by Sophia Riley | Jan 4, 2024 | Accounts Payable, AP Automation
In the intricate realm of financial management, the Accounts Payable (AP) reconciliation process stands as a crucial navigational tool. It ensures financial accuracy, transparency, and compliance. This article aims to provide comprehensive insights and tips for organizations to enhance their AP reconciliation processes. By adopting effective strategies, businesses can streamline their financial workflows, reduce errors, and fortify the integrity of their financial records.
Understanding the Significance of AP Reconciliation: A Financial Compass
Before delving into the tips for optimizing the AP reconciliation process, it’s essential to grasp its significance. AP reconciliation involves comparing and adjusting the company’s financial records with its vendors or suppliers. This process is akin to a financial compass, guiding organizations through the intricate web of transactions, ensuring accuracy, and preventing discrepancies that could lead to financial inaccuracies or compliance issues.
1. Maintain Accurate Records: The Foundation of Reconciliation
The foundation of a successful AP reconciliation process lies in maintaining accurate and up-to-date records. Ensure that all invoices, receipts, and payment details are meticulously recorded. Adopting a robust record-keeping system simplifies the reconciliation process and serves as a cornerstone for financial transparency. Accurate records act as the anchor, preventing the reconciliation process from drifting into the sea of confusion and potential errors.
2. Embrace Automation: Sailing the Seas of Efficiency
Automation emerges as a powerful wind in the sails of AP reconciliation. Implementing automated invoice processing and reconciliation systems not only accelerates the entire process but also minimizes the risk of manual errors. Automation tools can match invoices with purchase orders and receipts, flagging discrepancies for further review. This efficiency ensures a smoother journey through the reconciliation process, allowing financial teams to navigate the seas of data with precision and speed.
3. Establish Clear Reconciliation Procedures: Charting a Course of Consistency
Consistency is the key to a successful AP reconciliation process. Establish clear and standardized reconciliation procedures consistently across all accounts and departments. Clearly define roles and responsibilities within the reconciliation process, ensuring each team member understands their part in the financial voyage. Consistent procedures act as the compass, guiding the reconciliation process along a defined path and minimizing the likelihood of oversights.
4. Regularly Monitor and Review Transactions: Navigating with Vigilance
Active monitoring and regular reviews of transactions are the vigilant watchtowers during the AP reconciliation process. Implement a system where transactions are reviewed periodically, ensuring that any discrepancies or anomalies are identified promptly. Regular reviews act as the binoculars that allow financial teams to spot potential issues on the horizon, preventing them from evolving into more significant problems. Navigating with vigilance ensures that the reconciliation process remains a proactive and dynamic endeavor.
5. Segregation of Duties: Safeguarding Financial Integrity
Similar to other financial processes, segregation of duties is a crucial internal control within the AP reconciliation process. Distribute responsibilities among different team members to prevent a single point of failure. This practice acts as a sturdy rudder, steering the reconciliation process with integrity. Segregation of duties enhances accountability and minimizes the risk of errors or fraudulent activities going undetected.
6. Leverage Technology for Intelligent Matching: Sailing with Precision
In the advanced seas of financial management, leveraging technology for intelligent matching becomes a paramount strategy. Implement reconciliation software that employs artificial intelligence and machine learning algorithms. These intelligent systems can automatically match invoices with corresponding purchase orders and receipts, learning from patterns and improving accuracy over time. By sailing with precision, organizations can significantly reduce the manual effort required for matching and enhance the accuracy of the AP reconciliation process.
7. Implement Exception Handling Protocols: Navigating Troubled Waters
In the unpredictable waters of financial transactions, it’s crucial to have robust exception-handling protocols in place. Define clear procedures for addressing discrepancies or exceptions during the reconciliation process. Whether it’s a missing invoice, a pricing discrepancy, or a delayed payment, establishing protocols ensures that financial teams can navigate through troubled waters efficiently and effectively, preventing minor issues from escalating into major financial discrepancies.
