoice before they are uploaded onto the accounts payable system. Ideally, the person who approves the invoices should be separate from the person who enters the data onto the system. If one person does both tasks, there is greater scope for error.

 

If you’re a sole trader and you do your own bookkeeping, this may not be possible. You need to have either a clear process for approval and data entry or employ the services of an accountant on a part-time (or “as and when needed” to double-check the figures).

 

As a small business, if you typically work with accounts payable only once a month, utilise a system whereby you identify early payment discounts as soon as each invoice is received. Don’t just put all invoices in a monthly pile – read them thoroughly to avoid missing out.

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Businesses are facing huge challenges as a result of the troubled economy. Inflation has reached a 41-year high of 11.1% and the Bank of England is warning of a long recession looming. As a result, businesses are increasingly automating their accounts payable process to increase efficiency going into 2023.

 

Surveys have revealed CEOs’ main goals are digitisation, growth and efficiency. All three are directly connected in post-pandemic Britain as businesses streamline processes to utilise limited resources most effectively.

 

The current economic climate, combined with businesses still dealing with the impact of Covid, has led to the adoption of digital technologies speeding up by at least three years, according to research.

 

Read on to find out about the top accounts payable trends for 2023 that are aimed at preparing your AP team for survival in the mid-term and success in the longer term.

 

1. Paperless processing

 

In an era where digital transformation has been rapid, businesses are set to further replace time-consuming manual activities and paper documents with electronic accounts payable processes. Around 50% of organisations surveyed are already using Optical Character Recognition technology to read documents in the processing queue.

 

In addition, more than half of respondents are using an electronic invoice matching system to support AP processes. Only 15% of businesses are using artificial intelligence-based cognitive automation and 36% use rules-based robotic process automation on data-related tasks.

 

The indications are these numbers will increase in 2023, which is good news for the 50% of organisations that are still “pen-pushing” in the accounts department.

 

2. Changes in productivity and costs

 

The significant increase in process efficiency in accounts payable suggests the general cost of operations will be driven down in 2023. However, on a more cautious note, these savings are likely to be offset by rising labour costs and a general shortage of talent.

 

Digital accounts payable technology has become more affordable and accessible for companies of all sizes in recent years. Studies into invoice processing efficiency between 2019 and 2022 reveal that productivity has increased by an average of 7% during the past three years.

 

The data shows organisations across the board have become more efficient and productive since 2019. This is “almost certainly” down to the digital transformation, according to analysts.

 

The impact has been greater in low and medium-performing organisations. Processing efficiency increased by 28.6% and 16.6% respectively in these performer levels. This is because typically, these organisations use fewer employees to carry out the related transactional activity.

 

3. Impact of the “Great Resignation”

 

The impact of the “Great Resignation” will continue to be felt in AP departments. It describes an economic phenomenon whereby employees are considering quitting their job.

 

It began early in 2021, in the immediate aftermath of the Covid-19 pandemic and lockdowns. Significant social and economic changes impacted people all over the world and thousands decided it was a good time for a career change. The main reasons included salary stagnation and the rising cost of living.

 

The latest figures show 40% of workers are considering resigning from their jobs. An increase in labour costs is being driven by the talent shortages and employee retention problems that have prevailed recently.

 

The Great Resignation has specifically impacted accounts payable costs, where salaries have increased by 20% for a senior AP clerk between 2019 and 2022 as companies strive to attract the best talent. Companies trying to get a handle on costs during the anticipated recession will be looking towards more automation to try and save money.

 

4. Better forward planning

 

Accounts Payable has already seen tremendous changes since 2019 in terms of costs, but because it is a key process for every business, it must work effectively. People tend not to notice AP when it’s working well, but if it stops working, they will certainly notice the difference and everyone will know about it.

 

According to research, only around 30% of digital transformations in the accounts payable department are completely successful. This is because many organisations are rushing into it without having formulated a clear idea of how it will work.

Those taking the plunge in 2023 must make sure they have the correct processes in place to make it work efficiently, saving the business money and making it more sustainable. Those who miss the mark may experience a negative impact until they get it right.

 

5. More businesses will be outsourcing

 

Research suggests there will be an increase in accounts payable outsourcing in 2023. Many successful financial organisations have started outsourcing as part of their operating model.

 

The Deloitte CFO Signals survey reveals 34% of finance executives have indicated they are likely to increase outsourcing over the next 12 months in their day-to-day operations.

 

A top outsourcing firm will do accounts payable transactions for a living. They can do more than just perform the tasks and provide the talent. They are also experts at optimising processes to ensure the highest levels of efficiency and productivity.

 

They are the experts in implementing digital technology, removing the risks from these initiatives. If you have outsourced your AP activities to a professional consultancy, they should guarantee the outcomes when it comes to the delivery of your expected cost savings and ROI.

 

When you achieve better results for your transactional activities through outsourcing, this should lower your costs and improve your operational efficiency. It will enable you to focus on the key digital transformation projects that are the core of your business.

 

The idea is to allocate the resources previously swallowed up in administrative tasks into other parts of the business. By working with a professional AP provider, you can also overcome challenges such as different time zones and geographic proximity, language barriers and communication challenges.

 

Conclusion

 

The Great Resignation and the digital transformation will continue to impact the world as we know it during 2023. Forward-thinking finance executives will overcome these challenges by incorporating digitisation and outsourcing into their operating model to solve talent shortages and labour costs.

