How to Streamline AP for a Smoother Month-End Close
The following is a guest post by Theresa Condon of Stampli:
Every accountant is familiar with the frantic flurry of activity that accompanies the month-end close. In fact, 82% of surveyed finance professionals indicated the close as a negative experience, increasing stress levels and impacting life events. It is a critical time for finance departments for two reasons:
- The month-end close provides an important health check on the cash flow of a company for investors, employees, and — if applicable — the public.
- It provides crucial information for an executive team in making decisions regarding company operations.
Looking for a way to streamline the month-end close? Check out FloQast’s Best Practice Month-End Close Checklist.
Having all accounts reconciled by month-end is an important responsibility for controllers and CFOs. Not only must all the numbers add up, it’s important to ensure that all the supporting documentation is in order. Within smaller companies where only 1 or 2 people manage the majority of the processes, reconciling accounts may not present a significant challenge. This scenario changes quite a bit when larger teams, multiple locations, or many approvers become a part of the equation.
Improve Close Success with Streamlined Accounts Payable
Accounts Payable may be only one of the processes involved in a successful close, but it often presents a challenge due to sluggish approvals. In an attempt to speed up AP, well-meaning controllers often put solutions in place which automate the manual work of the process.
However, in most cases, automation doesn’t solve the true pain point of Accounts Payable, and this pain continues to be felt when it comes to the close.
Real success in Accounts Payable comes when the communication issues in the approvals process are resolved. Today, AP suffers from a lack of visibility and control once an invoice has been sent off for approval. Invoices often go through an epic journey to reach the person who truly knows whether the terms of service were met and the invoice is ready to be paid. Valuable time is wasted by people in many departments during this process due to poor communication.
Accelerate Accounts Payable Before the Next Close
It is important for any manager to be able to take a clear, hard look at their department to find areas where processes could be improved. Here are a few ways controllers can gain more control over the AP process:
- Improve communication for faster approvals so that AP is not held in limbo. Controllers will be able to get a more accurate picture of the company cash flow in terms of both Receivables and Payables.
- Regularly consult a complete Management Dashboard to track KPIs. A Dashboard should:
- Compile invoice due dates and amounts to help predict cash flow.
- Show bottlenecks such as which approvers are taking longer than normal to approve an invoice so you can accurately accrue.
- Stay audit-ready by storing invoice approvals communications and supporting documentation with each invoice.
- Make the approvals process easy for approvers as well as AP, to avoid a learning curve or long adoption period.
- Create a standardized channel to which all vendors submit invoices to reduce lost invoices or duplicate entries.
- Update your General Ledger and vendor lists on an ongoing basis.
- Set up a vendor/supplier portal so they can view their invoice statuses without taking up AP’s time with phone calls and emails. Further improve vendor relationships by taking advantage of early payment discounts whenever possible.
With 12 months in a year, controllers have ample opportunity to try new methods to improve their close success rate in Accounts Payable. One month is not too little time to make changes in AP that will significantly impact the next close. Making an effort to improve communications during the approvals process will be a big step toward making lasting change in AP, and quantifiable KPIs give you the power and visibility to act on accurate predictions of company cash flow.
We hope you enjoyed this guest post by Theresa Condon, who works for Stampli, a cloud-based interactive invoice management solution that helps Accounts Payable get invoices approved up to 5 times faster. Learn more at stampli.com.