8. Embrace Real-time Reconciliation: Steering through Dynamic Waves
Traditional reconciliation processes often operate on periodic cycles, which may lead to delays in identifying discrepancies. Embracing real-time reconciliation is akin to steering through dynamic waves with agility. Utilize technology to enable real-time updates and reconciliation, allowing financial teams to promptly address any issues as they arise. This proactive approach ensures that the financial ship stays on course, navigating the constantly evolving landscape of transactions with agility and precision.
9. Conduct Regular Training Programs: Nurturing a Skilled Crew
The effectiveness of the AP reconciliation process is significantly influenced by the skills and knowledge of the financial team. Conduct regular training programs to keep your team abreast of industry trends, technological advancements, and changes in regulatory requirements. Nurturing a skilled crew ensures that your financial ship is manned by professionals who can confidently navigate complex financial waters. Training programs serve as the compass that keeps the crew oriented and ready to tackle any challenges that may arise during the reconciliation journey.
10. Integrate AP Reconciliation with Overall Financial Planning: A Unified Navigation System
Integrate the AP reconciliation process with the broader financial planning and management systems for seamless financial navigation. This unified navigation system ensures that information flows seamlessly between different financial functions, providing a holistic view of the organization’s financial health. Integrating AP reconciliation with overall financial planning is like having a GPS system that guides the organization through the most efficient and strategic route, minimizing detours and optimizing financial performance.
Conclusion
Mastering the AP reconciliation process is an ongoing journey requiring foundational practices and advanced strategies. Organizations can streamline their reconciliation processes by maintaining accurate records, embracing automation, establishing clear procedures, and implementing advanced technologies. Additionally, adopting real-time reconciliation, exception-handling protocols, continuous training programs, and integration with overall financial planning ensures that organizations navigate the dynamic seas of financial transactions with resilience and precision. As financial stewards, organizations can chart a course toward financial integrity, efficiency, and success by implementing these tips and strategies in their AP reconciliation processes.
by Sophia Riley | Oct 3, 2023 | Accounts Payable, AP Automation, Automation, Digital Transformation, Invoicing
Is your accounts payable crew swamped beneath a heap of papers? Are they occupied to the point where you need more employees to handle the load? If this is the state at your company, it’s growing faster than your present AP methods can handle.
Streamlining AP processes can help you solve this problem, giving you less hassles and better sailing. With a simplified AP process, your team won’t have to sift through mountains of paperwork. They’ll glide through tasks more effectively and save some time to focus on the nitty-gritty that matters.
And there’s more. Simplifying your accounts payable processes will help you minimize errors. Mistakes can be quite expensive to fix, especially if they’re serious. Thankfully, simplified AP processes can help you overcome these financial fiascos and keep your wallet happier. The more simplified your processes are, the higher the morale of your employees. Keep reading to learn the steps for simplifying AP processes.
Take Inventory
It’s important to examine how long your staff takes to handle AP processes. If they’re wasting time wrestling with AP, it’s time to take inventory of your current methods.
When you take stock of what’s happening, you’ll uncover the tiny parts that make up the process. You’ll see where things might be getting tangled up or lost. With this insight, you can tweak and tailor the processes to make them faster — but that’s not all.
Taking inventory will enable you to spot the differences in how your employees do the same job. You can share the tricks that work with others to improve efficiency. Essentially, taking inventory isn’t just some extra task on your to-do list. It’s a passport to success. Digging into the processes, measuring time, and spotting the differences will help you revamp your finances.
Standardize AP Processes
Observe how the employees handling your accounts payable (AP) go about their work. Pay attention to how long it takes them to handle invoices and the steps they follow. You can greatly improve your accounts payable system by creating consistent methods that everyone on your team can use.
Establishing uniform procedures can also make your processes more efficient. When your team follows the same steps for handling invoices, there will be less confusion and errors. This can save time and improve the accuracy of your financial records.
