If you're not thinking about accounts payable best practices every day, well, you're pretty normal. But maybe you should be.
Why? Because doing accounts payable right gives you greater control of your finances, better relationships with your suppliers, and increased profitability and potential for growth.
With these 15 accounts payable management best practices in your pocket, you'll always know where your business is spending too much money and how to make the right decisions to save money. Ready? Let's go.
1. Simplify your accounts payable workflow
Centralizing your accounts payable workflow into a single platform enables end-to-end automation, where you can capture, integrate, measure, process, store, and access critical AP information—all in one place.
2. Go digital
Paper is obsolete. Manual cash management is disappearing. All hail digitization! Taking your invoice-to-pay workflow digital with help from an automated invoice management system can eliminate a huge chunk of your accounts payable processes.
Set guidelines for your vendors to submit digital invoices and implement invoice capture software (preferably with automation) so you can turn those piles of paperwork into tidy digital files you can sort and search with ease.
3. Limit access and establish controls
Fraud and security risks have been on the rise since the pandemic, and they're not going away anytime soon. Keep your business protected by leveraging stricter controls and approval processes so you can be sure only the right people have access to your accounts payable information.
65% of organizations were victims of payments fraud attacks/attempts in 2022. - 2023 AFP® Payments Fraud and Control Survey reports
Custom and two-layer approvals
Requiring a second admin approval (AKA two-layer approvals) for key actions can significantly reduce the risk of fraud and error. And establishing custom approval criteria for certain vendors, locations, departments, or general ledger accounts will make it easier to tighten controls where and when they're needed most.
Separation of duties
Requiring separate approvals for invoices and payments makes sure whoever approves invoices isn't the same one who approves payments. Applying this type of double verification inherently reduces risk and makes it easier to flag fraudulent activities.
Centralized data
Entering documents and invoices for approval into one digital system can all but eliminate the possibility of manual data entry errors. It also allows you to easily limit access by assigning different people to specific tasks. And makes searching for specific documents way easier when performing reconciliation or audits.
4. Prioritize invoices
Unless all your invoices are the same, you shouldn't treat them as such. That's why you should prioritize your invoices. Start with the due date and payment terms. So you never miss or make a late payment. But you don't want to make payments as soon as they come in. Instead, schedule payments for optimal cash flow.
You can also set up payment reminders to avoid late or missed payments by creating reminders to automatically notify you when payments are due.
Want to take it further? Introduce AP segmentation: separating invoices into categories like vendor, project, demographics, timing, need to review, or whatever other criteria is important to your business. If you use BILL, your Inbox will help you easily keep all of your documents organized in one place.
5. Renegotiate payment terms
Whether your invoices are net 30, 60, or 90 days, you can always renegotiate with your vendors for more favorable terms. Even if they say no, they might consider waiving late fees. Here are a few tips to help you get what you want.
Ask early
Reach out long before payments are due to renegotiate terms. Negotiations take time, and no one likes a last-minute request.
Look for a win-win
What can you offer in return for the terms you want? Maybe better cash flexibility will let you increase your order volume. Communicate how the new terms could benefit them, too.
Aim high
Be reasonable, but always ask for the higher end of what you need. This is a negotiation, after all.
6. Check for early payment discounts
It never hurts to ask. Discounts and rebates for early payments aren't often advertised, but they're out there. You just have to be proactive and reach out to vendors or creditors to see what's available. Some creditors are even willing to reduce interest rates if a certain number of payments are made in full and on time.
7. Upgrade your tech
Accounts payable automation is quickly becoming standard practices for SMBs of all sizes. The latest financial automation apps and platforms give you greater visibility and control over the entire accounts payable process. Not to mention reduced errors, increased fraud protections, and faster accounts payable reconciliation. All leading to more time and more money saved.
What to look for in an accounts payable automation platform
When searching for solutions, use these key features to compare and contrast:
- Integrations
- User Experience
- Security
- Pricing
- Scalability
- Automation
Learn more about building a modern finance tech stack. Ready to streamline your accounts payable process? Try BILL AP risk free.
8. Eliminate AP fraud
According to the ACFE’s Global Fraud Study, the top types of accounts payable fraud are check tampering, billing schemes, and fraudulent expense reimbursements. Check tampering alone results in a median loss of $158,000 per business.2 Here's a list of red flags to look for to catch AP fraud before it gets out of hand.
