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Best practices for streamlining accounts payable

Businesses in all industries want to be more profitable using fewer resources. School boards aren’t any different. Making this mindset work means taking an in-depth look at all the processes you currently have in place and streamlining them to be more efficient, more accurate, and have fewer mistakes. 

Only then can you free up funds for more working capital. For many industries, this means deviating from legacy systems.

Many organizations don’t give their accounts payable (AP) processes a second thought, even though this is the heartbeat of your cash flow. Experiencing regular challenges with your AP software can negatively affect your entire district.

If your school AP processes are outdated, you’re missing out on applying the best practices in your day-to-day operations. Updating your district’s accounts payable (AP) software will help you seamlessly forecast budgets and track spending, meaning more profit and success within your division.

Looking at AP Management With a Tactical Eye

The AP department isn’t usually a priority for school boards when changing or adapting different processes to gain working capital. But when you take a deeper look into different strategies that could optimize a working capital culture, AP is the place to start.

Some may think they’re maximizing their cash flow by delaying payments to suppliers as long as they can. But making suppliers wait does more harm than good and can lead to:

  • Tarnishing your relationships
  • More stringent payment terms
  • Delays in deliveries
  • No urgency to return calls
  • Invoice mistakes that get fixed on their time
  • Warranty issues no longer being extended

Submitting payment early to your suppliers could be helpful if they have early payment incentives or discounts. But sometimes that discount won’t outweigh keeping money on hand until the final deadline.

To successfully free up working capital, there must be a change in the processes being used and in the attitudes toward achieving them. This is where a collaborative approach between accounts payable, the purchasing department, and upper management can be beneficial. Essentially, the organization as a whole must take on a working capital culture.

And this involves more than just paying bills on time. There must be a change in company focus so that refining payment processes is recognized as being important. Only then can you free up money for growth.

Cause and Effects

Adopting a working capital culture throughout your district may not be easy, but the benefits will outweigh the challenges. Once you streamline your accounts payable process with cloud-based technology designed with schools in mind, you’ll see a change in your available cash flow. This is where you can fill any funding gaps and see an improved bottom line.

Expect to see many benefits when you improve your AP procedures:

  • Partner with suppliers and divide the risk
  • Lengthen payment due dates
  • Reinforce your negotiating power
  • Extend warranty terms
  • Get your supplier to give you stock on consignment

If you’re using outdated AP processes, your supplier payments may get delayed. This can affect your quick payment discounts or having extended payment terms. There are many things that can lead to issues with your AP processes:

  • Depending too much on manual processes that are susceptible to errors for approving requests, scanning invoices, and making payments
  • Forgetting to supply a PO with every order
  • Not matching packing slips to contract pricing
  • Accepting discounts without knowing the terms and conditions
  • Overlooking the value of purchasing in volume
  • Neglecting trade spend incentives offered by suppliers
  • Entering the wrong contract information 
  • Not having a system in place to detect or prevent missed payments, over payments, under payments, or late payments

Edsembli supports the full Req-to-Check process, giving users a seamless AP experience across all touchpoints in the process.


Follow Best Practices

Your school division’s AP needs don’t have to be complex. When choosing a financial platform,  ensure that it improves AP functionality with modules that meet your specific requirements. 

Follow these best practices to get your school district closer to your financial goals:

1. Unify AP Processing and Reporting

Centralizing accounts payable throughout your district keeps AP staff accountable by having to follow the same practices and procedures. This allows for easier and more accurate performance management

2. Adopt a More Strict Approach to Setting Procedures

When procedures come with strict guides, people pay more attention to ensure they’re following the rules. This results in less errors and more control over processes and supplier contracts.

3. Going Paperless Has Its Advantages

Electronic Data Interchange (EDI) is the way of the future. Automation allows you to communicate electronically with your suppliers and vendors, gaining you notable advantages and savings. 

Automatically generate, validate, accept, approve, and track your PO’s all within the system. 

Once you receive your order, the system will automatically pay the invoice. Vendors and suppliers appreciate automatic payments, so they offer discounts and rebates as an incentive for using EDI.

4. Set a Stronger Purchasing Cap

Make it known district wide that all purchases over a certain amount will need to be approved by specific personnel. Having control of purchases will stop frivolous buying and save money.

Using Edsembli’s expense claim management module, supervisors and board members can easily access expense claims, approve or deny them, and issue payment digitally. Notifications of management decisions are automatically sent to the purchasing employees. 

