Six Accounts Payable Practices to Spruce up Your Payables Operation
Artificial intelligence, machine learning, and the shift towards cloud-based computing all mean big changes to the way business is done. Functional units across industries are all experiencing unprecedented disruption as startups and entrepreneurs set their sights on process automation.
Is your accounts payable (AP) department leveraging best practices to create efficiency and surpass industry benchmarks? Let’s face it, the payables industry has changed a lot over the past decade. In the past, AP was perceived as an operational necessity without much room for strategic optimization; however, that paradigm is no longer true. The rapid adoption of self-service supplier portals and the rise of AP automation software have given way to a new era of forward-thinking CFOs and future-proofed AP operations.
The following best practices will help ensure that you and your colleagues stay ahead of the curve and keep your payables operations running smoothly:
1. It’s time to digitize.
If there’s one thing that should be at the top of your AP best practices list, it’s to make sure that your paper processes are automated and digitized. This can save massive amounts of time, greatly reduce the chance of human error, and perhaps most importantly, save money.
If you are still opening envelopes and processing paper invoices, it’s time to step out of the past. Digitizing the invoice-to-pay workflow with an automated invoice management system can eliminate more than 80 percent of your manual workload. Any modern invoice workflow should leverage a fusion of OCR (optical character recognition), AI (artificial intelligence), and managed services. This trifecta will take the “entry” out of data entry and allow you to scale your supplier relationships without needing to increase your AP department headcount.
2. Organize your vendor data with a supplier portal.
One of the benefits of digitization is the ability to manage supplier information, invoices, payment details, and tax records in one central place. A supplier portal allows your suppliers to opt-in to their payment method of choice, enter or update their payment and contact information, and access payment details on the fly.
Error-reduction is another value-add of self-service supplier portals. Real-time validation of Tax Identification Numbers (TIN validation), payment details, and address information helps takes the guesswork out of supplier information management. Fewer errors result in happy suppliers.
3. Offer early payment discounts.
Once your systems are digitized and your suppliers have been set up in your state-of-the-art supplier portal, it’s time to start thinking strategically. Early payment discounts can single-handedly transform your AP department from a cost center to a profit center.
Early payment discounts not only create a strategic differentiator without affecting your working capital, they also allow your suppliers to increase their liquidity by getting paid faster.
4. Integrate with your ERP, performance management, or accounting application.
For enterprise organizations, a stand-alone AP system often needs to be integrated with an accounting system, enterprise resource planning (ERP), or performance management application. A direct integration can remove some of the friction involved in invoice processing, making supplier payments, reconciling AP, and doing manual uploads or exports.
A pre-built integration between your AP system and your accounting system allows real-time payment status visibility without navigating out of your ERP or dealing with the complexity of an application programming interface (API). A bidirectional integration ensures up-to-date information within both platforms and simplifies the process of reconciling your payables with the general ledger.
5. Streamline your AP.
Streamlining AP means different things within different organizational structures, but these basic principles remain true across all organizations:
Having multiple AP departments can create unnecessary redundancy.
- The larger a company is, the more possibilities exist for AP processes to be fragmented or exist in silos.
- A resource audit often happens during acquisitions, but there’s no need to wait for that.
- Payment disbursement and invoice processing should happen in one central business unit or location, even in multi-entity organizations.
6. Automate tax form collection.
The process of collecting tax information is a complicated, stress-inducing maze. The regulatory framework for managing a global base of suppliers is becoming increasingly complex. Determining the necessary steps to remain compliant with the Foreign Account Tax Compliance Act (FATCA) and the Office of Foreign Asset Control (OFAC) requires deep knowledge and heavy attention to detail. For example, do your suppliers need to provide W-8BEN, W-8BEN-E, W-8EXP, W-8IMY, or W-8ECI forms?
Automating tax form collection is a win for both you and your suppliers. With an end-to-end AP automation solution such as Tipalti, tax and regulatory compliance is a breeze. Suppliers are guided through an online tax form wizard as part of the onboarding process.