What are accounts payable controls? There is a short answer to this and a long answer. The short answer is that it is the mechanism created to mitigate the risk of losses on the side of the AP team and, subsequently, the company.
Coming to the long version of the answer. To understand what account payable controls are, you need to look at the various types of AP controls that exist. In this article, we’ll be delving deep into AP controls.
Obligation to pay controls
There are various sub-parts in understanding this control, but here’s a basic overview. This control exists to approve payments that the authority needs to approve. It shows that the invoice is ready to become a supplier invoice. It’s one of the primary controls and isn’t as imminent as the other controls. It does have a lot of applications but doesn’t exert much pressure over the entire workflow.
Here are some of the uses this control has:
It makes the AP team assemble the invoice and authorize the purchase order. The invoice is thoroughly reviewed and checked for any errors before passing it.
It approves purchase orders. The AP workflow is closely related to the procurement department; this department looks into purchase orders and makes sure that all the orders have been approved by authorities before the invoices for the same are sent out.
It uses the three-way match approach. It’s easy to understand this three-way approach; in this, someone from the payables staff checks the invoice receipt and gives it the approval to move forward. Using this process can make the entire process quite methodical, but it is quite slow. It can break down easily too, but that can be taken care of by an automated AP workflow.
To get rid of duplicates. Duplicate invoices can often be the bane of the entire workflow. Getting rid of these is essential, and that’s what this control does.
Data Entry controls
Data entry is an important aspect of AP workflow. This control checks whether the information has been entered into the invoices and the databases and their validity. An AP workflow must manage how and how much data is entered, as any misstep can cause huge losses for the company. Data entry controls have four primary functions.
Here are the functions of Data Entry Controls
It enters records data before approval. The basic function of this control is not to get approval but to make payments to the suppliers. Via this control, all the invoices are recorded together into the system, making it easy to handle.
It also records data after the approval of the invoice. It makes sure that the AP team has looked into the invoices once before entering them into the database. This way, transparency can be maintained.
It gives the invoice numbering guidelines. The worst error that can happen in an AP workflow is the error of duplication. To prevent that from happening, a proper numbering of all invoice sheets is necessary. Data controls enable the AP team to do so but expect the users to keep a consistent way of numbering so that the system isn’t confused.
It matches the budget in financial statements. The invoices should be directed to the right department. Discrepancies in this rule can lead to the budget toppling over, so this needs to be handled with utmost care.
Payment controls
The third and final category of controls is payment controls. They exist to track payments and make sure that the supplier has received them. In the case of electronic payments, it’s a bit redundant because the payments are immediate, but if for some reason it doesn’t pass, the whole situation falls under the jurisdiction of payment controls. It has five major functions in offline transactions.
Here are the functions of payment controls:
It divides the work among the team to split printing checks and signing duties. This makes sure that someone is cross-checking these checks before signing them off. This way, the chances of error are decreased significantly.
It makes sure that the unused checks are secured in a locked location. This reduces the chances of fraud that can happen if these checks were to fall into the wrong hands.
They help in tracking the checks via their check numbers. In case any checks have been sent from the company but not received by the supplier, the firm can track them by their numbers. The number is unique to every check and can help the bank find out where the check is in its processing stages.
The last two functions of this control are relatively similar. They are the allowance of the manual signing of checks and allowing multiple people to sign in case of certain conditions that might arise.
Conclusion
This article was a deep dive into what account payable controls are. Hopefully, you were able to understand the long answer and can work with these controls with this basic understanding.
[vc_row][vc_column][vc_column_text]Change is always a prospect that is hard for people to harness. AP automation projects can be one such big change that people find hard to settle into. Implementing automation into a manual AP workflow can be hard because of employee resistance and/or lack of support from management.
This article will tell you how you can transit into a digital AP workflow easily and gradually while easing the employees of your business into this workflow.
Build a structure
The change you are trying to bring about shouldn’t be sudden; it should be planned and gradual. If someone asks you why the change is occurring, you should have a solid answer to that. A haphazard shift can cause confusion and chaos among your employees, which is an unfavorable situation. You need to build confidence that the changes that are being brought about are the right way to go, and without it, the company will fall behind. This should also be able to sway the decision of the management to lend you a hand.