Without standardized accounts payable processes, you might encounter several challenges. Firstly, consistency in how invoices are processed can lead to data entry and record-keeping mistakes. This can result in financial discrepancies and potential problems during audits. Secondly, if employees have their ways of handling invoices, it can be challenging to track the status of payments or identify bottlenecks in the process. A lack of visibility will lead to payment delays and strained vendor relationships.
To address these challenges, implementing standardized procedures is crucial. Begin by documenting a clear step-by-step process for handling invoices, from receipt to payment. Provide training to your AP staff to ensure they understand and follow these procedures, and regularly review and update them to adapt to changes in your organization or industry practices. Doing this will enhance your AP processes’ efficiency, accuracy, and transparency and promote better financial management.
Embrace Digitization
Shifting your workplace into the digital space comes with several advantages. One of the most significant is the reduction of paper usage. Going paperless benefits not only the environment but also your peace of mind.
Using paper presents a range of drawbacks for businesses. These include:
Loss and damage: Critical documents like invoices are susceptible to getting lost, misplaced, or even damaged when handled on paper.
Cost: Printing out paper documents can be expensive. You’ll incur costs for paper, ink, and printing equipment maintenance.
Space constraints: Storing archived paper documents can lead to space-related challenges. They’re likely to crowd your office and make retrieval difficult.
Security concerns: Sensitive information can be vulnerable when stored on paper. It can be easily stolen or accessed by unauthorized individuals.
Digital solutions can help you to avoid these problems. Adopting an ERP system will enable you to perform paper-heavy tasks digitally. Such tasks include receiving and approving electronic invoices and securely archiving paid documents. Furthermore, digitization can boost teamwork among colleagues. Through online document sharing, your employees will have real-time communication and better productivity.
Get Rid Of Manual Data Entry
Entering data manually can be stressful. Let’s face it: human fingers aren’t always the most accurate typists. Typos and misentries can sneak into your records, leading to confusion. Fortunately, a modern solution can save you from this old-fashioned practice – optical character recognition. This technology can instantly spot and grab data from scanned documents or electronic files. With OCR, you’ll spend less time entering data. The cherry on top? It’s not just your budget that will benefit, but your employees will be happy too.
Store Records Properly
Locating documents in physical storage locations can be quite challenging and time-consuming. You may spend more time searching for the documents, especially if they’re kept in a large room. Making room for extra stacks may also be difficult.
Thankfully, with the help of an ERP system, you can stash away your documents in digital form. When you need them, they’re just a click away. Cloud storage for your business records will add a layer of convenience as your employees can get them from wherever they are.
Invest In An AP Automation Software
Old methods slow down whole processes. Waiting for approvals and hunting down records can add up and hurt your company’s efficiency. If you want to modernize your workspace and make your accounts payable tasks smoother, you should include AP automation in your strategy. There are software options out there that are designed to do just that. These systems take care of repetitive, time-consuming tasks and help you focus on things that bring real value, making dealing with invoice info way more efficient thanks to the ability to snag, check, and tuck away data in a digital archive.
by Sophia Riley | Aug 15, 2023 | Accounts Payable, AP Automation
Accounts receivable llieat the core of well-managed accounting because it encompasses vital tasks such as collections, payments, billing, and tracking. A company’s proficiency in nurturing and navigating the AR lifecycle can influence its success or failure. Unfortunately, many businesses remain unaware of the potential hidden within automated AR processes despite their familiarity and widespread usage.
In this guide, you’ll learn about the untapped world of AR automation, what can be automated, and how to automate, to help you streamline your strategy and improve your company’s bottom line.
How Does The Traditional AR Process Work
The traditional AR process is a manual endeavor that a business manager or accountant handles. This labor-intensive task involves creating invoices, collecting payments, communicating billing information, and tracking the AR cycle. Human error often looms over this process, leading to costly mistakes and delays.