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There are many AP fraud red flags, like large payments to one vendor and unusually low or high prices—or even just invoices missing key details. So study up and stay vigilant, you never know which one you might encounter.
Secure AP automation
Whatever financial operations platform you use, make sure they have advanced security in place to protect you from fraud.
- Multi-layered security: Multiple layers of powerful technology are integrated into the platform to combat payment fraud, network security breaches, and unauthorized account access, so we can protect sensitive customer data.
- No third-party issuers: Make sure your AP automation platform keeps your payment processing in-house to mask your banking information.
- Real-time visibility: Prevent complex fraud incidents by making sure you're using platforms that monitor transactions in real-time—making it easier to catch fraud early.
- AICPA SOC 2 compliance: Your platform should adhere to the SOC 1 and SOC 2 compliance standards of the American Institute of CPAs (AICPA) and undergo annual audits.
9. Reduce verification and signature responsibility
Make your CFO's life easier by making sure the check run is assembled and ready to go. That way, all they have to do is verify the amounts and sign off. Your AP department should be running the aging summary, choosing the invoices to pay, assembling purchase orders and delivery receipts, printing the checks, and so on and so forth.
Consider leveraging accounts payable automation to drastically simplify accounts payable approvals by eliminating manual payment approvals and enabling automatic routing and mobile approvals right from your phone.
10. Use a supplier portal to organize vendor data
Want to improve your relationships with your vendors? Set up a supplier portal. Supplier portals make communication between you and your vendors easier. And gives everyone a single source of truth for everything from invoices and payment information to addresses and tax records. Portals can reduce errors and simplify your supplier information management. Look for ones (like BILL) that empower vendors by letting them see all their relevant payment information in one place.
11. Automate your processes
Want to spend 50% less time on your accounts payable process?2 You need accounts payable automation software. The next natural step after taking your AP digital, AP automation software allows you to:
- Improve bill pay accuracy with AI-driven data capture and error detection
- Sync transactions in real-time with your accounting platform
- See your cash flow with real-time transaction reporting, unlimited document storage, and a digital audit trail
- Speed up AP reconciliation and end-of-month close
12. Check for duplicate payments
Plug leaks in your cash flow and keep your books organized by checking for duplicate payments. Whether you're using an AP automation platform or matching invoices manually, checking for duplicates—both coming in and going out—can save money, time, and lots of headaches.
13. Regularly review your data
Keeping a close eye on your accounts payable data—and your bottom line—can help you keep your cash flow healthy. By regularly reviewing your data, especially with help from centralized data storage and advanced analytics and reporting, you can spot red flags and address common time-sucks before they become a problem.
Regularly reviewing data helps:
- Reduce security risks and fraud
- Reveal trends in your AP processes
- Improve cash flow planning
- Boost working capital
- Track value and volume of invoices and payments
- Build a digital audit trail
14. Keep track of disputes and resolutions
Addressing and resolving invoice disputes ASAP will help you maintain healthy vendor relationships. If you're overcharged or a discount wasn’t applied and go through with the payment, you're essentially giving up your ability to address it later. Which means it's absolutely critical to track vendor disputes and resolve them promptly.
15. Practice daily reconciliation of accounts
Daily AP reconciliation isn't just an accounts payable best practice, it's a good habit. If you need to make an additional payment to a vendor and it’s not recorded, your books won’t match the bank's. This can impact cash flow and lead to errors down the road.
Stay up to date on where your cash flow is at by preparing monthly voucher activity and payment history reports.
16. Cross-train your AP team
Make sure your accounts payable staff is cross-trained for all different functions within their department. By broadening your team's skillset, you can eliminate single points of failure and reduce bookkeeping errors, security risks, outsourcing costs, and vendor frustration.
Ready to improve your process with AP automation software?
Streamlining your AP system with automation can save your business time and money. And save your AP department stress and headaches.
It also provides an agile, scalable bill pay process that can pivot when markets change and grow with your business.
Request a live demo or start your risk-free trial today to see how BILL can help you implement accounts payable systems and process improvements that your AP team, approvers, and vendors will love.
1 ACFE Occupational Fraud Report, 2022
2 Based on a 2021 survey of over 2000 BILL customers.