Another important factor that you should take into consideration is giving the employees incentives for change. They should not feel like they’re being neglected; it can be a major cause of anxiety among them which should never be the case. You should have the skills to support your claims, though. You should act as an inspiration for your employees through times of change.
Build a case
If you’re taking the initiative to automate the entire AP workflow, you should be well aware of the problems you might face in the entire process. You also need to consider the challenges you are facing in the manual AP workflow and weigh out the pros and cons of shifting it to a digitized workflow. Your desire to improve the efficiency of the entire process shouldn’t go unnoticed in this case. You will need to create a document listing out all these points so that the higher-ups can understand the problem and take the necessary actions to help you out.
You need to make sure that there are shared goals with other departments of your company so that you can get greater support for your ideals. Avoid any discrepancies in your reports and your actions to get better support for automating AP workflow. This leads us to the next step in this endeavor.
Establish a vision and communicate
The next step is establishing a solid vision that everyone can follow and have surety that they’ll achieve something great via this change. The vision shouldn’t just be well established; it should be well communicated with everyone in the company to keep maximum transparency. The reason and the advantage of keeping this transparent attitude will reflect when all the employees get ample time to prepare for the change. This way, no one will be taken by surprise and can experience a harmonious change in the company.
Along with a structured plan, you should also be able to communicate well what your ideas are and how they’ll bring a change for the betterment of the company. This should be able to convince a lot of people as automating workflow can improve the efficiency of your company by a thousand-fold. This communication plan should be perfect for the same reasons. Any flaws can lead to your plan not getting approved.
Bring change in behaviors
The next step is basically a preparation for when the plan has been implemented. You need to train your employees as to how to do the work after the AP workflow has been automated. However, all this training is useless without a real-life scenario to work around. You can have various drills to get people used to the new system. The AP team needs to take charge in such a situation and teach everyone how to operate without disrupting the system that would be set in place. You should promote behaviors that set good examples for other employees and reinforce people to do so.
Sustain that change
Once the plan has been implemented, the AP team must take follow-ups from the employees to make sure that the plan has been implemented well. They should inform the new employees as to how to operate the existing workflow. The AP team should set benchmarks as to how well the AP workflow has been operating.
Conclusion
Automating a workflow is a cumbersome process that can fail at times. But if you follow the process mentioned in this article meticulously, there is a high chance that your plan will succeed and your AP workflow’s efficiency will increase drastically. It’s a risk worth taking and a plan worth elaborating upon if you have the chance to do so.[/vc_column_text][/vc_column][/vc_row]
It is normal for people to want to jump the gun when it comes to improving the pain points of their businesses. Before anyone makes any large decisions, it’s better to take a step back and realize what sort of problems you want to solve within your business. It’s easy to evaluate what your company needs at a high level. It’s easy to say a buzzword like “communication” or “efficiency”, but how do you plan on reaching those goals. Today we’re going to break down the Accounts Payable workflow and process and identify the weak points within it.
Before we get into the actual process of your accounts payable, we need to understand the flow within it. If you work in accounts payable, you know you have to focus on the upstream and downstream workflows.
The upstream workflow refers to the process of procurement. This involves going out and finding reliable suppliers for your business. The upstream workflow also involves building strong relationships with third parties to create contracts that help both parties.
The downstream workflow involves anything after your business buys something. This means the accounts payable section of your office has to confirm the receipt of goods, relevant vendor invoices, and ensure they have proper documentation and authorization for the payments. The downstream flow of someone’s business is often their weak point. An unorganized business and accounts payable can be susceptible to slow business and poor vendor relations. It’s important to understand your AP process before you try to optimize it.
Understanding your Accounts Payable workflow is essential to your business. If your business has sloppy bookkeeping, you might incur penalties for late-payments and have an inaccurate account of the standing of your business. We’re going to walk through the key components of the AP workflow and how an Accounts Payable automation system can help.
Creating a table of vendors to track your accounts
It’s important to create a detailed list of all your vendors with the payment terms (Net 10, 30, and 60) attached to their names. Most businesses must keep this up to date and detailed, but if you’re a young business you need to make sure you set a strong foundation for how you handle your transactions.