Fortunately, the advent of technology has revolutionized the landscape. Through tintegratingcomputers, accounting software, spreadsheets, and emails, the AR process has experienced a leap in efficiency. This has led to increased accuracy, more automation, and a reduced need for manpower. The development of specialized AR software has also propelled automation to new heights. With this software, you can deliver unparalleled efficiency, mitigate the need for overhead costs or additional staffing and minimize errors.
In the present day, installing an AR automation system may be a substantial investment. However, the returns far outweigh the initial expense. Invoice automation can pay for itself after about six months. This remarkable benefit is just the beginning.
Automating the AR process will also help you unlock greater efficiency and gain valuable insights into your financial operations. With enhanced accuracy and streamlined tracking, you’ll better understand your cash flow and make better decisions. Additionally, you’ll reduce your reliance on manual labor, and your team will become more productive because they’ll focus on more strategic tasks. The AR automation journey represents a transformative step toward financial success.
The Common Challenges You’re Likely To Experience With AR Processes
Before learning the transformative benefits of AR automation, you need to know the common challenges your business will likely face with the processes. They include:
The Struggle To Have Invoice Emails Read And Acknowledged
Shockingly, Forbes reveals that about 60% of emails go unnoticed. The infamous “I didn’t see it” excuse is all too familiar, making it difficult to know the status of your communication.
With automated AR services, knowing whether your email has been read is easy. The “client view” feature will deliver the client’s response directly to the recipient’s web browser. This feature can be used for pdf downloads, online payments, file attachments, comments, and more. Integrating a customer portal into your system can also enhance accessibility and let clients easily respond to invoices. The result? You’ll be informed at every click.
Failing To Be Firm When Requesting Payments
Another prevalent issue is the reluctance to assertively request payments, especially when deadlines pass, or payments are continuously late. It’s estimated that about 80% of invoices in the US are overdue by 30 days, adding unnecessary stress and disrupting the budget strategy.
AR automation provides a remedy to this problem. Automating the invoicing process and follow-ups eliminate emotions from the equation. Also, customer portals empower clients with flexible payment options, reducing unintentional missed payments and discouraging intentional delays or excuses.
Payment Excuses
Handling payment excuses is a common headache businesses face during billing and collections. Atradius estimates that customers delay about 50% of payments due to excuses about misplaced invoices or inaccurate information. Fortunately, AR automation tools act as a defense against these excuses. Through automation, you’ll achieve accurate invoice delivery and keep track of successful receipts.
Addressing these common AR challenges through automation will liberate your business from cumbersome manual processes and pave the way for smoother financial operations. You’ll also achieve increased accuracy and gain the confidence you need to nurture stronger client relationships, secure timely payments, and steer your enterprise toward sustainable growth and prosperity.
What Does The AR Automation Process Entail
There are several crucial aspects that you need to consider when switching to an automated process. Now that you know the challenges faced in the AR process, let’s look at some of the solutions that AR automation offers.
Generating Invoices
Complex invoice generation tools form the cornerstone of AR automation. They streamline the invoicing process and customer experience. Through external datasets and built-in templates, these tools will give you the correct billing information according to each customer’s preferences. This personalization will foster your relationship with your customers and expedite payment processing.
Tracking Payments
The laborious manual tracking of every payment can lead to errors. AR automation comes to the rescue by automating the cash application process, letting you effortlessly track and match each payment to its corresponding invoice. An ideal AR automation service should provide tools like multi-invoice applications, virtual lockboxes, cash application rules, and remittance acceptance advice. Adopting these features will guarantee you effective and accurate payment processing. It will also free your team from tedious tasks and minimize mistakes.
Automated Collections
Bid farewell to the days of managing collections through sticky notes, spreadsheets, and endless emails. AR automation is designed with collections tools that perform real-time tracking and maintain progress visibility and transparency. Using these features means reducing your dependence on staff overhead and minimizing human mistakes. You’ll also reclaim valuable time and resources that you can use to build other aspects of your business.
Payment Plans
Payment plans are indispensable for businesses offering high-value services like medical procedures or legal representation. AR automation should seamlessly incorporate payment plans within a cloud-based invoicing platform. Automating your plans will enhance your financial stability, foster consistency and increase trust.
