Running a smooth business means keeping your finances in order, and accounts payable process improvement is a big part of it. Even small changes in accounting processes can make a huge difference, saving you both time and money while keeping everything running as efficiently as possible.
In this article, you’ll find 17 practical ideas and real examples that will help you take control of your AP system.
17 Must-Consider Accounts Payable Process Improvement Ideas
Improving your accounts payable process can have a big impact on efficiency and cash flow management. Here are 17 must-consider ideas to help you get started.
1. Use AI-Powered Invoice Scanning to Capture Data Automatically
Automating invoice scanning with AI streamlines your accounts payable process. AI reads key details like vendor names, amounts, and dates, reducing manual entry errors. It also speeds up approvals and keeps payments on track. Additionally, it helps maintain a steady cash flow and minimizes late fees.
AI tools integrated with accounting software are even more efficient. They automatically match invoices with purchase orders and receipts and cut down repetitive tasks. This allows your AP team to focus on higher-priority work.
How to Use AI for Invoice Scanning:
- Pick a reliable AI tool: Try platforms like Tipalti or Tungsten Automation for automatic data capture.
- Connect with your accounting software: Make sure it integrates smoothly with systems like QuickBooks or SAP.
- Set up automatic matching rules: Program the system to match invoices with purchase orders and receipts.
- Review performance regularly: Check in to catch any errors or exceptions.
- Train your team: Make sure they know how to handle flagged errors or exceptions.
2. Set up a Supplier Self-Service Portal for Status Tracking & Communication
A supplier self-service portal lets vendors check invoices, payments, and order statuses without contacting your team. After submitting invoices, they get real-time updates, and can track payments, correct discrepancies, and provide missing information.
This reduces AP department involvement, improves communication, and minimizes errors. It’s an efficient way to strengthen relationships and streamline the process.
How to Set Up a Supplier Self-Service Portal:
- Pick a platform: The platforms mentioned above, Tipalti or Tungsten Automation, both have supplier self-service portals available.
- Allow invoice tracking: Give suppliers access to their invoice and payment status.
- Enable document uploads: Let them upload tax forms or update contracts directly in the portal.
- Automate reminders: Set reminders for vendors to provide missing paperwork.
- Provide support options: Offer a help desk or chat feature to resolve issues quickly.
3. Implement 3-Way Matching With Automated Exceptions Reporting
3-way matching compares the purchase order, the invoice, and the receiving report to confirm all the details match before any payment is made. This step comes after the invoice is received and helps prevent overpayments, fraud, or incorrect shipments.
Automating this process speeds up approvals while catching discrepancies—like price mismatches or wrong quantities—right away. This way, your billing coordinator and other accounts payable specialists only have to focus on the exceptions that need manual attention.
How to Implement 3-Way Matching with Automated Exceptions Reporting:
- Choose an AP automation tool: Try platforms like Tipalti or SAP Concur for automated matching.
- Set matching rules: Configure the software to match purchase orders, invoices, and receiving reports.
- Automate exception reporting: Let the system flag any mismatches automatically.
- Follow up on flagged exceptions: Have your team review flagged discrepancies quickly to avoid delays.
- Tweak matching rules: Adjust the rules over time to better fit your business’s purchasing patterns.
4. Introduce Mobile Approval Workflows for Invoice Processing on the Go
Mobile approval workflows let you approve invoices right from your smartphone or tablet. Once an invoice is submitted, you can quickly review and approve it on the go.
This solution is perfect if you have remote teams or members who frequently travel. It keeps things moving smoothly, reduces delays, and helps payments stay on track.
How to Implement Mobile Approval Workflows:
- Select a platform with mobile access: Platforms like BILL and Plooto offer mobile invoice approval.
- Train your team: Show key staff how to use the mobile interface for quick access.
- Set up push notifications: Automatic alerts let approvers know when an invoice needs review.
- Track performance: Review how well the mobile workflow works to catch any slowdowns.
- Offer user support: Make sure your team has help if they run into any issues with the mobile system.
5. Use Dynamic Discounting to Negotiate Early Payment Terms With Suppliers
Dynamic discounting gives you the option to pay suppliers earlier in exchange for a discount. Suppliers get paid faster, which boosts their cash flow, and your business saves by paying less. It’s a simple way to build strong relationships with suppliers while managing your own expenses more efficiently.