Bill Details
When you get an invoice from a vendor, you need to go in and manually reconcile the bill for accuracy. Make sure that all the products on the invoice have been received and are in good condition. It is important to ensure that the products or services were completed to 100 percent accuracy for any invoices received. Once you’ve ensured accuracy, you can begin entering in the invoice information into your ledger accounts. You can also enter all accounts payable for your business and approve the bills as you review them.
Process payments
It is important to stay up to date and constantly check up on your table of accounts to know when your payments are due. When you are aware of your payment status, you must choose a method a payment method. Some of the options include writing a check, credit card, or electronic payment methods. Whatever method you use, you should notify the vendor that the payment has been made.
Stay consistent with your methods and delivery
It is important to create a schedule that best fits your companies needs for accounts payable. Keep yourself up to date to avoid paying late fees by staying on a consistent schedule.
While this system may work, it is easily prone to error and takes up valuable time. Manual data entry costs you valuable time for your business that can be spent on financial planning and strategy. Your AP automation system can automatically reconcile your purchase and invoice numbers to ensure total accuracy when making payments. If two payments don’t add up, there is a double payment, or your payment is almost due, your system will raise a red flag and you’ll be notified. Good thing the future of business is here with Accounts Payable automation. If you’ve been able to identify these pain points in your business, then you can get rid of the headaches that long-lasting manual tasks have been giving you.
Invoices are crucial pieces of documents for any existing business. These documents elaborate on all the necessary payment details you need to pay to your suppliers and form an important part of your accounts payable department. Also, invoices are the proof of your company expenditures that later is included in calculations during audits.
Therefore, ensuring that your invoices are correct, well-managed and organized, and well-tracked is an important part of the accounts payable process. Thankfully, because of Accounts Payable Automation, managing and keeping track of your invoices has become extremely convenient and efficient. Yet, there are a few things that you should always check and make sure are correct. One of those factors is the type of information that your Accounts Payable Automation should include in your vendor invoices.
Therefore, in this article, we will take a thorough look at the kind of information that your vendor invoice should contain so that you have the right kind of information to support your transactions.
Basic invoice information that must be included in a Vendor Invoice
There are particular specifics that every vendor invoice must include. Therefore, make sure that you set this information up while you are setting up your Accounts Payable Automation. Let us go over them, one by one.
Heading specifying Invoice
The first and very important part is the header of the invoice, specified as ‘Invoice.’ Though it may seem very insignificant, this header will quickly help you differentiate an invoice from other types of notes, including credit notes, quotes, or receipts.
Unique Invoice Identification Number
Your AP automation must have a unique invoice identification numbering system. This will help you give a unique ID to every invoice you receive, which can help you keep records and track them when needed. Therefore, instead of having to look through several invoices, you can simply search your database with the unique ID and be able to find an invoice.
Company name and address
Your invoice should carry the name, address, and contact information of your company. These pieces of information are vital for all documents. Therefore, ensure that you have fed these data to your AP automation so that they appear on every invoice.
Date of invoice and supply
The next information that your AP automation must include in all invoices is the date the invoice was issued and the date when the goods and services were provided (known as supply date). These are mandatory and will help you keep better records. Also, please note that the date the invoice and the goods and services were issued might not be the same. Your AP automation should be set up so that it can automatically date the invoices accordingly.
List of items
Next, the most important piece of information for any invoice to have is a proper list of all the goods and services provided. The items should be listed properly (numerically) and separately. Each item should have a clear description to ensure that it is identified properly.
Total Payable Amount (including discounts and taxes)
Along with the list of items, the next important thing is the total amount payable. The amount for each item should be listed alongside the items. The total sum of the amount payable should be listed properly beneath them. You need to feed your AP automation system with the right format for listing and pricing the items. Other things that should be included under this category are:
Discounts (if any)
Applicable Taxes
A complete breakdown of the amount charged if additional charges exist
Payment terms and method
Other things that you must include in an invoice are the terms of payment and payment methods. Terms of payment refer to all the conditions under which both parties involved have agreed to make the transaction of goods and services for a decided amount. It also includes the payment schedule or due dates.
The next thing to be mentioned is the payment methods. It is necessary to mention the agreed mode of payment and the subsequent details. For example, if the amount is to be paid through bank transfer, the invoice must contain the bank details.
