The Dangers Of Not Automating Accounts Payable
AR TO AP RATIO
Companies large and small face unique monetary conundrum when it comes to managing their accounts payable: the Accounts Payable Ratio or AP Ratio. This complex algorithm measures the amount of time between when company pays its vendors and when it records the expenses related to that payment in its accounts payable ledger. An apt Accounts Payable Ratio is important to any organizations overall financial health. Unfortunately, not automating accounts payable activities in an effort to manage this ratio is risky endeavor.
Unmanaged accounts payable transactions can potentially harm business by damaging Vendor relationships, leading to costly penalties, impeding the effectiveness of internal processes, and failing to expedite the collection of discounts. By failing to implement the necessary automation tools, companies can forget or miss payments due or incur extra costs by overpaying.
An automated accounts payable system provides timely alerts of upcoming and overdue payments with the ability to quickly process them, including discounts. This type of software allows Finance Executives to manage their AP Ratio via visibility into payment status from all vendors in one single repository, allowing for easy review and monitoring of existing payments, discounts and reconciliation results for both current and historical periods. Automated accounts payable also provides audit trails ensuring all payment information is correctly documented along with the ability to track, report and analyze vendor behaviours to ensure the optimal payment cycle is maintained.
Additionally, an automated system offers greater control and security over payments while eliminating human errors, providing more robust internal control environment than its manual counterpart. In this way, Finance Executives can be more assured that all payments, discounts and costs associated with accounts payable transactions are accurately captured and reported on timely basis to keep vendor relationships and company bottom lines healthy.
Accounts payable automation is no longer something only large corporations can take advantage of. With advancements in technology, software that automates accounts payable processes is now available to businesses of all sizes. By automating their accounts payable, organizations can save time and money, giving them competitive edge, and strengthening their financial forecasts into the future.
Overall, not automating accounts payable can expose any business to significant financial risks, hampering its ability to achieve its financial goals. By leveraging simple-to-use, yet powerful software for accounts payable automation, businesses can become more self-reliant and take control of their accounts payable, allowing them to consistently maintain an optimal AP Ratio and secure healthy financial trajectory.