Customer Portal
Simplifying payment processes and account management is paramount to AR automation. A customer portal enhances collection rates and consistency thanks to its ability to reduce customer service overhead.
Invest in a cloud-based, PCI-compliant customer portal that offers ample customization options that align with your overall customer experience strategy. A user-friendly customer portal will let your clients control their accounts and improve your overall experience.
Subscription Billing
For businesses with recurring revenue models like membership organizations, cloud software providers, or utility companies, automation extends its capabilities to manage billing and subscriptions seamlessly. An automated AR service should offer a flexible plan development and management that handles everything from proration to add-ons and contract renewal rules. Features like sign-up pages, extensive customization, and dunning management can boost your subscription business, optimize billing efficiency and increase subscriber satisfaction.
Simplify AR Processes With Automation
Having gained valuable insights into the significance of AR automation, it’s only natural to seek an automation service that meets your requirements. Fortunately, several companies provide a comprehensive suite of service tools accessible through a cloud-based platform.
by Sophia Riley | Aug 8, 2023 | AP Automation, Sales Order Processing
Businesses handle many types of documents in their sales and order processing. However, the accounts payable team finds it more challenging to work with purchase orders than invoices and money transfer records.
It is the sequence of activities from the moment a consumer orders up to delivery, including each step of the shopping and shipping process—also order selection, financial transactions, and logistics.
Sales Orders
Purchase and sales orders are similar, but they move in different ways. A seller offers the latter, which shows, there has been a sale, and lists the products, quantity, payment options, shipping details, and other details.
The purchase order is the opposite and originates with the buyer and describes the goods they want to buy. For instance, an enterprise may provide suppliers with a detailed document stating everything they need. After agreeing on the costs, the vendor offers a sales order responding to the customer’s requests.
The last part is the billing process, where a company generates a sales invoice for products and services. Businesses can create them after issuing the sales order or later describing the accepted payment conditions depending on the agreement. Both parties decide when this occurs before or after receiving the products.
On the other hand, the finance departments from each side will evaluate the documents to ensure the information are accurate. The orders mentioned above for sales may be for special one-of-a-kind things and require extensive legal work to set up the terms.
Looking from a distance, this continuum’s processing shows variations in order volume and payment demands. The purchase order involves capturing data for several recurring clients, while the sales order is complex.
The sorts of requests businesses process depend on the industry they operate in and their company’s structure. Sometimes the buyer does not care about a sales agreement’s repercussions as they are just interested in the order processing.
Businesses must comply with the terms in the sales order forms because not adhering to the agreement has legal implications.
The Role of Automation in Sales Order Processing
Previously buyers would expect a human being to handle their requests, but technology minimizes their involvement in order processing. Still, companies are utilizing end-to-end systems that enable them to collect orders electronically and will not need to convert documents into digital formats first.
Throughout computer and internet existence, Excel spreadsheets and emails have been a part of corporate processes. However, both of these tools frequently take up staff time which they could spend on more beneficial tasks.
Digital tools integration is necessary to streamline operations, simplify complex tasks and eliminate laborious work. Still, it is essential for creating the best customer experiences. Sales automation software assists businesses in managing sales operations better, from lead creation to sending automatic notifications by email. It also allows you to set aside time for activities that generate income.
Companies must view financial document processing as a process with the documents having many similarities and little yet significant variances. Executives must strategize how to streamline the procedure to get the best out of sales order management.
Similar to other business operations, manual work offers the biggest roadblocks in productivity and performance. Investing in digital solutions should be at the forefront of every business’s digital transformation.
Although technology has advanced significantly, it can still not mimic the type of human conduct that creates and maintains confidence in a business. Automation offers sales representatives more time and opportunities to tap into their unique abilities, which improves their working conditions. After that, they may engage with clients to form a long-lasting connection.
