8 Best Practices to Optimize Accounts Payable

Optimizing the account payable process using tools, such as AP automation software, facilitates accurate financial reporting, increases the efficiency and effectiveness of your company’s operations, and enhances compliance with laws and regulations. With an optimized account payable, you can mitigate funding gaps, position the company for improved liquidity, and yield more profits. Read on for eight ways to optimize your accounts payable to keep your business on track.

1.    Mitigate account payable fraud

As long as you are handling money, you are often vulnerable to fraud. Some fraud sources include your suppliers, employees, and cybercriminals. Your employees could develop dummy supplier accounts, and hackers could mimic your supplier email addresses and demand payment via different accounts.

To prevent fraud, you should consider investing in AP automation software. The software creates a trackable audit trail and ensures a rigorous approval tracking system. It also provides real-time visibility to invoices which helps catch errors and discrepancies and flag them for investigation. You could also limit employee access to your company’s master vendor file.

2.    Use paperless automation solutions

One of the most effective ways to optimize your company’s account payable process is by adopting paperless AP automation software. Paper invoices can easily be lost, resulting in assumptions, guesswork, late payments, and wasted time. They also take up unnecessary filling space.

Adopting digital automation can help you scan invoices automatically, streamline processes, and shorten the payment process, saving you time and money. If your company experiences a surge of invoices, the AP automation system can help you scale without hiring more staff.

3.    Set KPIs to measure the AP’s efficiency

Set clear, quantifiable goals to optimize the AP department’s performance. By creating reasonable KPIs, you can monitor the performance of ongoing processes, make adjustments where necessary, and inform employees about what you’re working to achieve. Common account payable key performance indicators include:

  • Payment accuracy rate
  • Days payable outstanding(DPO)
  • Early payment discount uptake
  • Cost of invoice processing
  • Electronic payment methods uptake
  • Time spent sorting supplier or vendor disputes

4.    Create reminders for payments

Managing payments with different timelines can be challenging, so you should consider setting up calendar reminders to improve the payable process. Invest in account payable systems with in-built reminders that sync to your calendars, then add the relevant payment details and due date to receive alerts. This helps maintain on-time payments and goodwill with the vendors.

5.    Set up a supplier portal

Be sure to set up a centralized portal for your vendors and suppliers to allow them to track delivery schedules electronically, the status of their orders, receive payments, and potential product shortages.  This reduces manual errors, improves order accuracy, speeds up time spent on approving invoices, and provides crucial business insights necessary for decision making.

6.    Create an emergency reserve fund

An emergency reserve fund is crucial to your accounts payable process and ensuring your vendors and suppliers receive timely payments. You may experience a downturn in your sales volume for a few months, or a piece of office equipment breaks down, so you should have a cash reserve to prepare for unforeseen events or rainy days. It ensures that your business remains financially healthy regardless of the prevailing economic conditions.

7.    Check for duplicate payments regularly

Whether you match invoice numbers manually or have an automation program, you are vulnerable to making duplicate payments and errors. Check for duplicates on the payments and received invoices. While some vendors could leave a credit on your account or return the extra charge, you should catch an issue before it leaves your hands. This keeps your books organized and prevents leaks in your business’s cash flow.

8.    Track and resolve invoice disputes

Exceptions are a significant challenge for account payable departments. They result in spending a lot of time handling vendor concerns, inquiries, delayed payments, and you may end up losing valuable suppliers. An automated approval process can help your company send invoices that match POs to ERP, leaving exceptions solely for your AP staff to handle. Such exceptions are quick to identify so they can be resolved promptly.

Keeping track of invoice disputes can help maintain healthy cash flow, keep books in order, organize AP processes and uphold good relationships with your suppliers and vendors. It also enables you to identify and cut off suppliers who charge differently from your agreement.


Improper management of your business’s account payable can negatively impact its operations and controls, leading to increased expenses. Consider implementing the above strategies to improve cash flow and your relationship with vendors and suppliers.

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