So what is the best approach to improving the accounts payable (AP) process? By our estimation it boils down to enabling vendor payments with virtual credit cards, negotiating terms that make paying and getting paid more lucrative, and streamlining the approval and reconciliation process. But how do you get vendor buy-in to AP automation? We’ve got it wrapped up into three simple steps.
Clean Up Vendor Databases
First things first. You must clean up vendor databases and that starts with purging vendors that have been inactive for more than 15-18 months. All changes should be audited in the master vendor file and only designated employees with specific authorization should be given access to the set up and maintenance functions, and that includes the ability to enter invoices and make payments.
Once you have an updated list of current and active vendors, it’s time to verify the credentials and validity of each company.
- Validate the Vendor’s Name and Address
- Perform TIN (Taxpayer Identification Number) validation and vendor name matching using the IRS TIN matching system which ensures the information obtained from the vendor is correct. For more info check out our blog about using the IRS TIN matching system.
- Consult the Federal Bureau of Industry and Security’s Excluded Persons and Companies List
- Verify the financial stability of the vendor
Once you’ve confirmed that the business is a legit entity, worthy of your payment, go ahead and obtain their W9 or equivalent form, which should always be in hand prior to vendor setup and payment.
These initial steps are the best frontline defense against both internal and external fraud. The last thing you want is to be paying a fake vendor because you didn’t take the time to perform due diligence tasks.
Negotiate Vendor Terms
Good negotiations begin with solid leg work and realistic expectations. You have to come to the table knowing what your buying power is and also recognize that it may be very different from vendor to vendor. The more solid your buying power, and the more you know about what the vendor is offering to other customers, the more negotiating room you will create for yourself.
Each vendor has a different history, business strategy, and approach to collecting payments. Some vendors may have very strict payment constraints in terms of when payments are due and if discounts are provided. Understanding these parameters will give you a leg-up if you can find a way to demonstrate how electronic accounts payable can work within their payment model to provide faster, safer payments that potentially save them money.
It never hurts to be honest. If you prefer to work with vendors that are on board with automated AP, lay that on the table. Be transparent about why this is a positive and necessary transition and highlight how the process can provide the same benefits to them.
Streamline the AP Approval Process
Once the negotiations are settled and the vendor is on board for AP automation, there are several steps to keeping both the AP team and vendors happy with the process.
The system should start with a workflow plan that includes an easy to understand approval process. That means providing a definition for exactly what is being approved and who is responsible for approving it. If the approval process feels cumbersome to the AP team, it can undermine the purpose of AP automation.
A few ways to streamline the AP process include breaking up approvals into different categories or dollar amounts and giving authority to different AP team members for the varying categories. This will ensure that the same person isn’t part of the approval process more than once or left feeling like they are always approving everything. Another way to ward off bottlenecks in the approval process is to set up more than one person in a category. This will allow the approval process to continue moving forward even if the lead approver on the account is tied up.
The final step to an improved AP process is to take it on the go. Yes, there is an app for that, even with AP automation. Mobile capabilities give you complete visibility into every part of the AP process so you can track everything in addition to executing secure mobile payments and virtual credit card payments no matter where you happen to be.
If you want best-in-class assistance with vendor enrollment, CSI Enterprises, Inc. has your back with a fully supported electronic accounts payable solution that includes industry-leading enablement teams. We can also get your AP team fully trained and your new payment system launched in as little as two weeks. It’s simple. Reduce costs, simplify reconciliation, and optimize cash flow.