Importance of Standardized Sales Processing
Since order processing is a series of procedures that the sales staff take, a structured process gives structure. It creates responsibility in sales initiatives while increasing productivity and shortening lead times. Sales representatives will know what to do at each step of the business transaction.
The sales team encounters numerous bottlenecks, and companies might only get the best out of their sales initiatives with well-defined procedures. Key performance indicators will assist the executives in evaluating the company’s achievements and ensure the team is on track with the core objectives.
A systematic sales process helps salespeople close transactions with greater consistency. Knowing the success rate, it becomes easy to predict with greater reliability the probable sales you can achieve from a certain number of leads and aids the leadership team in setting reasonable goals.
Teams will handle sales better and provide the right support by utilizing the same processes and terminologies standardized sales process. It improves communication and decreases confusion across departments.
A deal may fail and the rapport with a customer may suffer if a sales representative pushes a prospect into something they needed to prepare for. A regulated sales procedure guarantees that vendors will only take the deal forward after the buyer is prepared to do so.
Standardization lays the groundwork for an enjoyable client experience by adapting a sales method that matches a potential client for B2B sales. The objective is to establish trust and give value beforehand.
Tips for Navigating through a Complex Sales Order Management
- Make measurable objectives: It entails developing a comprehensive knowledge of your present sales order process utilizing accurate sales metrics, number of orders, data input error rates, and processing time for each stage.
- Specify how you collect data and how you get information: It includes the kind of format, data collection techniques, storage, and retrieval.
- Reporting and analysis: sales order automation is an effective way of monitoring business operations. The team can use software for data analysis and reporting.
- Frequent consumer communications: Spend time validating information, confirming orders, and making sure the correct goods are prepped for shipment. Automation gives businesses an edge over competitors as it will improve the capacity to meet the needs of clients.
- Use metrics: KPIs measure the efficiency of the business processes and technology regularly. By doing so, enterprises can grow and improve profitability through cost reduction and establish fresh ideas for future workflow improvement.
- Consider problems as opportunities to constantly enhance and improve your IT infrastructure. To be successful, you must have a continuous action plan.
by Sophia Riley | Aug 3, 2023 | AP Automation, Sales Order Processing
Companies, entrepreneurs, and managers are venturing into e-commerce for business growth. The strategy opens up opportunities for income generation and offers access to an extensive market.
Sales order automation is critical to achieving success through increased profits and should be at the forefront of an organization’s digital transformation.
An Overview of Sales Order Automation
It is the entire process of taking care of a customer’s order from order placement up to delivery, including taking requests, packaging, shipping, order tracking, and after-sales services like product returns.
We can simply say that it is the procedure of making sales and getting the items into the client’s hands or requested delivery point. Investing in sales order automation software will improve e-commerce by streamlining the processes and it is available for businesses across many industries.
Merchants will manage online orders more effectively and can use them on-premise to streamline sales while ensuring customer satisfaction.
E-commerce Sales Order Management
Automating sales orders for e-commerce is handling and completing online orders. It covers every aspect of the process, from customer ordering, order routing, packaging, labeling, shipping, and refunds.
Sales order automation aims to make the ordering process smooth and provide a product to a client promptly. It aids in tracking a customer’s item when purchasing online, from when shoppers add each item to the cart to when it reaches the customer, as well as any subsequent returns. Previously enterprises would rely on Excel sheets and enterprise resource planning applications, which could have been more effective.
Thanks to technology and innovation, businesses can invest in a flexible, scalable, and adaptive digital solution to be responsive to demand or market changes. Here is how an e-commerce sales order system should work;
- Placing an order
The order management lifecycle starts with the customer placing an order using an eCommerce platform. You will get the order details when someone purchases an item from your online shop. The personnel at the warehouse will need access to the information, which would help integrate the system with your warehouse management software.
- Item Picking
Sending order details to the warehouse should be automatic, particularly if your business processes many online orders as it will streamline and speed up order fulfillment.
Working with an established sales order automation service provider is critical for the project’s success. They can assist in identifying digital tools to integrate into the sales order management system depending on the business needs.
