5 Strategies for Improving Your Accounts Payable and Invoice Approvals

Without a doubt, accounts payable (AP) is one of the most critical functions in every modern enterprise. After all, each firm must ensure timely invoice approvals. Thus, improving your AP signifies a core avenue for your business growth. Although change might seem daunting, cultivating an approach optimised for AP might pave the way for significant advantages.

Moving forward, businesses must adopt a more strategic approach to managing their operations in today’s competitive business environment. Ensuring prompt electronic invoice approval is vital. They are continually under pressure to perform optimally, and cash flow management is a critical responsibility that companies must handle with precision. As such, AP operations must be meticulously recorded to maintain a clear cash flow picture, making the transition to a paperless invoice approval system crucial.

While the strategy each business adopts to achieve these goals should be unique.

Construct a Fundamental AP Workflow

Creating management workflows enables a comprehensive understanding of the AP department’s operations. Management workflows can help pinpoint and rectify system bottlenecks and streamline process handoffs to enhance liquidity management. One vital component is ensuring a structured invoice approvals process, detailing the frequency and methodology of your business payments. Following that, delineate how and by whom purchases and payments are approved, ensuring a smooth electronic invoice approval process.

The first step in optimising your AP process is to create a strategy. It refers to having a well-structured process for determining when and how frequently your business pays payments. Following that, you should specify how and by whom purchases and payments are approved. You should connect it to the rest of your cash flow in such a manner that your company’s liquidity is optimised.

Several details that should be determined in this process include the following:

• How data may be shared and entered
• Terms of payment and discounts
• How to proceed upon receipt of an invoice
• The approval procedure for invoices
• What to do when suppliers fail to adhere to contract conditions
• The procedure for dealing with late supplier deliveries

Establish Supplier Portals

Establishing supplier portals to enable suppliers to monitor the progress of orders, delivery timelines, possible product shortages, and payments received online. Along with lowering time spent on these operations, these technologies also reduce manual mistakes, resulting in increased order accuracy.

If you want to maximise the benefits of technology and improve the effectiveness and efficiency of your accounting process, you need to link smoothly with your major providers. Assume you often place large orders with one or more providers. Now, by connecting them to your AP system via a supplier or vendor portal, you may reap enormous benefits.

A vendor portal functions as a go-between for your business and its suppliers. Your business agrees on a set price for the goods, and the supplier ensures that the inventory stock level is maintained in accordance with your specifications. Your suppliers may use the vendor portal to manage inventory supply, receive automatic payments, etc. As a result, it simplifies your company’s AP procedure.

The following activities should be established so that suppliers can monitor your business’s performance:

• Product shortages that may occur
• Order status Scheduled delivery
• Received funds

Setting up supplier portals not only aids in managing AP but also in streamlining electronic invoice approvals. Such portals enable suppliers to monitor various aspects like order progress, delivery timelines, potential product shortages, and the status of their invoice approvals.

Overall, top-tier AP automation systems come with supplier portals as basic functionality.   Indeed, suppliers may instantaneously transform (or “flip”) electronic purchase orders received through an online portal into an electronic invoice that goes directly to the buyer’s enterprise resource planning (ERP) system, without the need for operator participation. Besides, electronic submissions of shipping notifications and other regular activities are also possible through an online portal.

Centralise your Operations

Centralising AP operations and reporting throughout the company via a shared service environment ensures that all personnel adheres to similar procedures and standards and that performance is measured against specified business metrics. Additionally, this enables you to complete more activities in less time and with fewer staff members, thereby lowering corporate expenses.

Ascertain that financial reports are current and accurately reflect current AP balances. Enhance real-time reporting capabilities through automation and maintenance. To boost the procedure, adhere to the following actions.

• Maintain accurate records of all payments
• Choose a payment method
• Validate supplier invoices against contract requirements and ensure that purchase orders are accurately billed

Centralising AP operations and the invoice approval process ensures uniformity across the company. This not only enhances efficiency but also ensures that all invoices go through a consistent approval procedure, maintaining clarity and transparency.

Automate your AP Process

Transitioning to AP automation and paperless invoice approval system has its merits. The Institute of Finance and Management (IOFM) estimates that just 9% of AP leaders questioned by IOFM indicate their department is completely automated with few or no human operations. Besides, 33% of AP divisions have limited automation, and 14% of AP departments generate invoices and pay vendors in a purely manual setting.

AP automation enables organisations to benefit from speedier payments and a healthy cash flow, especially in electronic invoice approval, allows organisations to benefit from expedited payments and a robust cash flow. Due to the automated nature of the procedure, all paperwork and payments are exchanged in an automated environment, eliminating the need for human operations. All financial reports, including those about overdue payments, invoice ageing, estimations, purchase orders, and taxes, are available for study. It reduces the cost of processing invoices.

Depending on the amount of automation you choose, you may even be able to automatically scan invoices, track delivery receipts, and handle disputes electronically rather than by human follow-up.

Based on findings from IOMA, the average cost of processing an invoice in an environment with a low degree of automation may be up to 20 times higher than the average cost of processing an invoice in an environment with a high level of automation.

While expenses differ considerably, Goldman Sachs estimates that the overall cost of processing a single invoice manually by AP personnel is $16.00 for medium-sized enterprises and $22.26 for small businesses. These figures decreased to $5.89 and $6.89, respectively, representing a net savings of around 60-70%.

An enterprise may use an electronic payables system to execute a range of operations that save significant time, such as:

• Executing purchase orders automatically
• Maintaining an inventory of received products.
• Accepting and validating invoices
• Approving purchase orders
• Paying bills on time

Enhancing Your Invoice Approvals Process

In every modern enterprise, the importance of invoice approvals cannot be understated. Ensuring timely and efficient approvals is key for a streamlined financial process. With advancements in technology, there are innovative ways to manage these approvals, such as the paperless invoice approval system and electronic invoice approval methods.

While change can be challenging, adopting these digital systems might bring about substantial benefits:

Embrace Electronic Invoice Approval Methods
Opting for electronic invoice approval mechanisms can significantly speed up the process, reduce errors, and provide a digital trail for every transaction.

Implement a Paperless Invoice Approval System
Transitioning to a paperless invoice approval system not only reduces the dependency on physical paperwork but also ensures a more environment-friendly approach, reducing the carbon footprint of your financial operations.

Regular Training and Updates
Ensure that the team is well-versed with the nuances of the electronic invoice approval process and the paperless invoice approval system to maximise efficiency.

Audit and Feedback
Periodically reviewing the invoice approvals process helps identify areas of improvement and ensures that the system remains robust and efficient.

To stay competitive in this evolving business landscape, organisations must adapt and incorporate these modern invoice approval methods, ensuring both efficiency and accuracy in their financial operations.

Ready to enhance your AP and Invoice Approval Processes?

Setting up an automated AP process and managing it in-house can be challenging for busy business owners. Nonetheless, you can speak with a Kefron expert to learn more about AP Automation.