A key element of ‘fast close’ is an effective accounts payable function. And if fast close is not one of your goals it is worthwhile re-considering given the benefits arising from an effective accounts payable function. Today an electronic procurement system is essential for any organisation and is one of the foundations for fast close. The good news for SunSystems sites is that by adopting iPOS for SunSystems you are well on your way to building an effective accounts payable function. With over 25,000 users worldwide it continues to deliver best practice.
Time and time again we find that the number one issue is data quality. Data quality is a key measure of the effectiveness of the accounts payable systems. Or put differently, the data must not need rework or substantial reconciliations to make it error free.
The electronic procurement system is the basis for ensuring an organisation is aware of its liabilities, (actual, accrual & commitments) at all times. If this is the case then there will be no wasted time at the end of a period gathering up all the invoices and listing the accruals required. This also means the finance department is surprised less. How is it acceptable in this day and age to have no idea of your liabilities till the invoice arrives in the post?
Another essential element of fast close is ensuring expenditure is within budget. Without a budget present there is no indication that spend was planned. Budget check means that any spend in excess of budgets becomes an exception and attracts heightened scrutiny and a different set of approval rules.
Approval parameters and escalation approval paths for requisitions provides a framework that gives confidence that the spend is within the organisation’s guidelines. Given this control, one can be assured that budget holders do not need to spend any effort in signing off physical invoices nor maintain various spreadsheets tracking expenditure against budget.
Real-time reporting of expenditure actual spend, accruals and commitments ensures that budget holders manage their approvals and limit any overspend. This approach increases the visibility of all organisational spend and with that, less surprises.
An electronic procurement system, like iPOS for SunSystems, replaces existing PO systems and is the first necessary step to a paperless office. The next step is to remove paper invoice handling. Removing paper invoices can be achieved by punch out, EDI, invoice scanning via email (please don’t scan snail mail paper invoices – just stop it ) or evaluated receipt settlement ( no invoices – nice).
To contrast an effective accounts payable function, I think a quick look at an ineffective AP function makes my point and highlights what you should avoid.
- Creditor and accrual finalisation commences after month end
- Unsure of the levels of liabilities
- Error prone data
- Delays in paying suppliers
- Phone hassling by suppliers chasing delayed or missed payments
- Budget holders spend too much time approving invoices and managing their spend control
- Paper invoices requiring final approval.
You can read other eProcurement blog posts here.
You can read more about Professional Advantage and iPOS here.
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