How to Use Dynamic Discounting:
- Pick a tool with dynamic discounting options: Platforms like Coupa or Invoiced are ideal for handling early payment discounts.
- Focus on key suppliers: Work with suppliers who value early payments and are open to offering discounts.
- Set flexible discount rates: Adjust discount offers based on how early you can make payments.
- Automate offers: Let the system send discount offers automatically to suppliers.
- Track savings: Regularly check how much you’re saving through dynamic discounting analytics.
6. Introduce Spend Analytics for Better Budgeting & Vendor Negotiations
Spend analytics gives you a detailed look at where your money is going, so you can make smarter decisions about your budget and vendor contracts.
This tool is especially helpful before you start budgeting and provides real data to back up negotiations with suppliers. With spend analytics, you can track purchases and identify areas where you’re overspending. Then you can use this information to negotiate better deals through data-backed conversations.
How to Use Spend Analytics:
- Pick a spend analytics platform: Consider tools like SAP Ariba or SpendHQ for in-depth spend tracking.
- Examine your spending trends: Review past spending to spot areas that could be improved.
- Set clear benchmarks: Use the data to create goals for future budgets. For example, if last quarter’s marketing spend was $10,000, aim to reduce it by 10% next quarter while maintaining results.
- Prepare for vendor negotiations: Use your analytics to negotiate better pricing and terms. If you noticed a 15% price increase over the past year, for instance, you can refer to that data when requesting a discount or locking in a better rate.
- Check spending regularly: Make reviewing your spending analytics part of your monthly or quarterly routine.
7. Consolidate Vendor Payments Into One Weekly or Monthly Payment Run
Instead of processing invoices individually, group payments into one batch, either weekly or monthly. This makes it easier to track and manage cash flow.
Staff accountants assist in managing this process, helping to maintain smooth approval workflows and ensuring payments are released on schedule without delays. This step comes after invoices are approved and ready for payment.
How to Consolidate Vendor Payments:
- Decide on a payment schedule: Choose a weekly or monthly payment cycle based on your business needs.
- Set up batch payments: Tools like Tipalti or Bill.com can help you manage this efficiently.
- Inform your vendors: Let your suppliers know when they can expect their payments.
- Watch your cash flow: Keep track of outgoing payments to stay on top of your budget.
- Automate the process: Automating batch payments reduces errors and saves time.
8. Create a Shared Calendar for Payment Deadlines & Approval Reminders
A shared calendar is an easy way to keep your team aligned on payment deadlines and approval reminders. Once invoices are submitted, the calendar helps track due dates and approval steps, so nothing slips through the cracks. This approach simplifies communication, keeps everyone accountable, and streamlines your workflow.
How to Set Up a Shared Calendar:
- Pick a collaborative tool: Use platforms like Google Calendar or Microsoft Outlook for easy sharing.
- Add key deadlines: Input all payment and approval deadlines in the calendar.
- Set automatic reminders: Schedule reminders to prompt action on upcoming approvals or payments.
- Assign roles: Make sure team members know what they’re responsible for at each stage.
- Check regularly: Review the calendar every week to stay on top of upcoming deadlines.
9. Automate Recurring Payments Using Smart Contracts & Blockchain
Ideal for regular payments, like subscriptions or ongoing service agreements, smart contracts trigger payments automatically once specific conditions are met, reducing the need for manual intervention.
Use Blockchain to add an extra layer of security and transparency. It helps avoid errors or fraud by recording every transaction in a decentralized ledger that is easily tracked and verified. It’s a great solution for companies looking to manage recurring payments efficiently and with less risk.
How to Automate Recurring Payments with Smart Contracts:
- Select a blockchain platform: Consider options like Ethereum or Hyperledger to set up your smart contracts.
- Define the terms: Clearly outline the conditions that trigger payments, like dates or service completion.
- Set up automatic payments: Configure the contract to release payments automatically when the agreed conditions are met.
- Monitor contracts regularly: Check to make sure everything is running smoothly and payments are being triggered as expected.
- Store secure backups: Keep backups of contracts to safeguard against any potential issues.
