Ready for the year ahead of you? As with any other company, cost savings and operational efficiency may certainly be two of the things you would want to achieve the most this year. Accounts Payable (AP) certainly counts among the critical business operations that, if managed poorly, could cost companies in the hundreds and thousands. Managing AP is such a routine, everyday exercise that businesses think little of how it could impact the overall revenues and cash flows. But it is a mission critical operation that has hidden savings. Companies will do well by tapping into these savings, which could be spent on more lucrative, growth oriented tasks. The one way to tap into these savings is by making accounts payable efficient. And technology is the way to do it.
Accounts payable operations involve paying the debt owed to vendors for purchases made, usually on credit. Getting AP right is very important for companies, in order to be in good standing in the marketplace and with their vendors. Vendors are critical to the success of a company. Timely payments will help avoid mounting debt and establish better trust with vendors. Having a good accounts payable system in place will help you monitor and process pending payments consistently, and lower your chances of piling up debt. Companies fare better when there are no pending liabilities or risks due to non-payment of debt, making it easier for them to focus on more strategic initiatives. Timely payments also means healthy cash flows as businesses spend less on invoice re-processing costs due to errors or late payment fees.
Following the social and economic upheavals over the past two years, business continuity has become top priority for many companies. The need of the hour for many companies is to ensure continuous operations even with limited capital and manpower. Accounts payable provides a perfect opportunity for companies to lower their liabilities, improve cash flows, and ensure continuity of connected operations. Accounts payable encompasses the entire processing cycle of invoices for purchases made. Invoices may include fixed expenses for regular raw materials sourced by a company or even miscellaneous articles like office refurbishment expenses. The payments owed to vendors are usually required to be made within a stipulated time frame, as per the agreement with the vendors.
The debts, therefore, are designed to be short-term and must be paid within the due date. Any late payments incur additional fees, and so it becomes very important that businesses process invoices quickly enough, in order to approve and make payments to vendors quickly.
Accounts payable operations usually involve balancing the books and paying off short-term debts.
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Long-term liabilities are usually billed under other expense categories and do not count as AP debt. Great products and timely customer service are not the only factors that determine a company’s success and longevity in the marketplace. A company’s good standing is, more often than not, determined by the relationships it maintains with its external stakeholders like vendors and partners. When it comes to vendor relationships, there may be many touchpoints for building trust and loyalty, but paying off debt is possibly the starting point for a long-term partnership.
The trouble with managing AP is that it is a daily routine that is often considered a chore rather than a strategic cost-saving exercise. The reason being accounts payable operations have traditionally been handled manually. Companies typically receive hundreds and thousands of invoices on a regular basis. Manually acquiring, processing, and approving those invoices for final payments to vendors can take weeks or months. In a fast-paced market environment, where your reach to lucrative consumer markets is determined not just by the products you sell but the pace and efficiency with which you deliver them, spending countless hours in mundane mission critical work can hold your business back by miles.
Technology, on the other hand, can reverse the way you manage AP for the better. The one noticeable factor that technology brings to the table is speed. Technology hastens invoice processing and accounts payable operations, with payments being processed within hours rather than weeks. Several testimonials and success stories from companies that have deployed intelligent automation to combat AP delays point to this fact. Intelligent automation simplifies the complex in invoice document processing, which otherwise is a tumbling block for many companies dealing with manual accounts payable. Invoice processing involves collecting, sorting, filing, validating, verifying, and approving invoices received by a company. Invoices can come from many different incoming channels like emails, file shares, scan, fax, etc. Collecting them and converting them to a format suitable for uploading in your company spreadsheet or accounting system takes a lot of diligence and time. Manual invoice data entry is time-consuming and highly error-prone. What companies fail to capitalise on is the time-and-cost-savings they can achieve by accelerating this crucial step in invoice processing.
Automatic data entry removes all the inconsistencies and delays that reverberate along the entire invoice processing chain from capture to approvals. Because manual effort is eliminated and all the work is done by intelligent automation bots, what you have is an error-free, near-autonomous invoice processing system that can scale and accelerate operations, without getting tired or losing consistency.