Streamlining Payables to Improve Cash Flow

The way a company manages its payables has a direct impact on its cash flow. Refining your approach to accounts payable can strengthen your firm’s overall financial health.

Improvements to your payables process can result in easier expense tracking, reduced risk for error and increased access to vendor discounts. An optimized process also tends to save employees time and strengthen vendor relationships.

Consider the following four steps to gain improvements:

  1. Reduce manual touches

    A manual approach to accounts payable means multiple people may be involved in opening invoices, checking their accuracy, entering them into an accounting system, and approving and sending payments. Each link in the chain introduces risk — for lost bills, mistakes in data entry and delayed or missing payments. Manual processes also keep staff from higher priority strategic tasks.

    To reduce inefficiencies and chokepoints, consider accepting electronic invoices and exploring software that automatically checks invoices against purchase orders to ensure that prices, quantities and other key details match. Automating these steps can free up accounts payable staff to focus on reviewing exceptions and other priorities.

  2. Tap payment tools

    Consider tools and tactics that can help to speed up accounts payable processing. These include:

    • Making electronic payments.

      Paying bills through the Automated Clearing House (ACH) network or via wire transfer lets clients receive payment more quickly, and it mitigates the risk of tampering and loss that can come with using checks. Paying electronically can also dramatically lower transaction costs: Sending a paper check is 10 times more expensive than sending an ACH payment, according to research, P D F opens in a new tab1 from the Association for Financial Professionals and Bottomline Technologies.

    • Issuing purchasing cards.

      Providing purchasing cards to employees for certain types of expenses cuts down on invoices and purchase orders, potentially saving time and reducing the risk of error. Using purchasing cards also simplifies expense tracking and allows for tighter control over spending, through the ability to set per-employee limits.

    • Fine-tuning account management.

      Banking services are available to help you gain greater visibility into cash outlays and manage cash more effectively. For example, controlled disbursement services provide notification each morning for checks that will clear against an account that day. You can then move funds into the account to cover the payment, or use excess funds for other purposes.

  3. Time payments to your benefit

    Automating your accounts payable process can result in shorter invoice processing and approval times, which in turn makes it easier to capture early payment discounts. Ensure you take these opportunities by establishing a payment-timing system that alerts you to when payments should be sent. For example, when bills are entered into your accounting system, include a note with the date you’d need to send payment to capture the discount. You can also use an online bill pay tool to schedule payments.

    Pursuing these discounts may not always make sense — in some cases, you might want to keep cash available for other purposes. Yet capturing them when you can may yield substantial savings, Opens in a new tab1.

  4. Gain visibility through reporting tools

    Using the reporting features included with some payments tools not only simplifies expense tracking and reconciliation, but can also help you spot broader trends in your spending and make better informed decisions. For example, examining your purchase card data can give you a clearer sense of the categories your company spends most on, helping you decide where adjustments may be needed. It can also help you quickly spot any duplicate or suspicious charges. Regularly running and reviewing reports on payables — for example, in your accounting software — can give you a big-picture view of your finances that helps you better time purchases and forecast cash flow.

    Need help streamlining your accounts payable process or tightening control over business spending? First Citizens can help. Learn about our payable solutions that can save you time and improve visibility.

Normal bank approval applies