10. Segment Vendors to Prioritize High-Impact Payment Processing
Organize your suppliers based on factors like contract size, payment terms, or their impact. This helps you focus on the ones that are most important to your operations.
After invoices are submitted, you can give priority to high-impact vendors, making sure their payments go through first. This helps manage cash flow and strengthens relationships with key vendors.
How to Segment Vendors for Payment Prioritization:
- Create priority categories: Segment vendors based on contract value, payment terms, or business importance.
- Set payment tiers: Develop different payment schedules for high-priority and lower-priority vendors.
- Automate priority payments: Configure your system to automatically prioritize payments for key vendors.
- Review segments regularly: Check your vendor list every few months and adjust segments as needed.
11. Use Virtual Cards for Secure & Trackable One-Time Supplier Payments
Instead of relying on traditional payment methods, you can generate a unique virtual card for each transaction to handle one-time supplier payments. This makes it more secure and also simpler to track the payment without worrying about fraud or unauthorized use.
How to Use Virtual Cards for One-Time Payments:
- Pick a virtual card provider: Consider platforms like Stripe or Airbase for virtual card services.
- Generate one-time cards: Create a new card for each transaction to maintain security.
- Set spending limits: Control the amount spent by capping each card with a specific limit.
- Integrate with your AP system: Connect virtual card platforms to your accounting software for smoother reconciliation.
12. Integrate AP Data Into Real-Time Cash Flow Forecasting Tools
Link your accounts payable data to cash flow forecasting tools to get a real-time view of your finances. This setup helps you track outgoing payments and accurately predict your cash flow, so you can stay ahead of potential shortfalls and better manage expenses and capital.
How to Connect AP Data to Cash Flow Forecasting:
- Select a forecasting tool: Consider platforms like Float for real-time cash flow management.
- Sync with your AP system: Connect your accounts payable software for automatic data integration.
- Review forecasts frequently: Regularly check cash flow projections to spot potential issues.
- Adjust as needed: Use the updated data to tweak your forecasts based on incoming invoices.
- Train your team: Make sure your finance team knows how to use the tools effectively.
13. Set up Custom Alerts for Unusual Invoice Amounts or Payment Requests
Custom alerts for unexpected invoice amounts or suspicious payment requests can help you catch fraud and mistakes early. These alerts notify your team whenever something doesn’t look right, like a higher-than-normal invoice or a payment request from an unfamiliar vendor.
They can then quickly investigate any flagged transactions, allowing you to stay on top of potential problems before they affect your bottom line.
How to Set Up Custom Alerts:
- Pick a platform with alert features: Systems like Tipalti or SAP allow you to create custom alerts.
- Set alert criteria: Decide what qualifies as unusual—whether it’s an invoice amount or a new payment request.
- Enable automatic notifications: Program the system to notify you instantly when something doesn’t match the set criteria.
- Investigate quickly: Act on flagged alerts immediately to prevent any potential issues.
- Adjust as you go: Update the alert settings as your business’s payment patterns evolve.
14. Use Vendor Performance Scoring to Identify & Reward Reliable Suppliers
Score your vendors on things like delivery times, product quality, and invoice accuracy to quickly spot which partners are the most reliable and track how well your suppliers meet your standards.
This makes it easy to prioritize those vendors for future orders and offer rewards to encourage their continued high performance. It also helps you build stronger, more dependable partnerships.
How to Start Vendor Performance Scoring:
- Pick a scoring tool: Consider platforms like ProcurementExpress or SynerTrade for vendor tracking.
- Set clear metrics: Decide what factors matter most—like on-time deliveries or accurate orders.
- Regularly evaluate vendors: Make performance reviews a routine part of your vendor management process. Compare their performance against industry standards to ensure you’re getting the best value.
- Reward reliable suppliers: Offer perks like early payments or exclusive deals to top-performing vendors.
- Use data to guide decisions: Base future purchases and negotiations on the performance scores.
15. Implement Multi-Currency Payment Automation for International Vendors
Managing payments for international suppliers can get complicated, but multi-currency payment automation takes the hassle out of the process. This system lets you handle different currencies without worrying about exchange rates or manual conversions.
It’s a faster, error-free way to make sure your payments are accurate, on time, and in line with local requirements.
