Do You Have a Cost-Effective A/P Department?
Use these three strategies to make your A/P department more efficient.
March 12, 2012
The proper handling of the accounts payable (A/P) function can make a significant contribution to an organization’s bottom line. Conversely, poor habits in A/P adversely affect the organization’s profitability. Doing it right is not difficult. It just takes a little bit of knowledge and the willingness to impose a structure that everyone adheres to — no exceptions.
Here are three strategies that will lay the foundation for a strong payment function for your company, regardless of size:
Establish a rigid coding standard for all invoices. This should address all possible variants of vendor names. It should also include a standard for assigning unique invoice numbers to invoices without invoice numbers. Most importantly, it should be given to all processors who should be required to use it. While creativity may be a desirable trait in many circumstances, processing invoices is not one of those times. This is one time when the manager needs to be rigid and not permit any variances.
Also consider setting up rigid processing standards. All associates should process invoices the same way. If someone comes up with a better suggestion, then it can be discussed. If it is decided that the new way is really better, then make a change in the standard and have all processors use the new approach.
Implement serious controls on the master vendor file. These include using a coding standard that mirrors the standard used for coding invoices, limiting who can make changes or add vendors and reviewing changes to the master vendor file on a very regular basis.
When assigning responsibility for the master vendor file appropriate segregation of duties should be considered. This is one area that is often handled poorly in many organizations.
Train and retrain the staff. Too often new processors are given rudimentary training when they first join an organization and never offered additional instruction. This is how workarounds tend to creep into a process. Periodically hold review sessions for the entire team. This might also be the time to discuss any suggestions on process improvements. All too frequently a staffer comes up with shortcuts that make their work easier, but creates mountains of problems elsewhere in the organization.
If a suggestion made by someone on staff is not implemented, it’s important to talk about why it won’t work. Otherwise, you may find yourself dealing with the same recommendation over and over again. Also, an explanation of why the suggestion doesn’t work may help the associate come up with an even better proposal.
These tactics will make your operation more efficient in that fewer duplicates will slip through and fraud becomes harder to perpetrate. Yes, there’s more than this to running a great A/P function, but these three strategies will get you off to a spectacular start.
And ignoring them will doom your operation no matter how much you spend on technology.
Mary S. Schaeffer is the author of more than 15 business books including the Controller & CFO’s Guide to Accounts Payable. As president of Crystallus Inc. she oversees the AP Now franchise which includes several accounts payable publications, a robust webinar and seminar schedule and a consulting practice.