Transformation Blog

How to Make Accounts Payable More Efficient: Tips and Strategies

Krzysztof Herdzik

Krzysztof Herdzik

GBS/SSC/BPO Practicioner

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Accounts payable is one of the most costly business processes for companies. In fact, it is often cited as the second or third highest expense next to sales and marketing costs. So, it’s no surprise that businesses are always looking for ways to make accounts payable more efficient. In this blog post, we will discuss some tips and strategies that can help you do just that!

We will look at the Accounts Payable process from the three angels. Each of them should be considered as the end to end Accounts Payable transformation strategy.

Accounts Payable process maturity model

One of the best ways to make accounts payable more efficient is to improve your process maturity. Process maturity is a measure of how well your accounts payable process is performing. There are five levels of process maturity, and each level has its own set of benefits:

– Level 0: This is the basic or starting point for any accounts payable process.

At this level, your accounts payable process may include things like manual data entry into spreadsheets or emailing invoices back and forth between departments. This level is actually hitting your working capital negatively!!

– Level I: This is where you start automating your accounts payable process.

This could include things like automated data entry or using a purchase order management system to track orders. Automating your accounts payable process at this level will help improve your cash flow and working capital.

– Level II: At this level, you are automating more tasks and improving your accounts payable process.

This could include things like integrating an accounts payable system with your ERP or CRM software so that invoices can be automatically downloaded into the system. Automating these steps will help you save time and money by eliminating manual processes, which means less work for employees!

– Level III: This is the next level of process maturity, and it involves automating your accounts payable process even further.

At this level, you could be using a supplier management system to track supplier performance or an invoice approval system to approve invoices before they are paid. Automating these processes will help improve your accuracy and efficiency.

– Level IV: This is the final level of accounts payable process maturity, and it involves implementing a strategic accounts payable system that integrates all aspects of your accounts payable process into one easy-to-use software solution.

Strategic accounts payable systems are designed to improve accuracy as well as efficiency by automating tasks such as purchase order creation, invoice approval, and supplier management.

Accounts payable benchmarks

Another way to make accounts payable more efficient is to benchmark your process against industry averages. This will help you identify areas where you can improve and measure the success of your efforts. There are a number of accounts payable benchmarks that you can use, including:

Business KPIs:

  • Days Payable Outstanding (DPO)
  • Cash to Accounts Payable (Cash to AP)
  • Accounts Payable Turnover (APT)
  • Payment Cycle Time

Process KPIs

  • No of invoices per Accounts Payable employee annually
  • Cost per invoice annually
  • Time to invoice
  • % of electronic invoices

Using these benchmarks, you can track the progress of your accounts payable process and identify areas where you need to make changes.

Using best practices

Finally, another way to make accounts payable more efficient is by using best practices. Best practices are the most efficient and effective way to perform a task, and they can be used in any business process. There are a number of accounts payable best practices that you can use, including:

– Centralizing your accounts payable process

– Implementing an accounts payable system

– Automating your accounts payable process

– Tracking supplier performance

The accounts payable process is one of the most costly and time-consuming business processes for companies. By using best practices, benchmarks, and process maturity levels, you can make your accounts payable process more efficient and improve your cash flow and working capital.

Thank you for reading! I hope this article was helpful in making your accounts payable process more

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