Optimizing the accounts payable (AP) process involves more than paying vendors on time — it’s also about maximizing efficiency and accuracy with every outgoing payment while managing cash flow to maintain a healthy business.
That’s why many AP teams are turning to automation and digitization to eliminate tedious, manual tasks, reduce human error, and ultimately streamline the AP process. As a result, finance departments can ensure accuracy in their processes, maintain strong vendor relationships, and avoid unnecessary costs, like fees associated with late or duplicate payments.
In this blog, we’ll explore 12 steps to optimize the AP workflow, focusing on process improvements in accounts payable.
Key takeaways
- Digitizing and automating AP processes is key to boosting efficiency, reducing manual errors, and accelerating processing times, allowing staff to concentrate on strategic initiatives
- An efficient AP process requires a holistic analysis of existing workflows, including invoice approvals, handling overdue payments, and the effectiveness of automation tools
- Continuous assessment and embracing innovative solutions is a key element to maintaining an optimized AP process
What is the AP process?
The AP process involves managing and tracking all outgoing payments a company is liable for, from vendor invoices to expense reimbursements. The process includes invoice receipt, verification, approval, and eventual payment. The primary goal for AP teams is to ensure timely, accurate payments to vendors.
Why is improving your accounts payable process important?
Improving your accounts payable process is key to keeping your finances in check and helping your business grow. A well-organized process can save you from headaches like duplicate payments or late fees while making sure your vendors are paid on time. It also gives you better control over cash flow by providing a clearer view of your financial health and helping you use resources more effectively.
Your teams can also tackle bigger priorities with a streamlined accounts payable system because it can cut down on manual tasks, reduce the chances of fraud, and boost overall efficiency. In the long run, fine-tuning this process sets your business up for better financial control and long-term success.
How do you increase productivity in accounts payable?
Efficiency in the AP process is paramount, especially in today’s economic climate where doing more with less is top of mind for many finance professionals. To achieve this, it’s important to complete a holistic analysis of your existing AP process. Consider re-examining areas such as:
- Invoice approvals
- our process for handling overdue payments
- The effectiveness of current analytics tools if applicable
By auditing your existing processes, you can pinpoint places to boost efficiency and productivity. In most cases, the next step involves digitizing and automating AP processes. According to MineralTree’s 9th Annual State of AP Report, AP is the top digitization priority for finance professionals for the 4th consecutive year.
Streamlining AP workflows through automation frees up valuable time for staff to concentrate on strategic initiatives, reduces manual errors, and accelerates processing times. According to the same report, it also helps maintain vendor relationships, which have grown in importance for two-thirds of finance leaders.
6 common challenges in the accounts payables process
Managing accounts payable comes with its fair share of hurdles, many of which can disrupt operations and strain your resources if not addressed accordingly. While every business faces unique obstacles, some challenges in the AP process are more common than others. These include:
- Slow and inefficient processes
- Duplicate payments and late invoices
- Unauthorized payments
- Human errors
- Reliance on manual systems
- Fraud risks
1. Slow and inefficient processes
Out-of-date practices like manual data entry or dealing with paper invoices can slow things down significantly. Without a streamlined workflow, payment cycles can take longer than expected, and you might miss out on early payment discounts or frustrate your vendors with late payments. Over time, these delays can hurt your supplier relationships and even damage your reputation.
2. Duplicate payments and late invoices
It’s easier than you think for duplicate payments to slip through the cracks, whether it’s because of mismatched invoices or poor record-keeping. Late invoices aren’t much better—they’re often caused by misplaced paperwork or bottlenecks in the approval process. Both can lead to penalties, and strained vendor relationships, and create unnecessary strain on your cash flow.
3. Unauthorized payments
When there’s no clear process for reviewing and approving invoices, businesses can fall victim to unauthorized payments. These could be fraudulent invoices, payments without proper approval, or simple oversight. The result? Financial losses and potentially serious legal risks.
4. Human errors
Nobody’s perfect, but mistakes in accounts payable can be costly. Whether it’s typing the wrong payment details, mixing up expense categories, or missing a reconciliation step, human errors can snowball into bigger issues. Not only does fixing these take valuable time, but they can also harm relationships with your business partners and affect your bottom line.
5. Reliance on manual systems
If your AP process still relies on paper checks or physical invoice filing, you’re probably dealing with more than your fair share of inefficiency. These outdated methods are time-consuming, prone to errors, and make tracking payments a nightmare. Plus, they’re less secure and often more expensive than modern digital solutions.
6. Fraud risks
Without strong controls, accounts payable can become a target for fraud. Whether it’s fake invoices, inflated charges, or even internal embezzlement, these schemes can drain your finances and erode trust within the organization and with vendors.
Addressing these challenges is important to creating a smooth, efficient, and secure AP process that keeps your business running and supports long-term growth.
14 ways to improve the accounts payable process
As finance departments face the challenge of doing more with less, many are leveraging automation and digitization to enhance AP workflows. Here are 14 ways your team can improve their AP workflow for a more efficient process:
1. Digitize invoice approvals
Eighty-seven percent of AP teams say the speed of payment is important to their suppliers. Digitizing invoice approval helps streamline the process by allowing easy approvals via email and automating the routing of invoices to the appropriate approver. As a result, you can reduce delays and facilitate faster processing.
2. Combine OCR and human review for faster invoice capture
Human error and delays are common in invoice capture when teams rely on either manual data entry or optical character recognition (OCR) technology alone. MineralTree’s unique integration of OCR technology with human review significantly accelerates invoice capture, enhancing accuracy and speed.
3. Leverage electronic payments
Outdated payment methods like paper checks can quickly become time-consuming due to processing costs and associated manual tasks. Transitioning to electronic methods like virtual cards and ACH payments helps improve efficiency and supports cost savings. Digital payments can also help bolster vendor relationships, with roughly 80% of vendors stating they want to receive more payments electronically according to the State of AP Report.
