Benefits of Accounts Payable
For those who are wondering what AP is all about, they should know that it is not simply a case of coping with bills and payments; it has various advantages. Here are some of the key benefits:
1. Improved Cash Flow Management: Through tenors, due dates, and tracking of early payment discounts, AP helps to control the working capital of a business, that is, the money that is flowing into the business and the money that is flowing out of the business.
2. Enhanced Vendor Relationships: Payment on time and to the correct amount ensure good relations with suppliers, hence valuable supplies at equally higher discounts and better supply chains. This can cause special treatment when some commodities are scarce or there are special requests for shipment.
3. Cost Savings: The optimized AP processes enable cost savings in such areas as supplier relationship management, whether it is in receiving better terms of payments, taking advantage of early payment discounts, etc., but not being able to avoid late charges.
4. Operational Efficiency: Automating AP processes decreases the number of manual tasks that need to be completed, consolidates the work with financial data, and increases the speed of their processing, enabling the staff to spend more time on value-added tasks rather than spend their time inputting the data.
5. Improved Financial Reporting: Effective AP management helps in appropriately recording the liabilities, which in turn would assist in the characterization of the accounts and improve the identification of the financial statements for decision-making processes.
6. Compliance and Risk Management: Compliance with regulatory standards and internal controls mitigates the risks related to errors and fraud; besides, penalties may be incurred if the requirements have not been met.
7. Scalability: Optimizing AP flow provides increases in scalability for the business’s needs as the processes do not exhibit large increases in overhead.
8. Better Negotiation Power: Since businesses have well-recorded payables with updated records of payable balances, they will likely negotiate favorable payment terms or discounts with the suppliers due to their well-structured system with accurate and updated records of the payables.
9. Improved Supplier Onboarding and Management: AP functions make it easier to manage suppliers’ workflows and give accurate details of vendors that help in making the right decisions about which suppliers to work with in the future.
10. Enhanced Visibility and Control: The use of AP automation solutions introduces a state of transparency to the status of invoices and payments, which makes it easier to monitor, control, and manage every aspect of the AP sphere.