Accounts payable processes may not be the most exciting thing about running a business and are often viewed as the back office ’out of the spotlight’ function. After all, who wants to think about paying bills?
However, managing your business’ accounts payable and invoicing function is a crucial process and, if not managed properly can cost your company real money or – maybe worse – damage your brand’s reputation and professional relationships.
Poor accounts payable functions are a real and present danger for small businesses, in particular, half of British SMEs are waiting for overdue bills to be settled, at a cost of about £44.6bn according to research by insurance company Zurich.
At best, waiting on late payments has caused cash flow problems for many of these small businesses and, at worst, has forced others to close altogether.
65% of respondents to Zurich’s questions said late payments were forcing many small businesses to close down while waiting for the money they were owed.
Paying bills late is sometimes unavoidable and is not always intentional, but being labelled as a business which regularly pays money to suppliers late is a sure way to damage your business, and your reputation and will likely lead to supply chain problems if suppliers start to avoid working with you.
In an effort to address late payments, the government recently introduced legislation creating a ‘duty to report on payment practices and performance’ making it compulsory for large businesses to report on their payment performance.
The first batch of reports were recently released for those businesses filing in November and highlighted how big a problem late payments are within UK business.
As well as the reputational damage of paying late, this can also lead to other problems, as businesses with poor accounts processes could end up duplicating payments in response to follow-up invoices.
This inevitably results in refunds being sought as well as the wasted time and effort in finding the duplicate invoices, arranging return payments and trying to update accounts.
Reputation becomes a problem here as well; your business is not going to be seen as a professional outfit if you have to go through the process of arranging refunds or looking for duplicate invoices.
This is not even to mention the extra effort your accounts department has to put in due to the increased workload, and the potential damage your reputation will suffer as an employer if you’re creating a more stressful work environment.
Then, just to pile on the problems of late payments, there is the prospect of late or inaccurate financial reports if information cannot be tracked down or is not recorded in time for deadlines.
The fines and penalties imposed by these delays or lost information can be substantial and add up, and is a situation any business would want to avoid at all costs.
On the flip side to poor accounts payable, getting this process right and running smoothly will lead to you being seen as a trusted customer by your vendors – and if you do run into payment troubles at some point, they are more likely to see it as a one-off and be more flexible.
Your suppliers may also view your consistent and reliable payments as a reason to offer you preferential deals or discounts, leading to cost savings.
So, having established the cons of getting a reputation as a late payer, and the pros of paying your vendors on time, how can a business ensure its accounts payable processes are as efficient, transparent and smooth as possible?
One answer is to automate the accounts payable process.
Using invoice capture and data extraction tools, your business can automatically pull information from invoices to and track it through the payment process, rather than relying on manual inputs and management.
This not only lowers the invoice processing costs by determining the important information automatically but also shortens the invoice processing cycle times by reducing the touchpoints for the invoice and improves internal visibility and transparency for the payment.
As an example, an automated accounts payable process can pull the information from the invoice, note who was last responsible for the payment in the process and update the tracking of the invoice from reception through to final payment.
Human error is also reduced by taking this approach and your business also does not require a large accounts payable department.
The automation of this function means you can become much more efficient and streamlined while protecting your business’ reputation with your vendors.
By empowering your accounts team with an automated payable solution, you can boost your business and focus more time on growth and development, rather than tracking down those invoices from two months ago.