If you’re managing your startup’s accounts payable system by putting together voucher packages and writing checks, you know this system can be time-consuming and full of opportunities for human error. But it doesn’t have to be this way: Why not use software to automate your accounts payable process, so it’s easy to manage, compliant with security regulations, and ready to scale as your company grows?
The number of approval tiers you need and the payment types you process will dictate whether you need simple bank bill pay functionality, a lightweight payment tool like Melio or Routable, or a robust AP automation solution like Plooto or Bill.com that can handle complex payable workflows and international payments.
However, getting the full benefits from accounts payable automation isn’t just a matter of choosing a platform: Setting up the system to suit your business and using the features in a forward-thinking way will help you avoid costly mistakes and extra work and improve your company’s cash flow. Below are five AP automation best practices to help you meet the needs of a growing startup.
5 Accounts Payable Automation Best Practices
1. Watch out for weekly payment limits.
Many banks offer simple bill pay tools as part of their online services. If your business is just starting out, this can be a simple first step. However, some bank bill pay systems limit the dollar value or the number of payments you can process each week. Once your business starts growing, you’ll quickly outgrow these limits and need to work with a specific accounts payable platform. Make sure you know the restrictions, and switch to a full accounts payable tool well before you hit them, so you don’t risk having an important payment delayed.
See also: 8 Best Accounting Tools for Startups
2. Don’t rely on the default exchange rate.
Not every accounts payable platform gives a great exchange rate on international payments: You could be spending hundreds of dollars extra to ensure your vendors receive the agreed fee. To avoid this, transfer international payments through a currency conversion platform, like TransferWise or CurrencyFair, that gives a better exchange rate; or, some accounts payable systems allow you to override the exchange rate in the platform setup.
See also: Startup Bookkeeping: Common Mistakes VC-Backed Startups Make and How We're Solving Them
3. Automate approval notifications.
As your business grows, the number of approvals you need for each payment will likely grow too. Paying the correct amount on time, every time, is key to building long-term, trusting vendor relationships. To speed up the process between receiving a vendor invoice and making the payment, use the workflow automation software built into your AP solution to automatically route invoices to the right approvers based on the dollar value of the payment or the department it’s assigned to. To prevent invoices getting held up in the approval process, set up your payables system to notify approvers by email each time they have an invoice waiting, or send an automated reminder of all outstanding bills due that week.
See also: 8 Advantages of Bill Pay Software for Your Startup
4. Keep an audit-ready record of all payments.
To save yourself hours of hassle if your business gets audited or a potential investor or acquirer carries out due diligence, use accounts payable software to archive all your invoices and related documents in one place, and maintain a paper trail in electronic format. If your platform has the capability, attach digital copies of files like customer contracts or estimates to each invoice, so you can make sure nothing is lost and you can easily get your hands on the records you need. (Whenever possible, request digital or electronic invoices vs paper invoices to streamline this process further.) Because automated AP systems record the approvals each invoice has gone through, you’ll also be able to show who signed off on each payment, as well as the account coding and the responsible department.
See also: How To Make Sure Your Startup Is Audit-Ready (And Two Things To Do If You're Audited)
5. Handle accounts payable as if your company is already public.
If you’re looking to go public with an IPO further down the line (or targeting an acquisition by a public company), make the preparation easier by putting financial controls and processes in place as if you’re a public company from the get-go. For example, all public companies in the United States will need to be compliant with the Sarbanes-Oxley act (SOX) to prevent fraudulent activity: For accounts payable, this includes documenting your banking security, showing evidence of ongoing AP process improvements, and creating an audit trail with timestamps for each action you take. If you include these measures as standard, you won’t have to spend time restructuring your entire accounts payable process to meet the regulations for IPO.
See also: When Startups Should (And Shouldn’t) Hire a Chief Financial Officer
How To Streamline Your Accounts Payable From Invoice To Receipt
Even with accounts payable best practices in place, managing all your bills and approving vendor payments still takes some oversight and input from your team. If you want to streamline the entire process from start to finish, you can outsource your AP department to Zeni. Zeni is a full-service finance firm that combines the efficiency of artificial intelligence with human expertise to deliver bookkeeping, accounting, and CFO services for startups and small businesses. All Zeni plans include daily bookkeeping, 24/7 access to a finance concierge, and access to your real-time financial data and insights via the Zeni Dashboard.
Zeni’s team of finance experts can set you up with an automated system for accounts payable that saves you hours of work every week. Our team can advise you on the right tool for your business, sync it with your accounting software, and build the workflows you need for each payment to be processed smoothly. When you sign up to the Full Service plan, Zeni’s team of finance experts will also handle all your customer invoicing, employee reimbursements, vendor bill pay, and data entry and management of your entire accounting system, so you can rest assured that every payment will be taken care of, securely and on schedule.
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