4. Reduce overdue payments
Late payments often occur due to human error or inefficient processes. But they aren’t just costly in the form of interest and late fees — they can also hurt your relationships with vendors. Prompt payments are crucial for maintaining these relationships and ensuring a healthy cash flow. Digitization and automation can help reduce human error and boost efficiency in your processes to ensure timely payments.
5. Avoid duplicate payments
Duplicate payments can also strain vendor relationships and waste resources. They often occur due to payment scams, a lack of digital payments, a lack of visibility into the AP process, or even a lack of a centralized process for receiving invoices. By using automated systems like MineralTree, you can streamline how you receive invoices and use digitized invoice capture to improve visibility into your process. An automated system can safeguard your organization’s financial integrity and strengthen relationships with vendors.
6. Invest in analytics
AP analytics play a pivotal role in strategic decision-making and cash flow management within AP. Investing in the right analytics tools can help turn your data into meaningful business insights. By looking at historical payment data, you can identify patterns and trends — like which vendors offer early payment discounts or rebates. These insights help you negotiate favorable terms with vendors and strategically decide between ACH transfers and virtual cards to optimize your payment mix.
7. Enroll vendors in digital payment methods
Digital payments don’t just boost efficiency and reduce fraud for your team — they also provide faster access to funds and reduce administrative costs for vendors. MineralTree helps you enroll vendors in virtual card payment methods for smoother transactions. This ultimately fosters stronger vendor relationships.
8. Combat fraud
ACH fraud, business email compromise (BEC) emails, and other forms of fraud have become major risks for AP teams as bad actors become more sophisticated. Robust internal security controls are crucial in safeguarding your business. For example, integrating payments with AP automation solutions reduces the need for human intervention, reducing unauthorized duplication or alteration.
9. Embrace a paperless process
AP workflows historically involved paper processes and time-intensive manual tasks. Fortunately, the emergence of AP automation platforms has demonstrated the value of digitization and automation within AP. A paperless AP process minimizes errors, enables faster payment processing times, and optimizes workflows for hybrid and remote work environments.
10. Reduce human error
Human error can be costly and time-consuming, making it a critical area of focus for your AP team. Automating repetitive tasks and digitizing processes helps ensure accuracy, significantly reducing the risk of costly mistakes.
11. Improve document management
Inefficient document management can make your AP data disorganized and difficult to access. Keeping your files organized with an AP document management system helps create an accessible, single source of truth for team members across your department. Additionally, an organized system can help team members answer supplier questions or make it easier to audit AP. As a result, you save time and reduce the risk of human error.
12. Automate the entire end-to-end AP process
AP automation is critical to the success of modern AP teams. MineralTree’s end-to-end AP automation solution revolutionizes the entire AP process from invoice receipt to payment. The comprehensive platform optimizes efficiency, reduces manual intervention, boosts AP team productivity, and ensures a seamless AP workflow.
13. Standardize your AP processes
An inconsistent accounts payable process can lead to problems like unpaid invoices or duplicate payments, and having different methods of receiving and handling invoices can increase the risk of errors. Standardizing the process of receiving invoices and making payments ensures accuracy, reduces mistakes, and helps prevent issues such as double payments.
14. Integrate your AP system with your ERP platform
Integrating your AP system with your ERP platform can be a game-changer. This connection eliminates manual data entry, reduces errors, and provides real-time insights into your cash flow and payment status. With bi-directional sync, data flows seamlessly between both systems, ensuring that any updates in one platform are automatically reflected in the other.
Final thoughts
Enhancing efficiency in your AP workflow is fundamental to your organization’s financial health and your department’s success. MineralTree’s comprehensive solutions cater to these needs, providing a robust platform to automate and optimize your AP process.
By implementing these 12 tips and leveraging MineralTree’s solution, you can achieve significant process improvements in accounts payable, leading to increased efficiency, reduced costs, and enhanced financial stability.
Remember, continual assessment and adaptation are key to maintaining a highly optimized AP process. As technologies evolve, embracing innovative solutions will further elevate AP efficiency.
Request a demo of MineralTree’s end-to-end AP automation platform to learn how your team can more effectively manage AP.
FAQs on the AP process
Tl;dr? If you’re short on time, the frequently asked questions below provide a quick snapshot of what you need to know about the AP process.
H3: What is the first step in improving my accounts payable process?
To begin with, it’s essential to perform a thorough assessment of your current workflow, identifying inefficiencies, bottlenecks, and areas prone to human error. From there, you can prioritize solutions such as digitization and automation to streamline the process.
How can automation help my accounts payable team?
Automation can drastically reduce manual tasks, minimize human errors, speed up processing times, and enhance security. It allows your team to focus on higher-level tasks, like vendor relationship management and strategic decision-making.
What are the benefits of going paperless with accounts payable?
Going paperless reduces the risk of errors, speeds up payment processing, and simplifies document management. It also enhances visibility into your payment status and supports a more secure, environmentally friendly process.
How do I reduce the risk of fraud in the AP process?
You can reduce fraud risk by implementing robust security measures like dual factor authentication, utilizing automated systems to avoid human intervention, and leveraging secure payment methods such as ACH transfers and virtual cards.
How does AP automation improve vendor relationships?
AP automation improves vendor relationships by ensuring timely, accurate payments and providing vendors with the option of digital payment methods, which can lead to faster payment processing and fewer errors.
Can AP automation integrate with other financial software?
Yes, many AP automation solutions, like MineralTree, can seamlessly integrate with your ERP system and other financial platforms, reducing manual data entry and providing real-time insights into your cash flow and payment status.