How to Set Up Multi-Currency Payment Automation:
- Pick a payment platform: Tools like Wise or Tipalti are designed for handling payments in multiple currencies.
- Connect to your AP software: Link the payment platform to your existing accounts payable system for smooth transactions.
- Program currency settings: Set the platform to automatically manage currency conversions and apply the correct rates.
- Monitor payments: Keep track of transactions in real time to make sure everything is running smoothly.
- Check periodically: Review the setup from time to time to make sure it’s still working as expected and adjust as needed.
16. Develop a Standardized Dispute Resolution Process With Clear Timelines
Having a standardized process for handling disputes makes it easier to deal with vendor issues, like invoice errors or product concerns.
Laying out clear steps and deadlines lets you address problems efficiently and avoid long delays. This kind of process strengthens your supplier relationships by showing that issues will be handled fairly and quickly, while also keeping your operations running smoothly.
How to Build a Dispute Resolution Process:
- Outline each step: Create a detailed plan for resolving disputes, from receiving the complaint to resolving the issue.
- Set timelines for each stage: Assign specific deadlines to prevent delays and keep disputes moving forward.
- Involve the right team members: Ensure that the appropriate people are handling each type of dispute.
- Track disputes closely: Use a tracking system to monitor disputes and make sure nothing is overlooked.
- Review and improve regularly: Look at the process periodically to find ways to make it more efficient.
17. Introduce Electronic Data Interchange (EDI) to Sync With Vendors’ Systems
Electronic Data Interchange (EDI) helps automate the exchange of documents, like invoices and purchase orders, between your system and your vendors’ systems.
With EDI, you can sync data directly, cutting down on manual data entry and reducing errors. It speeds up communication with your vendors and makes the entire process—from ordering to payments—smoother and more accurate.
How to Set Up EDI With Vendors:
- Select an EDI provider: Consider using platforms like TrueCommerce or SPS Commerce to handle data syncing.
- Integrate with your AP system: Make sure the EDI system connects directly to your accounts payable software.
- Configure the document types: Set up the system to handle invoices, purchase orders, and payment confirmations.
- Run tests with key vendors: Test the system with your primary vendors to catch any issues before going live.
- Monitor the system: Check in regularly to ensure the process is working smoothly and to spot any errors early.
How To Identify What Needs Improvement In Your Accounts Payable Process
Once you’ve decided to improve your accounts payable process, you need to know how exactly you can do that.
Step 1: Map Out the Current Accounts Payable Workflow
Start by mapping out the entire AP process, from receiving invoices to processing payments. This will help you spot inefficiencies and areas that need improvement.
- List each task in sequence: Break down every step from invoice receipt to payment processing.
- Highlight manual tasks: Identify tasks that rely on manual work and could be automated.
- Spot bottlenecks: Find where tasks slow down, like approvals or verifications.
- Check communication issues: Look for any breakdowns in communication with vendors or departments.
- Track exceptions: Note how often errors or issues occur and how long they take to resolve.
Step 2: Collect Data on Invoice Processing Times & Error Rates
Track how long invoices take to process and where errors happen to identify the parts of your workflow that need improvement. Without this data, it’s hard to know exactly where things are slowing down or costing you time and money.
- Measure time for each step: Record the time from invoice receipt to payment approval.
- Spot error-heavy tasks: Identify tasks where mistakes happen most, like manual data entry or approval delays.
- Compare vendor performance: See if certain vendors consistently slow the process down or create errors.
- Track rework time: Check how much time is spent fixing mistakes or reprocessing invoices.
- Calculate the impact: Assess how these delays and errors are affecting your bottom line.
Step 3: Interview Key Stakeholders For Feedback
Talk to the people involved in the accounts payable process—your team, department heads, and even vendors—to get firsthand insights that data alone might miss. Their feedback can help pinpoint specific pain points or inefficiencies that need attention.
- Engage your AP team: Ask them what parts of the process feel slow or frustrating.
- Talk to department managers: Get their input on approval delays or communication gaps.
- Consult your vendors: See what challenges they face in your payment process and how it affects their operations.
- Identify recurring issues: Gather feedback on common obstacles or frustrations.
- Use their insights for improvement: Focus on suggestions that could streamline the process or reduce errors.
