Accounts Payable

Want to Get Financially Fit? Your AP Needs To Develop These 3 Habits

February 10, 2022

Stretching at work photo

Estimated Reading Time: 3 minutes

Building a healthy accounts payable department is a bit like developing a good physical fitness regimen. You have to develop the right habits and put them into practice.

The basic steps are simple. If you want your AP to be in shape, you need to regularly measure key performance indicators (KPIs), streamline your workflow, and proactively safeguard against fraud. Using automation software makes each of these steps simpler.

Give your finances a health check

To get where you’re going, it helps to know where you’ve been. Measuring KPIs will provide insight into how well your accounts payable is performing. To obtain a comprehensive picture, it helps to examine the following areas:

  • Cost to Process An Invoice: To find out exactly how much you are spending on each invoice, visit this Beanworks calculator. In general, Levvel Research has found that companies who use manual processes spend as much as $15 per invoice whereas using an automation system can cost up to 80% less.
  • Invoice Processing Time: Figuring out this number involves taking the date that the invoice was received, the date it was approved for payment, and calculating the total number of days from receipt to payment. From there, collect the average for the total number over a given period of time, such as a month or quarter.

For companies who still have not automated, it could be taking as many as 25 days, compared to as few as three days using automation software.

  • Invoice Exception Rate: Another key statistic to monitor is the rate at which your invoices contain errors. Mistakes like duplicate POs and coding errors can add significant amounts of time to the AP process. You can calculate using this formula: exceptions per month ÷ total invoices processed per month x 100.
  • Number of Invoices Processed per Full-Time Employee: This statistic will provide an idea of the productivity and efficiency of your AP team. Simply take your total invoices per month and divide them by the number of employees in accounts payable.
  • Total Touchpoints: Discovering how many individual touchpoints are in your AP process will also give you a good idea of how effectively your AP is operating. If you are still using manual processes, the number is probably higher than it needs to be, with manual steps like printing the invoice, data entry, PO matching, scanning, and more. The larger the total, the slower the process and the greater chance of errors sneaking in and causing disruptions.

Burn the fat – and feed the muscles

The ability to pay invoices on time with regularity is vital to maintaining vendor relationships, as well as ensuring that late payment fees or disruptions to your supply chain are kept to a minimum.

By consistently tracking KPIs, you can identify key areas in your AP that need trimming. The next step is to make adjustments that will empower your team to become more effective. As noted, manually processing invoices is both more costly and time-consuming than using an automation solution.

A typical manual workflow may look a bit like this:

An automation solution like Beanworks can eliminate 83% of data entry by employing data capture and line item capture. It does away with the need for printing and physical storage, by saving all data on the cloud, and allows you to route things like POs, approval requests, and invoices to the appropriate team member. The program will also send out regular reminders until a task is completed, strengthening your workflow process and reducing the amount of time that a document or request sits waiting.

scared

Keep your guard up

In the world of sports, it’s often said that the best offense is a good defense. It’s an adage that is particularly relevant when it comes to the ever-present reality of financial fraud. To keep your company’s funds safe requires constant vigilance.

To avoid fraudulent payments, organizations should separate duties to ensure that the person who approves invoices and the one who authorizes payments are not the same. Through Beanworks’ customizable approval matrix, you can assign specific duties to employees to avoid pitfalls like unauthorized purchases. Setting approval thresholds for payment through the software adds additional safeguards, granting CFOs greater control over the entire accounts payable process.

Solutions like Beanworks also utilize document matching for vendor invoices, purchase orders, and payment information so that you can avoid illegitimate charges. An additional feature provided by automation is the ability to upload receipts and route them for approval in real-time, creating a digital audit trail of expenses and approvals.

Building better habits is an ongoing process of learning and adaptation. For more tips and tricks that will keep your AP performing optimally, visit Beanworks’ resource

library


newsletter signup
Straight To Your Inbox

Stay up-to-date on top accounting and finance trends

Sign up for our newsletter and receive our latest resources, news and insights.

Learn More About Beanworks

Discover how AP automation can free your accounting team from manual data entry, delays, and paper-based processes.

View Our Product