- Ordering
Packaging operations happen at the warehouse. With an integrated sales order automation solution, workers can quickly gather details about items from several orders and move them for packaging, where another team preps the item for shipping.
The stage includes labeling orders for shipping according to customer requests and preferences. An integrated system makes information easily accessible to all involved in prepping orders before delivery.
- Order delivery
Shipping is the final step in order processing which involves sending out the ordered products using a reliable courier service. Depending on the customer’s delivery address, online merchants can partner with shipping companies and identify suitable service providers.
Sales order automation will provide digital tools for order shipping management but you’ll need to work with the courier services to ensure that they arrive on time to pick up.
- Order tracking and Customer Updates
Online merchants must inform clients about their order status: A sales order automation system helps update shipments and the dates the items will likely reach customers. Some businesses have a shipping company communicate to customers about their shipment, passing up a chance to engage and impress the client.
- After-sale Service and Problem Resolution
Businesses seek to make an impression on customers through packaging but must provide after-sales service to guarantee customer satisfaction.
Clients should easily find return information in case of an error or if they don’t like what they bought. An integrated system enables buyers to get assistance from the customer service department with speedy resolutions to problems with their orders.
How automated is your process?
Many businesses find out later that their sales order management systems are not adequate to handle increased demand and changing consumer needs. Enterprises can determine inefficiencies in sales order management if several manually executed steps can be laborious, waste time, and increase expenses.
You probably have automated many business processes, but ensuring that it supports your e-commerce strategies is important.
Here are some things that can help you identify if you have a fully automated system for e-commerce:
Inadequate Functionality
Sales order automation software might not fulfill all requirements in your e-commerce business, requiring additional features if missing a crucial function. The inadequacy makes transitioning to a new system difficult later.
It is advisable to integrate digital tools that improve your business management system. Still, avoiding having numerous features might make the sales order processing platform hard to use. Only select the tools you need and specific to your industry.
Slow or erratic Syncs
Inaccurate inventory and shipping information can arise from human errors or challenges in data synchronization. Also, users may find it challenging to send data from different applications without continuous synchronization, meaning there will be no accurate records at all times.
The existing System does not Support Multiple Packages
If your sales order platform does not support multiple order processing, upgrading is necessary. You do not want to send items clients had in the same cart during order placement in separate packages. The system may occasionally mistake multiple requests as a single order, taking more time to process client requests necessitating upgrading,
Scalability
Firms serving clients from different territories or are likely to expand in the future require a scalable digital solution to suit their needs.
Users cannot View Data in the system
After entering data and configuring digital tools integrations, you cannot view the information, generate reports or access the dashboard, your sales order management system is inadequate.
by Sophia Riley | Aug 1, 2023 | AP Automation
Automating accounts payable processes involves digitizing the workflow and eliminating manual tasks. Businesses integrate business management systems and tools to support employees in performing their duties, enabling businesses to process supplier invoices.
Thanks to an integrated system, enterprises can automate the processing of company payments from beginning to end. Software records billing information digitally, typically using a scanner or other type of technology like optical character recognition (OCR). After classifying, matching, and validating data, it moves to the integrated system for processing.
By reducing human operations, AP automation saves business costs, mitigate fraud risks, eliminate billing duplication, manage vendor portfolio, and get discounts for prompt account settlement.
Key Performance Indicators
Traditionally the accounting department would focus on offsetting company bills, but nowadays they have more tasks in their account payables. Businesses can realize several advantages by having key performance indicators.
Besides improving the cash flow, KPIs are essential for efficiency and productivity. Still, it enhances relationships with suppliers. Failure to implement key performance indicators leads to missed chances for profitability and business success. Here are some accounts payable KPIs businesses should be measuring;
- Payment Timelines
Late payments will attract fines and strained supplier relationships. AP automation will help in making early payments and observing the set timelines. Suppliers trust companies that make timely payments as it makes vendors glad to work with them, while a disruption in supply may result due to late payments.
