Best Practices for Handling Accounts Payable at Year’s End Close

11/17/2021

As the year’s end draws closer, your accounting team is likely finalizing and organizing the past twelve months of company finances. One critical aspect of the process involves handling accounts payable: your company’s ongoing expenses incurred from suppliers or vendors which need to be paid to the corresponding parties. 

The purpose of accounts payable is to allow an organization to generate revenue from the supplies or services purchased, enabling them to be able to reimburse the corresponding supplier, vendor, or distributor after an agreed period of time. Accounts payable are usually due after 30, 60 or 90 days – or simply by the end of the calendar year.  

The obvious reason for staying on top of your accounts payables invoices is to remain in good financial standing as an organization, but maintaining good practices also helps your organization’s accounting team remain organized and prepared for tax season, maintain a positive relationship with vendors and suppliers, and detail accurate accounting records to give you a better sense of working capital.  

To properly close out your organization’s balance sheets and pay what you owe to lenders and suppliers before the end of the year, we outlined several key tactics for your accounting team to implement to successfully take care of your accounts payable for the year.  

Utilize Technology to Your Advantage 

The main challenges regarding accounts payable are invoice approval delays, document management and late vendor payments. Each of these problems, when unaddressed, can cause extra hours of overtime for accounting professionals and higher costs come with manually processes invoices – the average cost can be as steep as $15. 

Luckily, your team can easily be alleviated of unnecessary extra tasks through implementing technology and automation into the accounts payable process. Data shows that 76% of accounting teams that employ automated AP processes report increased productivity and less overtime.  

Integrating technology into your account processes is simple once you find the most appropriate automation software option available for your company to simplify managing accounts payable. 

Software programs for accounts payable automation include Sage, Xero, FreshBooks, Papersave AP Automation, Stampli, AvidXchange, Oracle, Chrome R, and more.  

By digitizing the invoice and accounts payable system, it provides clear insight into each step of the purchasing and payment process. There are usually time stamps assigned to every action, even if some are automated, and employees can manually view specific aspects of the process to ensure its accuracy and integrity.  

Technology also holds accountable those users whom have access to the system and financial information by keeping track of which individual completes which action for each step of the process – and administrators can view this information too.  

Keep Cybersecurity in Mind 

Though technology applied to accounts payable functions can increase productivity, save company money and keep books organized, there are also potential risks that come with its utilization. Companies lose around 5% of annual revenue as a result of fraud, according to a report published by the Association of Certified Fraud Examiners (ACFE). More so, 74% of organizations were targets of an attempted or actual payment fraud attack in 2020, according to the Association of Financial Professionals.  

To eliminate the attempt of fraud before it occurs, its effective to apply automation and machine learning to your accounts payable function. Some accounting software also come with AI and machine learning functions, so thoroughly consider your options before selecting one. 

Another tool proven to be effective in preventing fraud during the invoicing and accounts payable process is virtual card usage: payment cards that are only issued for one-time use and have designated fund amounts available, which expire in a short period of time.  

To mitigate the potential of fraud, assign a designated individual from your team to be the only one able to authorize payments, both on paper and electronically, if possible. It may seem monotonous or unnecessary but taking every precaution to lessen the risk of fraud or cybersecurity breaches will help uphold the reputability of your organization, especially to the vendors with whom you do business.  

Find Top Accounting Talent 

Even the most sophisticated accounts payable software and automation cannot complete the tasks as effectively as a strong accounting team.  

Finance and accounting professionals who are committed, organized, and detail-oriented can be difficult to find, but with the help of Addison Group, we can set your team up for success. We rely on our robust network of candidates, experienced teams of recruiters and proven processes to supply highly qualified candidates for any position you need filled.  

From year-end close to mergers and acquisitions, we deliver the specialized finance and accounting expertise you need to bring your business into compliance, to transform, and to grow. When it comes to finding the right people, Addison Group has a proven track record and is ready to help you next. Reach out today.