Step 4: Conduct a Root Cause Analysis of Frequent Issues
Instead of just treating problems as they come up, dig into the root cause of recurring issues to fix them for good. This way, you’re addressing the underlying problems rather than just patching up symptoms.
- Identify frequent problems: Look for recurring issues like missed payments or incorrect invoice data.
- Break down each issue: Analyze what’s really causing these problems—manual errors, system glitches, or communication breakdowns.
- Find patterns: Look for any common themes that keep coming up in these issues.
- Assign responsibility: Figure out which team or role is best suited to address and resolve each problem.
- Create action plans: Develop specific solutions that target the root of each problem, not just the surface issues.
Step 5: Review the Current Technology & Tools in Use
Take a close look at the technology and tools your AP team relies on. Are they doing the job efficiently, or are they outdated and slowing things down? This review will help you figure out if your current systems need an upgrade to keep pace with your business needs.
- Check system capacity: See if your software can handle your current and future invoice volume.
- Spot integration issues: Identify where your AP tools might not be syncing smoothly with other systems.
- Get user feedback: Ask your team how easy or frustrating it is to use the current tools.
- Research new options: Look into tools that can automate tasks and improve overall efficiency.
- Evaluate security: Make sure your systems protect sensitive data, especially around payments.
Step 6: Benchmark Your Process Against Industry Standards
Measure your AP process against industry benchmarks so you can see where improvements are needed. Knowing how you compare to others also helps you understand if you’re behind or ahead of the curve. Plus, you can assess the performance of your team, from junior accounts payable clerks to more senior staff.
- Research industry metrics: Find out the typical processing times, error rates, and costs for your industry.
- Measure your performance: Compare your invoice processing times, error rates, and costs to industry averages.
- Set improvement targets: Use the benchmarks to create specific goals for cutting down on time and mistakes.
- Identify weak spots: Find areas where your process lags behind and prioritize them for improvement.
- Track progress regularly: Keep tabs on how your process changes over time and how it matches up to industry standards.
Step 7: Analyze the Approval Workflow for Bottlenecks
The approval process is often a major source of delays. Break down each step to spot where things slow down and figure out how to speed them up.
- Measure approval times: Track how long it takes to get invoices approved from start to finish.
- Find the slow spots: Look at the stages where approvals consistently get delayed.
- Review communication flow: Check if breakdowns between departments are causing unnecessary holdups.
- Simplify approvals: See if you can reduce the number of approvals or streamline the process.
- Automate steps where possible: Consider automating routine approvals to free up time for more complex tasks.
Step 8: Identify Repetitive Manual Tasks for Automation
Manual tasks eat up time and are more likely to result in errors. Finding these tasks and automating them can significantly boost your AP process’s efficiency and accuracy.
- List repetitive tasks: Identify any tasks done manually, like entering invoice data or matching invoices to purchase orders.
- Look for automation tools: Explore software that can take over repetitive tasks, like invoice scanning or automated approvals.
- Prioritize time-consuming tasks: Focus on automating tasks that take up the most time or are prone to errors.
- Integrate with current systems: Make sure any new tools fit with your existing software to avoid disruptions.
- Track results: Monitor how automation impacts efficiency and error rates after implementation.
7 Challenges When Improving Accounts Payable Process + Solutions
It’s normal to encounter a few challenges when implementing your accounts payable process improvement. Here are common hurdles and practical ways to overcome them without stress.
I. Resistance To Change From The Team
When you introduce changes to the AP process—like automating tasks or implementing new software—some employees may be hesitant. Team members who have been manually entering invoices or handling approvals for years might worry about losing control over familiar tasks or dealing with the learning curve that comes with new technology. This resistance can create tension and slow down the transition.
Solution: Get your team involved early to address their concerns head-on. Offer practical training sessions and demonstrate how the new tools will make their jobs easier—reducing manual work and cutting down on errors. Show the long-term benefits, like faster processing times and fewer headaches, so they can see how these improvements will help them, not complicate things.
II. Lack Of Budget For New Technology
Investing in new AP technology can feel out of reach, especially for businesses working with tight budgets. High upfront costs for new software or automation tools may discourage companies from upgrading, even when improvements are needed.