- Days Payable Outstanding
It refers to the time it takes businesses to settle their accounts payable. The key performance indicator assists companies in finding a balance in payments and maintaining healthy cash flow for business operations.
If a company realizes it is paying suppliers late, it might lead to higher fees and bad financial standing, among other consequences. Having DPO among the KPIs aids companies in utilizing their credit terms and enables them to assess if they are handling their cash flow effectively.
- Discount Ratio from Suppliers
Vendors offer discounts to customers paying their invoices earlier, and businesses can take advantage of the conditions. However, a company’s financial position will determine its capability to pay before the agreed date and benefit from supplier discounts.
Utilizing vendor discounts is beneficial as it saves money, which increases profits. The KPI gives insight into how well the organization handles its suppliers’ responsibilities.
- Invoice Cost
Your company’s first indication of AP team effectiveness comes from analyzing the cost of handling each invoice. Manual account payables processing or using outdated technology will increase the cost of handling invoices. Companies must evaluate the cost per invoice through AP automation.
- Electronic Invoices Submission
Receiving electronic invoices expedites processing and simplifies tasks. Besides saving time and money in submitting financial documents, AP automation improves information sharing.
The key performance indicator cuts across a business and its suppliers. Integrating digital tools is not enough as you need to onboard the human resources on the technology to get the best outcome with digital transformation.
Third-party business management software providers assist enterprises with Implementation and provide continuous support to clients depending on their service delivery.
- Invoices the System Processes Independently
When there is no human intervention in processing invoices, it is much more affordable and quick than manual techniques. Monitoring the invoices the system processes independently is necessary to increase profits and efficiency.
Companies benefit from cost reduction, increased security, smooth workflow, and efficiency, and allows employees to handle other essential tasks. In addition, smooth invoice processing through accounts payables automation improves supplier relationships and satisfaction.
- Invoice exceptions
Invoice exceptions can be an AP officer’s worst nightmare. It takes a lot of time to analyze invoices with mismatched information in the company database and resolve them. AP departments must include it in their KPIs to ensure process effectiveness.
Measuring and evaluating invoice exception rates is critical in determining the account payable department’s performance. It helps in reducing the resources it takes to resolve invoice issues.
Businesses can identify the reason for invoice exceptions to find appropriate solutions. AP automation utilizing an integrated system collects information from all departments and provides a centralized data access platform.
- Invoices linking to Purchase Orders
Knowing the invoices linked to a purchase order is essential for AP departments as it affects the processing duration and costs. Businesses can use the KPI to evaluate the process’s flawlessness and identify areas to improve on.
Invoices with conflicting information to the purchase order will cause delays in payments which should be a concern for the accounts payable team. Besides taking longer to process invoices, it increases the department’s operating costs which affect a business’s profits.
- Daily Employee Invoice processing
Assessing worker output in handling account payables will help enhance the billing process, and the information you gain from this metric applies to many different aspects of a business. It estimates how many invoices staff process daily, weekly, and monthly.
Businesses will know the number of workers they need to handle a certain workload and plan accordingly. The human resources department can utilize the information in its planning.
The number of invoices a company handles annually per full-time worker is a measure to determine productivity. It is a measure that provides a thorough perspective of production and enables the company to investigate the causes of gaps. However, the metric changes depending on the sector your business is in.
- Electronic payment options
Although switching suppliers to digital payment systems is advantageous, many companies still use cheques. AP automation can help companies integrate electronic payments to support AP processes. Tracking suppliers according to their preferred payment method helps improve the billing and payment process.
Conclusion
Monitoring key performance indicators in accounts payables might reveal flaws in business operations. The metrics show areas needing improvement by highlighting tasks and tools preventing effective operation. The appropriate KPIs also indicate the remedies that businesses can exploit.
Before adopting new digital solutions, AP teams must figure out the most important, applicable KPIs that will allow them to monitor efficiency, growth, and performance, which result in financial gains.