Conclusion
Invoices are an important device in the entire buying and purchase cycle of a business. Not only does it give you a proper idea of the goods and services bought, but it also helps you keep track of your purchases and expenditures. For bookkeeping and the amounts payable department, invoices are important and should be properly listed and managed.
With AP automation, you can easily keep track of all your invoices along with managing and organizing for record purposes. With smart AI and automation, your AP automation can help you create the perfect invoices without any laborious efforts. Therefore, keep in mind this basic information about what should be included in an invoice and format your AP automation accordingly.
The economy has stepped into the era of digitalization, where every factor now has an undeniable influence by the latest technologies. Due to this, businesses around the globe have been able to make impeccable progress, quickly adopting an entire ecosystem that effectively eliminates all taxing and repetitive actions. This allows businesses to focus solely on important business activities, thus increasing productivity and profitability.
African Professional Chartered Accountant Woman Doing Tax
There are numerous business aids and tools in the market right now that have made this reality possible. Among them is the AP automation technology. For businesses who are yet to discover this business tool and everything about it, this article will surely be a great help. We will take a look at what this business aid is and who it is for.
What is AP automation?
First, to understand who can use it and how we need to clear our concept of what an AP automation or Accounts Payable automation is. For businesses, proper management of funds and accounts is absolutely necessary. It is important to have a clear idea and data on where your funds are coming from and where they are being used. With digitalization and tools such systems such as AP automation, taking care of such activities has become extremely convenient.
AP automation, therefore, is a process that helps to digitize all activities related to accounts payable processes. It eliminates any manual activities, thus reducing monotony risks and increasing efficiency and productivity. It has been a ground-breaking innovation for the business world that has allowed companies to manage their invoices and other accounts payable factors in a much more profitable way.
AP automation manages three elements of business payments:
Receiving invoices
AP automation allows a business to easily receive invoices and turn them into digital data. The invoices may be electrical or paper-based. For electrical invoices, the system will use methods such as PDF invoicing, EDI/B2B connections, or receiving the receipts through a supply portal. For paper-based invoices, the system will scan the receipt and store it online.
Approval and Workflow management
Once the system receives the receipts, it either matches them to the goods or variables purchased or automatically sends them to the department in charge for approval. Once the receipts are approved, the system passes the receipts to the accounting system to make the necessary payments.
Storage and auditing
Lastly, once the payments are made, the system ensures that all the receipts are properly stored for reviewing and auditing purposes. It also keeps track of all the activity and status related to the receipts for better management. With digital storage, it is also easier to manage and organize the receipts for quick access.
All these are done completely digitally with any manual input, so there is no confusion or scopes of errors or mistakes. It seamlessly integrates with existing software and programs of the company to effortlessly exchange information without any hassle.
How can it help your business?
Technology has already helped the business industry (and various other industries around the globe) grow and flourish in numerous ways. AP automation is just another example of such aid. To put it into words, here is how AP automation can help a business:
Saves time and effort
By now, we have a clear understanding of how AP automation is great at saving your time and efforts. The whole system is automated and does not depend on human interference. Thus, your employees need not waste their time doing redundant activities, saving them that time and effort. This extra time could then be used for some other, more important business activity.
Enhances efficiency
Automating the system means the system knows what to do and does so systematically. Also, with its integration capability, it helps in increasing efficiency as there are no provisions for any mistakes and errors. Also, due to the automation, the system can immediately pick out mistakes such as additional charges or duplicate invoices.
Cost-effective
AP automation can help companies save a significant amount of expenditure expenses. With AP automation, companies can cut down on labor costs, storage costs, invoice production and postage costs, and so. In short, AP automation is a great long-term investment for a business.
Conclusion
All things considered, AP automation is perfect for all kinds of businesses that have a large number of suppliers and vendors. This system is the perfect aid for employees such as accountants, managers, clerks, AP managers, and any employee-related to the financial and accounts department.
With its high-end technological support, AP automation is the business aid that all businesses can benefit from. It reduces efforts, increases efficiency and productivity while eliminating chances of human error. It also helps maintain transparent transactions, thus preventing any chances of fraud or other criminal activities.
In conclusion, AP automation is an example of what technology has to offer. It is a must-have for businesses that look forward to an innovative and optimum future.
