Having ravaged by COVID-19 pandemic for months now, getting back on track is a challenge that is faced by businesses all around the world. Adhering to a lean work-force model with limited capital, businesses in every sector want to accomplish more with less which means that they have to improve their productivity by optimizing their working capital. And effective working capital management to free up the cash reserves stuck in the balance sheet is the way ahead for businesses to stabilize the ship, improve productivity, and trigger growth.
Optimize your working capital with effective Accounts Payable Process:
The disruption caused by the COVID-19 has led the business to focus on all possible ways that can optimize and improve working capital management. And back-office functions, especially Accounts Payable play a crucial role in improving the working capital by efficiently managing the whole process.
Few businesses work on their Accounts Payable Process by extending their payables as further as possible to expand their working capital and improve cash flow. Though this strategy may help in a few cases it comes with an added risk of corrosion of supplier’s goodwill, delayed responses & delivery times, and adjusted payment terms. However, a business can still improve their cash flow and working capital by improving their overall Accounts Payable Process.
Given that most businesses are adopting Remote Accounts Payable Process during this COVID-19 times, it is even easier to significantly improve the Accounts Payable Process by adhering to improved practices.
Here is the list of 6 best practices that can improve Remote Accounts Payable Process for small businesses:
Level-up your vendor selection process:
As a small to medium business you are in a perfect position to optimize your vendor selection process that positions your business to negotiate favourable buying terms; a basement for profitable Accounts Payable Process. Develop a preferred vendors list and maintain a supplier scorecard system to measure their performance across key metrics such as quality, defect rates, time of delivery, etc. This system can help you negotiate better and longer payment terms with favourable conditions.
Set-up and work from a master vendor list:
Now that you have negotiated the payment terms with the vendors, it helps to properly capture and maintain the entire data in the service level agreements: product details, delivery timelines, quality standards, and other compliances along with the vendor registration. Working in accordance with the data avoids payment errors, double and late payment and help you enjoy all the discounts, rebates and makes it easy to cross-check and update the systems according to the developments. This list also simplifies all the vendor’s transactions when it comes to the Remote Accounts Payable Process.
Regularly review the vendor contracts:
Having a master vendor list at hand, small businesses must emphasize reviewing the vendor’s compliance with the contractual terms. Most businesses use supplier scorecards to measure and monitor vendor performance with respect to metrics such as quality, time of delivery, defect rate, etc. A dip in the measured performance can help you alert vendors and even negotiate discounts and rebates in few cases. This periodic review process can also help you compare the existing payment terms with industry standards to help you update them accordingly.
Centralize the Accounts Payable Process:
Automating Accounts Payable Process by enabling electronic data exchange with vendors and customers forms the base of the Remote Accounts Payable Process. By automating the generation of purchase orders and validating, accepting and approving invoices, the whole Accounts Payable Process can be streamlined for better results while working remotely.
However, this process can be further improved by centralizing the process by making sure every staff member adheres to a standard practice that can be compared to establish KPIs. This common adherence to measurable indicators can help you accomplish more with fewer resources, which is a common goal for businesses during this COVID-19 pandemic.
Integrating the above 4 practices into your Accounts Payable Process can help you streamline the whole process to help you optimize your working capital. However, if you are small to medium business aiming to revamp your Accounts Payable Process to free-up your cash reserves and improve cash flow, you need expert help you can guide you through the entire process. And hiring Remote Accounts Payable Services can help you accomplish your working capital and cash flow goals while saving you a lot of time and money.
If you are aiming to automate your Accounts Payable Process or looking for Remote Accounts Payable Services that can help you reap significant benefits from a streamlined, efficient, and accurate Accounts Payable Process, then Back Office Accountants can help you. You can find us here: https://www.backofficeaccountants.com/