How To Manage The Accounts Payable?

Tally Solutions | Updated on: May 9, 2022

Accounts payable is the management of the payments that the company has to make. In a company that has a large purchase process, accounts payable is a voluminous and detailed process. In a small company, the owner usually manages the accounts payable. In a larger company, the accounts payable department handles the verification, approval, and processing of the payment of invoices and bills. Modern technology makes it easy to manage accounts payable for timely and accurate payments and provides management the necessary tools to control cash flow.

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How to manage the accounts payable process in 2022?

Accounts payable is vital to the operations of the company. Automation of accounts payable is essential for both small and large companies. Small companies need to do more with limited resources and having an accounts payable software frees the time of human resources.

Accounts payable approval is essential to prevent wrong payments and protect against fraud. Manual processing of accounts payable involves the movement of physical documents in the company. This slows the process and can delay supplier payments.. Automation gathers and links all the relevant documents in one place. The process of approval is quick and on time.

Small and medium businesses alike need to optimize their cash flow. Paying their bills too early limits the cash in hand. Delayed payments impact supplier relationships and the creditworthiness of the company. When you use software to manage accounts payable, you can make payments on time.

A company can improve its financial health by controlling unnecessary expenditure and creating a greater cash inflow than outflow. Managing accounts payable through software helps spot spending patterns and trends and control unnecessary expenditures.

The security of financial information is important. Physical documents are easily misplaced. Digitization of the documents in the accounts payable process keeps them secure and away from unauthorized access.

The optimal management of the accounts payable process is best achieved by using an integrated software solution such as TallyPrime. It automates and integrates all the relevant business functions of the company with accounts payable.

The importance of AP management

Accounts payable receives the invoice from the supplier/vendor and cross-verifies it with the purchase order and the receiving report. It is the key process to ensuring correct and timely payments to suppliers.

There is the possibility of fraudsters submitting an invoice for a non-existent order that was not delivered. If a company is careless in their accounts payable process, they would be easily cheated out of their money by making such a payment. Accounts payable also ensures that the supplier is paid only if the supplied goods are exactly as per the purchase order. The accounts payable checkpoint protects the company from fraud and malpractices through purchasing.

A company’s success and financial health are determined by how well it makes money than it spends. Uncontrolled expenditure would soon drain the company of its working capital. Maintaining control over the accounts payable process can prevent wasteful or unnecessary expenditure and prevent fraudulent payments. Human errors and mistakes in issuing payments can result in excessive or double payments for an invoice.

Accounts payable payments attract tax and other government levies. If the process and payments are not properly managed and recorded, the company will fail in compliance with the authorities. This could attract penalties and legal consequences from the suppliers and the authorities.

Accounts payable vs. accounts receivable: What’s the difference?

Cash flow is key for a business. A company should aim to have a bigger inflow of money than an outflow. Accounts receivable is the management of money that is due to the company. It is the incoming cash. On the other hand, accounts payable is the management of the money due by the company to others. It is the outflow of money. Managing the end to end process of accounts payable well results in the company collecting all its dues and paying all its bills on time.

Managing the accounts payable process

The accounts payable process issues payments to suppliers of goods, materials, and services to the company. Many individuals and companies are reliant on the timely payment of their dues. When a company does not manage accounts payable well and delays payments, it can have serious consequences.

Accounts payable should verify if the invoice has been received against a purchase order from the company.. Since accounts payable is vulnerable to fraud, the process should be secure and foolproof. Software such as TallyPrime centralizes the storage of these documents and links them for end to end process of accounts payable.

Accounts payable should maintain accurate records of all the paperwork  and  speed up the approval process so that there is no delay in payment. The accounts payable process should also link to and update the company's inventory and financial accounting records. TallyPrime is an integrated solution that unites and synchronizes the end to end process of accounts payable.

Accounts payable can be managed optimally only when management can properly understand and analyze the spending data. When there is a huge volume of accounts payable transactions, manual accounts payable management makes data analysis difficult. Using intelligent software such as TallyPrime empowers management to study the accounts payable data in detail and make better decisions.

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