December 23, 2020 Ramzan Muhammad

Accounts Payable Document Management Advantages

accounts payable document management

These purchases are made during the period for which you need to measure the accounts payable turnover ratio. Accounts payable refers to the vendor invoices against which you receive goods or services before payment is made against them. Thus, your vendors supplying goods on credit are also referred to as trade creditors.

It leads to duplicate invoices, fake receipts, missing invoices, and other adverse situations. Despite the size of a business, every AP team can definitely take help from automation. accounts payable management This is the beginning of streamlining payments and storing documents in a safe spot. The odds of getting the money back are low if you have identified the error after the payment.

Greater OCR Data Accessibility & Business Insight

Confidential financial data, such as payment records and sensitive company information, remain protected against unauthorized access and data breaches. With AP automation software, though, companies get a far cleaner payment process. The software often comes standard these days with supplier/vendor portals, where vendors can enter their invoice information directly.

This is in line with accrual accounting, where expenses are recognized when incurred rather than when cash changes hands. The company then pays the bill, and the accountant enters a $500 credit to the cash account and a debit for $500 to accounts payable. In sum, by embracing digital document management, businesses can streamline their AP processes, enhance productivity, and strengthen data security. This transformation to digital records management allows organizations to optimize their operations, improve decision-making, and ultimately achieve greater success in their financial processes.

Accounts Payable vs. Trade Payables

From receiving an invoice to making payment, the whole process has an extensive workflow. Once the payments are sent out, receipts will be available to download and that’s how you can automate your accounts payable and have a unified platform to store all AP documents. But with this kind of documentation, they can’t achieve 100% efficiency. Documents travel within teams a lot, increasing the average invoice processing time.

Most regulations require organizations to store documents for at least 3 to 5 years. Now we know how many documents are involved in a single transaction. For them or anyone, paper-based documentation only adds up additional work and entangles everything. First, it found that 43% of businesses “often need more information to process an invoice” than the info that’s on it (a common culprit is likely missing PO numbers).

How Hyland can help you with your accounts payable document management

So, the following is the journal entry for cash paid to the supplier. Accordingly, the 2/10 net 30 payment term means you can take a 2% discount on the total due amount. Otherwise, you would have to pay the full amount standing against the due invoice by November 9. Accordingly, you are required to pay your supplier latest by November 9. A final area to consider is how to create a structure for the department that supports better results in and of itself while reducing the risk for fraud.

  • It is important for your business to receive trade credit from its suppliers in the form of accounts payable.
  • This means that you will receive a discount of 2% if you pay the amount due within 10 days.
  • There is never any hardware to maintain, software to install or upgrade fees to pay.
  • Likewise, crediting the Sales Account by $300,000 means an increase in Sales by the same amount.
  • However, the accounts payable balance would decrease if there is a debit entry.

So, whenever your supplier provides goods or services on credit to your business, there are accounts payable outstanding on your balance sheet. This means the accounts payable account gets credited as there is an increase in the current liability of your business. Furthermore, you’d be able to create a rule that controls the document’s flow. Let’s say you want an invoice to be automatically routed back to the AP department after it’s been approved by the purchasing department — you can do that easily in a workflow tool. And by reviewing  your history of comments, users will be able to know what actions are required on a particular document to complete the process. This makes it easy to track files, create new steps for approval, change routing rules, and even receive updates on documents.