5 Steps to Improved Efficiency
Today, Accounts Payable is a critical component in the engine that moves a business forward. Purchase orders, contracts, invoices and many other documents contain vital, time-sensitive information that have direct implications on revenue. The complications that slow down efficiency for Accounts Payable are often caused by a reliance on legacy systems and paper-based processes. Essentially, this is a data problem. Businesses are required to deal with more and more data, and without the aid of digital transformation they may be trying to solve problems that their current solutions can’t fix. According to Gartner, IT spending in India is projected to grow 6.9 per cent to reach USD 72.4 billion in 2017 due to growth in software and IT services revenue. This indicates that increasingly organizations are realizing the impact digital can have on business outcomes. Today, it’s no longer about making a shift to digital, but designing strategies with digital infrastructure as the backbone.
Accounts Payable hurdles can come in many forms:
- Paper forms are routed to Line-of-Business (LOB) heads, as well as purchasing, via the infamous ‘sneaker-net.’
- Approval signatures need to pass between different groups, with different expectations – from individual managers to LOB heads to purchasing.
- Tracking payment status for vendors can be an exercise in frustration – For both the suppliers seeking status and the internal people tasked with responding to requests.
As a result, most large businesses pay late – an average of 7.6 days late, to be precise. Accounts Payable is one of the first places businesses go to reflect the impact of negative macroeconomic situations. To sight an example – Economic Slowdown in the country resulted mostly due to increased payment delays.
For all these reasons (and more), improving Accounts Payable operational efficiency appears to be even more daunting an objective than constructing the great pyramids. That said, real change is possible only in small increments meaning organizations will have to take it one block at a time.
Overcome Accounts Payable Hurdles – 5 Quick Steps
- Establish a Master Vendor Management Practice
Vendor lists require frequent cleansing in order to maintain updated records and reduce clutter. Duplicate and one-off project vendors should be cleaned up regularly, and out-of-date contact information or master agreements should be revisited.
By creating a list of all vendors and making it a habit to keep it up-to-date, Accounts Payable will have a solid foundation of information to work from. Make sure that vendor lists are centrally accessible, so the burden of maintenance doesn’t rest on one person’s shoulders.
As part of Master Vendor Management, Accounts Payable departments should work hand in hand with Purchasing to vet new vendors, maintain a list of vendors and negotiate the best rates. When LOB’s request new work, purchasing should come to the table as an adviser, rather than an order taker. With a list of approved suppliers that Purchasing and Accounts Payable agree on, they can best serve the needs of the business.
- Improve exception handling with prioritization
Not all vendor situations are created equal. Some require immediate attention because what the vendor offers is fundamental to business operations, and payment may be past due. Other vendors provide peripheral or otherwise less critical products & services. Prioritizing vendors by urgency allows you to arrange your payment schedule when necessary, in the interest of keeping the business moving forward.
- Move invoices to digital at the first stage of the process
Digitizing the accounts payable process can lead to increased efficiency and reduced reliance on paper by up to 90% further lending credence to the fact that digital transformation as well as a combination of web-based capture solutions can automate information extraction which can truly streamline work.
- Enhance invoice processing accuracy
Increasing accuracy in invoice processing is a function of defining required and critical form fields, and automating systems to handle higher volumes of invoices. The right tools offer substantial benefits to reducing handling errors, by learning from past intake of critical documents, identifying key fields and enabling automated extraction for future jobs. The result is an increase in accuracy and governance by placing the Accounts Payable team in the role of overseers of the document capture process, rather than subject to it.
- Establish a follow-up policy.
As great as it can feel to get documents out of the door, it is important to follow up. By setting a policy for follow-up times based on the type and urgency of communication, organizations can avoid delays for critical documents. Especially when pending invoices are involved, automated follow-up reminders are a fantastic way to make sure business is uninterrupted and all involved parties are happy.
The Way Forward
In conclusion, businesses need efficient, dependable Accounts Payable teams in order to grow. With the digital age now upon us and a wide array of deeply embedded legacy systems, Accounts Payable teams will face new hurdles that require new solutions. The answer to that lies in the right imaging science and capture technology which can truly transform Accounts Payable into a vehicle for growth.
By: Vivek Naidu, VP – Information Management, Kodak Alaris India
