Why You Need a Good Accounts Payable Workflow (Free Template)
Accounts payable encompasses all of the transactions a business makes minus payroll expenses. The accounts payable workflow is an integral part of a company’s financial standing, especially when it comes to cash flow.
According to the Accounts Payable Association, 36% of businesses were concerned about late payments due to process delays. That’s one major reason why it’s so important to have an effective workflow management process in place.
In this article, we’ll walk you through what an accounts payable workflow looks like, the benefits of having an AP workflow, and the steps that a good workflow will typically include. You can also find a free accounts payable workflow template at the end of the post.
What is an Accounts Payable Workflow?
An efficient workflow is a well-organized sequence of steps that take a project from start to finish. When it comes to an accounts payable workflow, it’s the steps taken from the point at which the goods are received to the point where the invoice is paid.
Think of an accounts payable workflow as an assembly line. Every step should be well defined with rules or guidelines to standardize the process from beginning to end.
Business accounting systems have an accounts payable workflow that is either implemented manually or through accounts payable automation software. Streamlining the accounts payable workflow is essential for consistency, accuracy, visibility, and running a business efficiently.
While you can have an accounts payable workflow composed of many manual tasks, it comes with its own set of problems. Some businesses have hundreds or thousands of invoices to process a month. Keeping track of all these paper invoices is overwhelming.
Manual processes without checklists or some type of project management system in place can also lead to invoice errors. It’s also easier for things to fall through the cracks, causing missed deadlines for clients. In the end, these mistakes waste time, incur costs, and disrupt the flow of production.
In the video below, you can see how to diagram out a bookkeeping workflow, like accounts payable:
Benefits of Having an Accounts Payable Workflow
You may be tempted to continue doing things the way you always have, but creating a workflow for your accounts payable process will save you a lot of time and energy once implemented.
The following are the other primary benefits of having a good accounts payable workflow:
- Stay organized and ahead of deadlines. With a good workflow, you can reduce errors, hit deadlines, and stay under your time budgets.
- Lower risk of fraud. An accounts payable workflow automation system is more likely to catch errors if the data on the invoice doesn’t match the data on the purchase order or sales receipt which would indicate the vendor isn’t legitimate.
- Don’t miss payments. With manual systems, misplaced invoices are more likely, which can result in missed or late payments and affect supplier and vendor relationships. A smart AP workflow makes the invoice process a cinch.
- Avoid late payment penalties. A good workflow keeps you up to date on the status of invoices and payments. Deadline tracking will let you know when a due date approaches so the payment is made on time.
- Save time for what matters. Spend less time on manual data entry and more time on strategy.
- Accelerate the approval process. A good workflow will keep everyone within your firm in the loop on the progress of a task, invoice approvals, or a project. Even better is a system that ensures invoices don’t just sit around and bottleneck like they do in a more freeflow system.
- Make audits easy. Workflows make audit trails much easier and faster with everything under a single database. It’s also easier to share the information with the auditors.
What Does a Good Accounts Payable Workflow Include?
The goal of an effective accounts payable workflow is to speed up processing time, reduce the manual workload of repetitive and tedious tasks, and make sure everyone gets paid on time.
Here are some of the key things to include in your accounts payable workflow that will make your business run more efficiently:
- Invoice recording. Scan and import invoice data so that the information is digitized, sorted, and processed. This way the invoice can be tracked throughout the whole AP process.
- Three-way match capability. Matching pairs invoices to purchase orders and goods received and ensures that vendors and suppliers get paid on time. It also makes it easier to pinpoint deviations and errors.
- Verify receipts. Accounts payable should verify the receipts of good and services to approve invoices.
- Review for variances. If any variances are found (i.e. wrong quantity for a particular good that was ordered), accounts payable should send the invoice to the buyer to find the cause of the issue.
- Approvals. Get the approvals you need from the right people at the right step in the process.
- Payments. After the invoice is approved and all variances have been addressed and corrected, payments should be issued and invoices should be marked as paid.
While you could keep track of your workflow steps in a spreadsheet, many CPA and bookkeeping firms find that this system becomes inefficient and difficult to keep organized. Managing spreadsheets on a daily basis is the last thing most owners and managers want to spend their time doing. This is one of the many reasons why firms rely on Jetpack Workflow.
The primary benefits Jetpack Workflow customers receive are keeping tasks and projects organized so their firms hit deadlines with automated reminders, keep track of what their team is working on with its cloud-based real-time project tracking feature, and ensure that nothing falls through the cracks.
What Features to Look for in an Accounts Payable Workflow Software
How do you choose the right software for automation when there are so many to choose from? Now is the time for a little business insight and analysis.
Think about the services you offer, your current process, growth prospects, and things you would like to do differently or benefits you would like to gain. Then pair those answers up with the software that most meets those needs.
Here are six criteria that every accounts payable workflow should include:
- Ease of set-up and user interface. Make sure the software includes tutorials, webinars, training sessions, prompts, and great customer service to fall back on when setting up the accounts payable software. You also want to make sure the software is easy to navigate so that you can make the most out of all the features.
- Day-to-day management. The software should be a hassle-free experience that will help you make better business decisions and not something that you dread logging into every day.
- Functionality. The software should include appealing and efficient features for task management, progress reporting, client management, common integrations, and cloud-based real-time project tracking.
- Customer service. Customer service should include helpful resources, fast response time, and multiple methods of contact such as email, phone support, and live chat.
- Price. Some things to consider when it comes to price are the number of users, bandwidth/resources, and any extra features.
- Integrations. Make sure all the communication, client, sales, and accounting tools work seamlessly together.
Free Accounts Payable Workflow Template
If you’re looking for a simple accounts payable workflow template, you can download one for free here. It also includes 31 other free accounting workflow templates to help you jumpstart your growth.