5 Accounts Payable Best Practices in SAAS start-ups.

Many start-ups lack sufficient structure in their accounts payable (AP) processes, causing them to make duplicate payments or late payments—but this doesn’t have to be the case for your business. To make your AP system more efficient with minimal effort, follow these four accounts payable best practices that other founders and CEOs have learned from their experiences.

1.??????Create a standardized workflow.

From recording invoice data to payment processing, the accounts payable process includes multiple steps, leaving many opportunities for error and potential fraud. Defining your startup’s accounts payable management workflows helps ensure the same protocols for each invoice you process and efficiency of your accounts.

“Create uniform procedures, educate all employees to follow them, and then adhere to them whenever an invoice is received,” recommends Richard Mews, CEO of Sell With Richard. “This simplifies accounts payable and enables you and your whole organization to increase efficiency via repetition of a familiar routine.” It’s also an important part of accounts payable internal controls best practices: A standardized workflow clarifies who is responsible for each step, limits bottlenecks, and makes it easier to audit your process.

2.??????Set up a vendor registration process.

Having inaccurate details about or informal arrangements with vendors or suppliers can result in delayed payments, incorrectly categorized expenses, and significant frustration for both parties. To ensure your AP system runs smoothly with greater visibility, consider implementing a vendor registration process or setting up a supplier portal. This process might include:

·????????Confirmation of details, including bank verification and access to vendor portals

·????????Vendor signature on a contract outlining key commitments

·????????Agreement to your payment terms and conditions

·????????Approval from your head of finance or CFO

Vendor registration is also an opportunity to discuss a more favourable arrangement: “Vendors are often surprisingly willing to negotiate the terms of accounts payable,” notes Zach Reese, CPA and owner of Colony Roofers. “They are willing to negotiate on due dates and interest rates as long as you present a strong case for why they should do so.”

As well as striking deals with new vendors, be sure to regularly audit your master vendor list to remove inactive or duplicate vendors and keep payment details up to date.

3.??????Automate accounts payable tasks.

It’s hard to uphold accounts payable invoice processing best practices if you’re using spreadsheets to handle AP manually. As Michael Knight, co-founder and head of marketing at Incorporation Insight, explains, manual data entry of invoices is “not only time-consuming, but it also increases the possibility of human error. A single miscalculation can cause financial havoc in your company.”

Instead, Knight suggests switching from manual AP processing to implementing software with an automation solution that collects and enters the data for you. Accounts payable automation software reviews the information on invoices, matches them to the relevant expense and supporting documents related to the transactions or purchases, applies the correct category code, and assigns it to the appropriate person in your approval workflow—all in a fraction of the time it would take to complete these tasks manually. Plus, the audit trail tracked with AP automation software helps keep your startup’s financial operations within compliance.

4.??????Track the balances you owe with an aging report.

“Don’t let AP age too much; you will just be growing liabilities,” advises Avner Brodsky, co-founder and CEO of Superwatches.com. If you’re not sufficiently monitoring when each payment is due, you risk damaging vendor relationships and running into cash flow issues.

To ensure you don’t miss payments, let them remain unpaid too long, rack up late fees or penalties, or miss out on early payment discounts offered by some vendors, Brodsky recommends tracking the amounts you owe to each vendor in an AP aging report. This report summarizes key information on each payable amount, including the vendor name, the amount due, and the age of the invoice. You can then total the amount owed to each creditor and in each age category. Brodsky also suggests setting up calendar alerts that remind you to make payments to help you keep track of invoice due dates with greater accuracy.

5.??????Develop written policies and procedures with checks and balances.

Clearly document your AP policies and procedures to establish separation of duties within your AP process to prevent business fraud or other issues within your organization. “Having a written policies and procedures document ensures there is sufficient oversight and training for all parties involved. This will also help uphold certain checks and balances needed for proper cash disbursements.

For example, when approving invoices the company should make it a point to assign different approvers depending on the type of expense or even an expense threshold amount.?Further, restricting access to edit vendor information will guarantee all payments are accounted for properly. Applying this strategic approach to your back office operations also helps safeguard your business against future audits.