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How to Manage the Accounts Payable Process in 2024

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Businesses today commonly encounter accounts payable problems that include invoice mistakes, undetected fraud, and cash flow management issues. Remote workforces and rapidly growing transaction volumes can quickly overwhelm old processing systems. These mounting AP struggles lead companies to seek outsourced help.

ILM Corp offers comprehensive AP management solutions tailored to modern business needs. Our approach combines advanced technology with expert oversight to streamline AP operations. We enable enterprises to achieve new levels of efficiency, visibility, and control in their accounts payable processes.

Read on to learn how to manage the end-to-end AP processing operations.

Understanding the Accounts Payable Process

The AP payment process begins with vendors submitting invoices and bills through various channels including email, mail, upload, hand delivery, and fax. Managing these multiple formats effectively is crucial for efficient processing. A designated person within the company reviews each invoice for accuracy and then approves, rejects, or asks additional questions.

Extracting Invoice Data

Invoice metadata extraction is a critical step that is often time-consuming and intensive. This involves identifying unique data fields such as the date, vendor name, invoice number, account number, and line item details. The data is formatted for integration into accounting or ERP software. Purchase Order (PO) matching to ensure the invoice is in line with the issued purchase order reduces fraud and catches errors. General Ledger (GL) coding then associates line item charges with the appropriate accounts in the Chart of Accounts.

The payment terms associated with an invoice, such as Net 15 or Net 30, stipulate the due date for payment. Paying within a defined early period (e.g., within ten days) may qualify the payer for prompt payment discounts from the vendor. Taking advantage of these discounts can provide substantial cost savings for the buying organization.

Managing the Full AP Lifecycle

At ILM, we believe the AP process extends beyond a simplified 3-step view. True AP management should encompass the full lifecycle of an invoice—from initial receipt through payment issuance.

Having a single point of contact using a provider that can handle incoming AP invoice processing, metadata extraction, and payment disbursement is more efficient than dealing with multiple internal departments or vendors.

Key Tools for Accounts Payable Management

Modern AP management relies heavily on technology. Tools like invoice capture software and automated workflows are essential. They help in processing invoices efficiently and accurately.

The Accounts Payable process relies on various payment methods, including:

  • Traditional print and mail checks
  • ACH transfers
  • e-Checks (where a check is emailed and printed by the vendor)
  • Wire transfers
  • Virtual payment cards (V-Cards)
  • Digital platforms like PayPal, Venmo, and Zelle.

Streamlining the AP Process: Centralization and Tracking

Centralizing invoice payments is a powerful strategy for enhancing accounts payable management. Consolidating these processes simplifies the workflow and improves overall control and visibility of payment activities.

Effective tracking of due payments is essential for ensuring on-time processing. ILM Corp’s solutions are specifically designed to streamline the tracking and centralization aspects, aiding businesses in maintaining robust and healthy financial operations.

Establishing Clear Payment Authorization Protocols

Defining who authorizes payments is essential to maintain control over the AP process. This involves setting clear protocols and authorization limits. Establishing these parameters ensures a structured and secure payment system.

ILM Corp advises on establishing robust authorization procedures to prevent errors and fraud in the payment process. These procedures involve regular audits and compliance checks. They also include training staff to understand and adhere to these protocols effectively.

Best Practices for Successful AP Management

Accuracy and fraud prevention are pillars of effective AP management. Ensuring accuracy in AP involves comparing each invoice with its related Purchase Order (PO). This comparison confirms that billed products or services match the contractual agreement, thereby reducing the risk of fraud.

A proficient automated workflow system is vital in AP management. The ideal setup should perform the following tasks:

  • Efficiently routes PDF invoices and associated documents to designated personnel or departments.
  • Tracks invoice statuses: received, pending, or completed.
  • Monitors invoices and sends reminders.
  • Redirects invoices when required.
  • Streamlines invoice approval, rejection, or query processes.
  • Offers features for annotation, editing, and commenting.

Practical Tips for Improving AP Efficiency

Utilizing recurring payment systems can significantly enhance AP efficiency. This approach is particularly effective for regular, fixed payments. It automates the payment process, reducing manual effort and the likelihood of errors.

Setting up task reminders is crucial to ensure the timely completion of all AP tasks. ILM Corp’s systems are designed to integrate such features, thereby streamlining the workflow. This not only saves time but also increases overall task management efficiency.

Challenges in Accounts Payable Management

A major challenge in AP management is staffing. Recruiting, training, and managing skilled accounting staff can be difficult for many organizations and is often compounded by the need to keep up with rapidly evolving AP technologies and practices. Organizations must also balance the cost and resources of maintaining an effective AP team.

Common mistakes in AP processing include relying on paper-intensive and manual processes. Even electronically received invoices are often printed and manually annotated for GL codes, approvals, or PO matching. This not only slows down the process but is prone to errors and can be costly due to missed discounts and high labor costs.

Strategies to Overcome AP Challenges

Outsourcing AP functions is a strategic solution to address staffing challenges. It enables businesses to leverage external expertise and advanced tools without the overhead of an in-house team.

This approach also introduces efficiency and cost-effectiveness into the AP process. Outsourcing provides access to a pool of specialized talent and the latest technological advancements, ensuring high-quality AP management.

ILM Corp actively tailors our outsourcing services to manage fluctuating invoice volumes effectively. Our services utilize state-of-the-art tools to enable faster and more accurate processing. We design solutions to adapt to your unique business needs, ensuring seamless integration with your existing financial systems.

The Future of Accounts Payable Management

Automation and AI technologies are reshaping the future of AP management. They streamline processes, enhance accuracy, and reduce processing times. Integrating machine learning and data analytics into Accounts Payable systems enhances financial data analysis. These insights give businesses valuable decision-making support for improving AP processes and cash flow.

ILM Corp is at the forefront of these technological trends, providing our clients with the most current advancements in AP management. We continuously integrate cutting-edge technologies into our services, offering solutions that are not only efficient but also future-proof.

This commitment positions ILM Corp as a leader in transforming the landscape of accounts payable management.

Maximize Accounts Payable Performance

An efficient AP system relies on competent internal staffing and up-to-date technologies. However, building skilled teams presents an escalating challenge with rising labor costs. This makes maintaining adequate staffing difficult.

ILM Corp understands that obstacles like staffing and outdated systems prevent businesses from realizing peak AP performance. With this in mind, we simplify accounts payable outsourcing through our specialized solutions. Our customized outsourcing services directly address the staffing and technology barriers that hinder effective AP management.

With ILM Corp as your trusted partner, you gain a dedicated, expert AP staff and access to the latest automation tools which guarantee accuracy, prevent fraud, and maximize the value of every dollar you spend.

Click below to see how ILM Corp’s outsourcing services provide the dedicated expertise and state-of-the-art automation tools to streamline your AP processes.

Accounts Payable Outsourcing

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