 

Once you have improved operational performance and productivity, this will enable you to start working on the goals of growth, further digitisation and efficiency.

The role of accounts payable staff has changed significantly over the past two decades as technology has continued to play an ever-increasing part in day-to-day duties. Today, AP employees are more likely to spend their time working at a computer, rather than chasing up paper invoices.

 

As more aspects of AP processes are taken over by technology, the question is, what is the future of accounts payable? What role will accountants and AP employees play in the next ten to 20 years? Will the processes become completely automated?

Read on to find out how the future of AP may play out, and how to prepare for it.

Artificial intelligence

 

Machine learning technology and artificial intelligence are assisting people and managing processes in almost every aspect of the corporate world, including AP. In fact, the growth of technology in the business world is having the most significant influence on the future of AP.

 

In the financial sector, professionals are growing accustomed to the fact that accounts payable automation isn’t a luxury reserved for larger companies with equally large budgets.

 

With cost-effective tools available, even small to medium-sized businesses can access the same features. Automatic approval reminders, invoice capture and code are some of the services that automation tools can provide for enterprises.

 

Making the move to AP automation has the opportunity to reduce costs and improve the department’s efficiency. This can potentially make the accounts payable team a more strategic and data-driven body.

Challenging security threats

 

As digital storage continues to gain ground, many experts predict security threats will reduce significantly. Limiting access to critical files and using cloud storage can minimise the risks of fraud and other security threats, as long as the correct controls are put in place.

 

Accounts payable will need to keep on top of the ever-changing environment and keep up to speed with new security threats. Best practices should include performing daily bank reconciliations, so any unusual activities can be spotted as soon as possible.

 

The communications medium will minimise the risk of sensitive information falling into the wrong hands by establishing more secure communication channels with the vendor supplier.

 

Because the AP team will have access to more data in real-time, it is likely to be the first to notice if something is wrong. This will give the accounting department the chance to assist businesses and the IT team in navigating the digital financial landscape and supporting improved security efforts.

Advisory role

 

The advances in AP automation will provide businesses with greater access to performance indicators, such as the processing time of invoices. In addition, accounts payable will gain access to real-time indicators of business performance, including account reconciliation, the history of payments, and cash flow.

 

If the reports are automated, or almost fully automated, accounts payable professionals won’t need to spend hours developing reports. Their role will change into a more advisory one. They will be responsible for explaining to business stakeholders what the reports mean and making recommendations about improving business health and cash flow.

 

It is predicted that AP automation can help businesses manage cash better, optimise performance, control spending, and mitigate risks in ways that weren’t possible in the past. The next question is what the AP department might look like, ten years from now.

Less manual data entry

 

As technology advances, data will flow automatically from systems and clients into AP automation software. It could even flow into real-time reports. This means there will be a reduction in manual data entry. Considering manual entry is more prone to errors, this is likely to become a thing of the past.

 

Accounts payable professionals will be able to focus more on strategic tasks, rather than spending time on tedious tasks and businesses will have access to more insights, enabling them to grow without taking on additional AP staff.

 

Some aspects of the AP team’s work are already managed digitally. For example, the query management system is in the form of an online database to register customers’ queries and complaints.

 

In the future, most AP tasks, such as calculating and distributing internal reimbursement payments and sales tax exemption certificates, could all be managed by an automated system. This would further reduce AP employees’ manual workload.

Automatic alerts

 

Accounts payable automation offers a wide range of alerts and notifications, including reminding decision-makers to approve an invoice for example. In the future, accountants are likely to have real-time access to a much wider range of data, including financial information about their own company, or about their clients.

 

On receiving these alerts, AP employees will be able to flag up issues, including invoice fraud, earlier in the process. They will also be able to gain a more accurate picture of the business’s overall health.

Proactive vs reactive

 

Having real-time reports as part of an automated system will permit AP teams to become proactive rather than reactive when it comes to problem-solving. Employees will no longer be waiting for paper invoices to fall onto their desks. Instead, they will be able to log into the digital system to find out what’s holding up a payment.

 

Problem solving will also be proactive rather than reactive, thanks to employees being able to see potential issues in real-time, preventing them from becoming significant problems. For example, if a dip in cash flow is projected, AP employees can make a proactive decision on freeing up cash for necessities, such as investing in new equipment.

More strategic role

 

Accounts payable is likely to play a more strategic role in the future, as the department becomes more streamlined and digital, involving less physical paperwork.

 

It will be unlikely to lead to the complete automation of AP. Instead, the department’s employees will have more time to analyse data, ensure the appropriate controls are in place, and look for growth opportunities.

Preparing AP for the future

 

There’s no magical formula to prepare your AP department for the future. However, there are some steps you can take to ease into new methods of working. Diversify employees’ skills as the work becomes more digital and less based on paperwork.

 

Future training areas for AP managers and employees could include data and business analytics, cloud storage and other technology, data security, online security, and handling payment-related inquiries.

 

With invoices uploaded automatically into the AP system and sent to the relevant person for approval, AP employees will have direct access digitally to the invoice management information they require. They will be able to focus more on building relationships with business stakeholders.

 

AP professionals should be willing to learn new technology skills to prepare them to become strategic partners. The Accounts Payable Association is here to help your business take the leap into AP automation. Subscribe for all the latest industry news and information.