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What to Look for in Accounts Payable Solutions?

By Annapoorna

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Updated on: Sep 14th, 2023

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5 min read

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Accounts payable solutions has been the choice of many finance leaders and now trending across the globe. Accounts payable refers to the amount owed by a business to its suppliers or vendors. 

An AP head needs to ensure timely payments to their suppliers while ensuring working capital does not get adversely affected amidst ever-evolving GST framework. Therefore, a business should design an effective accounts payable solutions to process invoices and automate business payments. Read on to know more about the importance and criteria.

 

Need for Automating Accounts Payable Process

 

Traditionally, payments to vendors or suppliers were managed manually. This involved storage of physical invoices and purchase orders, comparing documents for purchase rates and credit terms, issuing pay orders or cheques and approval from various departments. The process is time-consuming, cumbersome and involves a lot of paperwork.

With the increase in speed of trade and commerce across the globe, businesses have shifted from manual processing to automated solutions for managing their accounts payable. These solutions involve cross-matching documents, recording invoices and obtaining approval from departments, and offering cash-flow and ageing analysis features.

The analysis provides cash movements to vendors and examines outstandings to highlight the long-pending dues. These solutions help companies to pay their vendors on time and reduce human workload and errors in processing purchase invoices.

 

Criteria to select Accounts Payable Solution

 

There are various accounts payable solutions available. So we have listed down the criteria a business should look for when choosing the best accounts payable solutions as follows-
 

1. Does it solve an existing problem? 

For a company, it is imperative to understand its existing problem or pain points in processing invoices and payments manually. This may include the time and cost, the number of manual touch points, varieties of supplier invoice formats, etc.

Hence, it needs to know whether the solution will resolve these existing problems. A company should draw out its existing workflow from receiving an invoice, mapping it to purchase orders & supporting documents till the payment of the vendor. The solution provider can offer a customised solution which complements the existing software.
 

2. Does it adapt to business needs

A solution must be adaptable to every size of business. It should support large volumes of vendor database, invoices and payment history, which would help any company to extract historical records and perform meaningful analysis.

A company can measure how quickly it pays its vendor by calculating days payable outstanding or performing an ageing analysis. Also, a company can make a vendor & product-wise matrix to know which vendors are crucial to its success.
 

3. Is it easy to use?

A solution should be easy to use by everyone/user-friendly. This helps a company reduce its training cost and quickly implement the solution. The data has to be easily transferred from one software to their existing accounting systems/ERP without requiring manual entry. A company should consider whether the solution provider provides onboarding training to its employees.
 

4. Can it connect with existing software? 

A company needs to consider whether a solution can connect or link or integrate with existing systems/ERPs (modules on finance & accounting, payments etc.). Linkage with existing systems will reduce data duplication across systems. Also, the solution should integrate with bank accounts, ensuring error-free and timely payments to vendors.
 

5. What is the extent of automation and can approval workflow be defined?

A solution should automate every process from invoice receipt to vendor payouts. A solution should automatically capture the contents of the invoice, for example, the vendor’s name, type of product, purchase rates, credit period, transport charges, taxes, etc.

All the relevant header and line-level invoice information should be captured using digitisation technology. A human review will be necessary to ensure closer to 100% accuracy. A solution should have a configurable workflow that records necessary requests and approvals from various departments and enables management to review and authorise payments.
 

6. Is it on-premise or cloud-based?

A company should consider whether it requires an on-premise or cloud-based solution. On-premise solutions require a longer implementation period as it may require an IT consultant to install and update the software on all devices. Cloud-based solutions can be implemented easily and can be automatically updated.
 

7. What are the security features?

A company should ensure that there are no data leakages outside the organisation. The solution should have two-factor security and strong recovery options to prevent misappropriation or fraud.

A solution should have International Organisation for Standardisation (ISO) certification, which maintains credibility and trust with various stakeholders. A solution having audit certification (SOC 2) in the Security Operations Centre (SOC) would help a business against cybercrimes and any security breaches. 
 

8. Do a cost-benefit analysis

A company should ensure whether there is a true value received from the software. This may be in the form of a reduction in paperwork or time savings. The cost paid for the solution should meet its potential benefits. The factors the company should consider are TCO (Total cost of ownership) reduction & tangible ROI (return on investment) projected by investing in a heavy automation solution. 
 

9. How are post-sales support and reviews?

A company should scrutinise reviews of the solution used by its existing clients. User feedback gives a gist of how well a solution works in terms of initial implementation and post-sales services. Post-sales services include on-call and site support and regular updates in solutions according to the latest rules and amendments. A delicate customer relationship manager would help you to provide customised solutions accordingly to our needs.

 

Conclusion

The choice of accounts payable solution for a business should be weighed based on the above criteria. The AP head should actively participate in the discussions and communicate with other team heads to see if their pain points are addressed too before shortlisting the AP solutions for the enterprise. 

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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