Optimizing Accounts Payable Turnover Ratio With Payments Solution
Accounts Payable Turnover Ratio Definition
Profitability and liquidity of business depend on efficient cash management, which is primarily enabled by effective accounts payable (AP) performance. Accounts payable turnover ratio (APTR) is key metric used to gauge the companies performance in paying its bills. high APTR in comparison to industry peers ensures beneficial relationship with vendors and good terms with suppliers. It also evidences an efficient and effective AP process while staying within compliance standards.
However, this may be difficult task as the AP process involves many manual steps, different documents, business rules, and vendor contracts. To actualize APTR, Payments Solution is viable option. It encompasses suite of modules used to digitize, automate and manage the entire AP process. This article is guide to use the Payments Solution for measuring APTR.
Step 1: Set up Payment Channels
Depending on companies vendor setup, payments need to be dispersed through any of the preferred payment networks such as ACH, Wire, EFT and Check. From the admin panel of the Payments Solution, define payment types, set up payment instructions and bank account details, enterprise wide payment limits and payment centers.
Step 2: Integrate Payments Solution with Existing Accounts Payable Process
The solution needs to be integrated with the existing AP system. This is done to do away with redundant tasks, manual efforts and errors. Through the solution, AP processes such as payments and credits can be largely automated. Such automation reduces the time taken to reconcile accounts and record payments in the accounting system.
Step 3: Connect Vendor Profiles
The admin panel of the system allows the administrators to add vendor profiles with the legal name, contact number, pricing terms, credit limit, and other details. Through the solution, these details are easily accessible. This allows users to send invoices to vendors, compare pricing and payment terms, manage credit limits and also send reminders for due payments.
Step 4: Generate Payment Status Report
The solution allows users to generate payment status report, which is an analysis of the payments against the due dates. It includes invoices, check register, payment history, billing and tracking. Such reports are highly beneficial in spotting any issues with payments and intervening before any negative consequences occur.
Step 5: Monitor and Manage Accounts Payable Turnover Ratio
The payments Solution generates an accounts payable turnover ratio report once all the details have been input and all payment methods configured. This report helps to measure the APTR. It provides insights regarding the number of times business pays its suppliers in period and measures vendor and supplier relationship.
Conclusion
Payment Solutions have been great way to enhance accounts payable turnaround and manage APTR efficiently. It enables business to abide by all the compliance standards, automate large portion of the AP process, and stay within the budget. This guide explains how the Payment Solutions can be used to measure APTR. Thereby, this article offers useful insights into the significance of APTR and the Payment Solutions in optimizing accounts and payment management.
