The role of accounts payable invoice processing
Invoice processing is an integral part of the accounts payable function in a company or organization. Accounts payable is the generic name of the account which represents the amount that needs to be paid, in other words, is payable, to suppliers of goods and services and other creditors who may have not supplied goods and services but other resources like money. It is shown under current liabilities in the Balance Sheet as it is generally of a temporary nature and is extinguished within a short period of time. The Account Payable, or AP, team, is responsible for ensuring that payment is made early enough so that the company does not attract overdue charges like penalties levied by the supplier, while paying it late enough to maximize and extend the beneficial impact of reduced funding requirement to that extent, and hence lower interest costs. So closely is invoice processing identified with accounts payable that it is often referred to as accounts payable invoice processing, even though the two are also unique terms with their own connotations. Being deeply embedded in the business-critical processes of our clients around the world, such as invoicing, enables oWorkers to play to its strength in consistently delivering back office BPO services of the highest quality. Being recognized as one of the top three in the world is no mean achievement considering that we have been in business for just over 8 years.
The role of accounts payable
As it is classified as a back-office function, many times it flies under the radar. However, for the business it serves, accounts payable provides invaluable services. Accounts payable in a company usually operates along with the procurement function. The procurement function is responsible for making purchases for the company and for identification and appointment of vendors and suppliers. As this eventually leads to payment of money to suppliers and vendors, on account of the possibility of misuse of company money, the procurement function sometimes gets an unjustified, bad image as being corrupt even though they provide an invaluable service, of ensuring a consistent supply of high-quality input materials and services that are required to power the engines of the company’s production facilities, enabling it to manufacture and sell and earn revenues. Some of this occasionally reflects on the accounts payable function as well, even though they are not responsible for the purchases or appointments. However, an efficient accounts payable team is able to ensure good relations with suppliers and vendors, by releasing payments when due and, in other cases, operating in a transparent manner and keeping them informed. It must be remembered that quality vendors are a key ingredient in the success of a business, hence they need to be handled professionally and well. They are the ones who will ensure that there is a well-managed supply of input materials and services. While it is understood that the accounts payable team will, first and foremost, protect the interests of the company it works for, it does not need to be at the expense of a supplier. Both can be done together. The accounts payable team is one of the key players in the efficient management of a company’s cash flow, making sure there is enough to meet requirements while not being so much that either incurs an interest cost or forces the company to sacrifice interest earnings. With the help of strong systems and processes, they are also able to identify and head off frauds and the misuse of the company’s money. Accounts payable invoice processing is the central activity around which most of the other functions of this team are carried out. All processes in accounts payable require knowledgeable resources. oWorkers has ensured that it has access to the best resources, one of the keys to BPO success, through their engagement and commitment with local communities encouraging them to offer themselves for employment with oWorkers. Through local communities, oWorkers accesses a perennial supply of fresh talent, enabling them to staff all client projects with suitable talent.Challenges faced by account payable
Companies always try to do more with less. And increasingly more with increasingly less. Accounts payable is no exception and gets caught up in the company’s desire and ambition. At times, the results could be disastrous, if inadequate controls lead to a payment being made to the wrong party or of a wrong amount. Being a cost center, as against being a profit center, also puts the focus on accounts payable as one of the departments where the company could reduce expenses. But that is, in many ways, the nature of the beast. One has to learn to operate within the natural boundaries defined. Accounts payable is also the department which is likely to be the most manual, or non-digitized, in its processes. What is the reason? It is fairly straightforward, really. Account payable invoice processing is done on the basis of a document that has been generated by another company through their own systems and processes. The generated document is then sent across, either in paper form or as an attachment to an email, which is equivalent to being in paper form, to the client. Hence, the client’s process begins upon the receipt of a physical document and hence it needs to be manual, at least the initial phase, where it might be data entered into their own invoice processing software. From that point onwards, it could become a digital process, or stay manual till the point of release of payment. As systems for processing invoices are designed as B2B systems, even where the client and supplier are using the same software, on account of differences in the way they have been set up, it is quite possible that the output of the supplier system may not be accepted by the client system. It also faces issues that are related to paper transactions, such as those related to filing and retrieval, and relative lack of visibility and control. Among the challenges most businesses face is the cyclicality in volumes and actuals turning out to be different from forecast volumes. It impacts clients of oWorkers too. But, with oWorkers as a partner, clients have an additional tool up their sleeve for handling volume spikes, which is the unmatched ability of oWorkers to hire almost a hundred additional resources within 48 hours. With this ability of their partner oWorkers, clients can choose to dispense with expensive ‘just in case’ benches.Processing steps in accounts payable invoice processing
The sequence of steps from the receipt of invoice through to the release of the payment followed by most companies are usually fairly standard, and could be summarized as follows:Verification
The received document needs to be verified, as per good practice for conduct of business, not merely good practice for processing of invoices. This enables the recipient to ensure that it has been received by them correctly and that the information contained in it is accurate. Usually, the following information would need to be checked:- Supplier details, including Tax ID
- Description of goods and/ or services supplied
- Rate, quantity and value of supplies
- Applicable taxes and levies
- Payment information like due date and mode of payment
