As the backbone of business financial management, accounts payable (AP) is a crucial process that covers everything from invoice management to vendor payments. But a business can be like a living organism — one that grows and evolves over time. And if your AP process hasn’t been evolving with it, chances are you’ve already outgrown it. Here are five signs you’ve outgrown your accounts payable process – and what you should do about it.
1. Increasing cycle time
One of the clearest signs that your AP process needs an overhaul is that you take too long to pay vendors. This happens when the process cycle time increases — which can be a result of inefficiencies in the approval process, delays in invoice processing, or issues with your existing software. In any case, the longer the cycle time, the higher the chances of missing vendor discounts or facing vendor relationship problems.
Manual, paper-based AP processes tend to be fairly disorganized. Invoices, vendor records, and payment approvals can pile up, making it all too easy to miss out on important details, payments, and notifications. If you’re buried in drifts of paperwork, it’s a clear sign your accounts payable process needs updating.
3. Lack of supplier visibility
The accounts payable process involves multiple parties and stakeholders, including suppliers, operations, procurement, and finance. Sometimes, however, suppliers may feel neglected in the process and they may not be able to access information on time. In such cases, consider adopting a system such as a supplier portal, which provides suppliers with visibility into their payment status.
4. High paper costs
Check your monthly paper spend: it might be greater than you think. Everything involved in manual AP processes — stacks of paper, ink and printing costs, postage, and your team’s wasted time — is an expense your company doesn’t need. Going digital with cloud-based automation can not only save money but also increase the accuracy of data entry, and your team’s productivity.
5. Poor invoice approval processes
The accounts payable process is unique in each organization. It’s important to identify and integrate specific approval processes to reduce the risk of fraud, ensure appropriate controls, and create a consistent workflow for your organization. If you lack a defined workflow, or the invoices aren’t authorized on time, it’s a clear sign you’re outgrowing your current process.
Identifying that your AP process is no longer effective is the first step towards implementing improvements. It is crucial to examine how change can be implemented for specific pain points, keep an eye on costs, and stay flexible with automation. An inaccurate and outdated process can harm your accounts payable ROI, delay approvals, and even cause missed payments, which can negatively impact vendor relationships. Make sure you understand how to handle fixing these changes best so that your business processes can keep up with the growth and move forward.