Solution: Start small. Focus on automating the tasks that eat up the most time or frequently cause errors. Many software providers offer scalable solutions, allowing you to start with affordable options and expand as needed. Consider cloud-based or subscription models that spread out costs, giving you flexibility without large upfront expenses.
III. Integrating AP Software With Existing Systems
One of the biggest challenges in upgrading your AP process is making sure new software integrates smoothly with your current systems. Misalignment between platforms can cause headaches and delay improvements, frustrating your team.
Solution: Opt for AP solutions designed to integrate well with the systems you already use, like your accounting or ERP platforms. Choose providers that offer strong customer support and assist with integration, so you have expert help along the way. Planning and testing the integration process before a full rollout will minimize disruption and make the transition much smoother.
IV. Managing Diverse Vendor Payment Terms
Dealing with different vendor payment terms can quickly become a juggling act. When each supplier has its own payment schedule or specific terms, it’s easy to lose track of deadlines and risk late payments. This makes it harder to manage cash flow and stay organized when there’s no uniformity across the board.
Solution: Set up an automated system that tracks payment terms for each vendor and sends timely reminders for upcoming payments. With the right software, you can categorize payments based on priority or due date, which takes the guesswork out of staying on top of multiple schedules. Automation helps you simplify the process and stay on track with your vendors’ needs.
V. Limited Visibility Into Invoice Status
It’s hard to manage your AP process when you don’t have a clear view of where an invoice is in the pipeline. If your team isn’t sure whether an invoice has been approved, paid, or is still pending, it can slow everything down and cause late payments or missed deadlines.
Solution: Invest in AP software that gives you real-time updates on invoice status. Having visibility at every stage—submission, approval, payment—keeps your team informed without needing to chase down answers. This clarity speeds up approvals and payments and cuts down on the delays that come from a lack of visibility.
VI. High Volume Of Manual Data Entry
Entering invoice and payment data manually can be time-consuming and prone to errors. When your team is handling high volumes of data by hand, mistakes like typos or missed details are bound to happen. These errors can disrupt your entire AP workflow.
Solution: Automate your data entry with AI-driven tools that can scan and capture invoice details automatically. This drastically cuts down on manual work and reduces the risk of errors. Not only does automation speed up the process, but it also frees up your team to focus on more important tasks that require their attention.
VII. Ensuring Data Accuracy & Consistency
When data across your systems is inconsistent or inaccurate, it creates problems throughout the AP process. Missing or mismatched data can cause duplicate payments, overlooked invoices, or incorrect financial reporting, resulting in bigger issues down the line.
Solution: Connect your AP software with your accounting and ERP systems to keep data aligned across the board. Automating data synchronization and matching purchase orders with invoices will help maintain accuracy. Regular checks and audits can also catch any issues early, making it easier to keep everything consistent and running smoothly.
Conclusion
Improving your accounts payable process is crucial for streamlining operations and reducing errors. From automating manual tasks to keeping track of diverse vendor payment terms, optimizing your AP workflow makes everything more efficient. Addressing these challenges will help you build a reliable and seamless system that supports your business growth.
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FAQs
Can I improve my accounts payable process without buying new software?
Yes, you can improve the accounts payable process by optimizing your current workflow. For example, tightening up communication, enforcing deadlines for approvals, and rethinking how tasks are assigned can go a long way. But if you’re looking for a long-term fix, investing in automation software will help you save time and money down the road.
What are some hidden trouble spots in the AP process that could be causing problems?
Manual data entry and dealing with invoice discrepancies are often overlooked but can create big slowdowns. These small issues tend to pile up over time, creating delays. Automating these tasks or catching discrepancies early can significantly boost your AP speed and accuracy.
Can I still stay in control if I outsource parts of the AP process?
Yes, outsourcing doesn’t mean you lose control. You can choose what tasks to outsource and keep the rest in-house. Many providers offer flexible services, so you can still oversee key areas like final payment approvals while outsourcing time-consuming tasks like invoice processing.
How can I tell if my accounts payable improvements are working?
The best way to track your success is through metrics like processing time, error rates, and how much you’re saving on costs. Compare these numbers before and after you’ve made changes to see where things have sped up, become more accurate, or saved you money. Keep an eye on these over time to measure long-term success.
