In the present business atmosphere, business ventures in every sector are under tremendous pressure to perform a lot of tasks with limited resources. Therefore, businesses need to take hold of every opportunity they can find for releasing their working capital.
Apart from human resources, companies make the uppermost investments in finance systems. As accounts payable is mostly a back office function, companies do not give it much value as their main focus is building competitive advantage. To recognize opportunities effectively and to take the right decision when faced with potentially conflicting outcomes, a more strategic approach towards accounts payable must be taken by business enterprises.
Here are top 4 practices in accounts payable:
Practice Paperless Processing System:
Majority of professionals felt that the key challenge to efficiency in a business is the use of paper in various tasks. Paper is an inefficient medium as it is easily lost, either in mail or in a pile of invoices. For a change, now businesses are mainly implementing electronic data interchange (EDI) which completely eliminates paper.
However, implementing EDI can be quite expensive but companies that automate their accounts payable systems gain significant functionality by applying electronic communication with vendors. Depending on the selected level of automation, companies can also automatically resolve disputes, scan invoices, track delivery receipts rather than carrying them out manually.
Centralized AP Processing:
There are many companies who have to pay their staff, suppliers and service provider at every location. This can result in duplicating the efforts and functions. Centralizing the process of handling these payments can save time and money through increased efficiency and productivity. All accounts payable functions are aggregated in a centralized accounts payable system in one centralized location consisting of a single staffing group. The additional advantage of centralizing is that it enables the businesses to perform more tasks in a smaller time frame with minimum resources thereby reducing business costs.
Build Well-organized Management Workflows:
To improve the efficiency of the accounts payable processes companies have to create a management for workflows. These workflows can help the business to recognize and resolve system bottleneck and can improve the management in the most efficient manner.
The important features of workflow management includes collections and credit management, various invoice entry methods, receipt application and reporting.
Companies spend a lot of time and money to ensure that they get the greatest possible return on investment. This is where an accurate financial record can help. A record keeping system or a ledger, irrespective of it being on paper or on a computer system, must be easily comprehensible, simple to use, reliable, consistent and accurate and must provide information on a timely basis.
If business ventures approach these practices in an effective manner, they can reinforce corporate cost management, minimize routine transaction risks, reduce process complexity and successfully improve vendor contract compliance.
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