How To Manage An Accounts Payable System

Accounts payable systems can be managed in several steps. These systems facilitate business procedures, policies, and practices to manage trade credit transactions. Some of these practices include seeking lines of trade credit, favorable purchase terms or faster lending timeframes. For example, many SBA line of credit solutions finance projects. As a financial professional, you should develop an accounts payable management strategy that frees up additional liquidity. Using this liquidity, your business can reduce costs, fund growth, and capitalize on new investment opportunities. In this post, we will discuss how to manage an accounts payable system.

Select Accounts Payable Solution

First, you must select an accounts payable system to manage. Many off-the-shelf accounting software solutions contain accounts payable modules. When evaluating these solutions, several features should be considered. These features include duplicate invoice spotting, early payment discount advantages, and electronic payment capabilities. Importantly, you should also consider functionalities to standardize payment information for individual suppliers. This way, the features of your chosen solution come together to make payments in a timely manner. Additionally, these functionalities improve payment accuracy, ensuring correct payments to suppliers. Surely, choosing an accounts payable system to manage lends focus and direction to your management processes.

Set Up Supplier Portals

Second, setup some supplier portals within your accounts payable system. These portals allow your suppliers to track what your business does. Typically, these tracking capabilities allow them to see potential product shortages and order statuses. Moreover, suppliers can also check scheduled deliveries, payment history and in-progress payments. Of course, these features lead to stronger business relationships as suppliers may offer reduced prices, larger order volumes or streamlined order fulfillment steps. In addition, these portals reduce manual errors, improving order accuracy significantly. Absolutely, supplier portals keep your suppliers happy and collaborating well with your accounts payable system.

Centralize Invoice Payments

Third, you should centralize invoice payments when managing an accounts payable system. In fact, ensure all company spending comes from one card or account. With centralized spending like this, you have a much clearer picture of your company’s monthly spending. This way, you can identify and eliminate frivolous spending. Additionally, keeping all payments from one account drastically reduces security risks for the company. Of course, when you manage AP permissions carefully, you can mitigate the financial risks of cyberattacks and fraud significantly. Certainly, centralize payments to keep all accounts payable system management in one location.

Manually Track Payments

Next, manually track payments to keep your accounts payable system working properly. Even if you have other responsibilities, you must keep an eye on your accounts payable system regularly. Of course, you should let other team members handle most of the manual data entry to reduce your workload. When doing so, check their work periodically for any errors, discrepancies, or duplicate entries. Ideally, perform these checks on a daily, weekly, or monthly basis, depending on the expertise of your team. Additionally, make sure team members include important information on each invoice. Reconcile the date of arrival, due date, and any relevant comments. These manual reviews should match with the automated system and accounting books. Definitely, manual tracking of payments ensures your accounts payable system works smoothly.

Implement Fraud Reduction Policies

Lastly, perform active fraud reduction continuously when managing an accounts payable system. First, implement system parameters preventing creation of new vendors without proper due diligence. Second, if a new vendor must be created, require full proof of their existence and the services they provided to your company. Third, ensure multiple approval levels to set up new vendors within your accounts payable system. This way, you confirm the credibility, reputation, and legitimacy of any vendors your company is paying. You should also spend some time understanding fraud triangle business to further mitigate financial risks. Assuredly, active fraud reduction activities during the accounts payable management process mitigate significant financial risks.

Managing accounts payable systems can be done in several steps. For example, start by choosing an accounts payable system to manage. Thus lends focus and direction to your management processes. Second, set up supplier portals to keep your suppliers happy and collaborating well with your accounts payable system. Third, centralize payments to keep all accounts payable system management in one location. Next, manually track payments to ensure your accounts payable system works smoothly. Finally, active fraud reduction activities during the accounts payable management process mitigate significant financial risks. Using this five step process, you can strategically increase your company’s liquidity.