5. Design a Seamless Handoff Process

When you streamline accounts payable system procedures it resolves bottlenecking during the handoff process between AP staff. This makes the entire accounts payable department more efficient, as the work flows at a more consistent pace.

6. Electronic Gateways for Suppliers

Setting up portals for suppliers allows them to track order status, delivery timelines, and even possible shortages. Portals save time, improve the accuracy of orders, and reduce errors. 


Tactical Planning for Increasing Your District’s Working Capital

Of all the processes and procedures that take place within the AP department, there are many that, if reformed and enhanced, will increase working capital. Edsembli’s Tangible Capital Asset module can help you stay on top of regulatory requirements with full transparency of the capital invested in your projects. 

1. Select the Right Suppliers

Start with a list of preferred suppliers. Make sure all staff are aware of the list so they don’t just buy from anywhere. This will allow your purchasing manager to arrange special terms. There are 4 key steps you can take when negotiating terms with suppliers that will help increase your working capital:

  • Give them a list of concerns and clarify that your top management is involved with your negotiating process
  • Use performance scorecards for all your preferred suppliers. You can use these to show them how their competition is better and urge them to improve if they want your business. This will ensure better service and competitive pricing
  • Ask for longer payment terms when you feel you have the upper hand 
  • Don’t be afraid to ask for lower pricing. Ask for volume discounts, and to match or beat competitors’ prices. Leverage your lower pricing requests as a means of compensation when suppliers have let you down with late delivery or stock deficiencies

2. Set Up and Enter Supplier Contract Details

Entering details of the negotiated contract correctly is crucial to all future AP processes. If entered wrong, your district could pay wrong prices and not meet payment deadlines. This has a snowball effect which could then void your eligibility for any discounts or incentives. It could even lead to service disruption. Here are 3 steps to prevent this from happening:

  • Ensure your AP cloud software can hold your supplier details. The reference data should include details of the product or service offered, specific guidelines and references of their quality of standards, pricing, responsibilities, delivery timetables, and any regulatory concessions that exist
  • Keep the master file current. Update whenever payment terms change and when there are new or different rebates/discounts/credits. If anything changes with the negotiated contract, note this in your master file
  • Storing vendor contracts can be done efficiently with document management systems. This makes searching for specific supplier information simple and easy

3. Contract Evaluation Process

Mistakes from suppliers happen. To prevent incorrect invoicing and missed discounts wherever possible, do a regular review of your supplier contracts:

  • Have someone on your team check for compliance of terms and accuracy of invoices. Have the same person be your performance scorecard keeper
  • Take advantage of clauses that give accountability to the supplier for any penalties gained from their mistakes or lack of performance 

4. Purchasing process

In order to manage accounts payable processes reliably, you must reconcile every invoice with its purchase order. 

Without knowing where your cash is going, you won’t be able to free up cash flow for working capital.

The bigger your district, the more suppliers and buyers you likely have. It can be challenging keeping everyone in line with procedures if you don’t have a good AP plan in place:

  • Provide a PO number for every purchase so you can authenticate it, confirm price and payment terms, and track each order to make sure it complies with your contract
  • Get the most savings possible by exploring all anglesvolume buying discounts, early payment rebates, and trade spend incentives. Closely monitor early payment or volume buying to make sure locking in your cash flow doesn’t defeat your purpose of finding working capital 
  • Use a system that automatically tracks your outstanding payables by supplier and payment terms
  • Use metrics that all staff can follow to keep things clear and in line with your district’s objectives
  • Reduce risk when ordering a new product that hasn’t proven itself yet. Ask for longer payment terms or, better yet, see if the supplier will give you the product on consignment. This will add to your working capital

5. Invoice Processing

Modernizing your invoice processing system is a sure way to free up cash flow. There are a few ways you can do this:

  • Centralized processing forces all AP staff to follow the same standards and procedures, ensuring better consistency throughout the department
  • Don’t pay invoices with mistakes. Send them back to the supplier and wait for a corrected version
  • Process invoices with a date stamp 
  • Only pay invoices when due, unless there is an early payment discount that is worth more than your cash flow needs
  • Run aging reports to see when invoices are due, so forecasts for available cash flow are more accurate
  • Integrate an EDI system so that processes can be done electronically with less error. This will give you more accurate AP records

6. Accounting Statements

Having accurate reports and statements for current accounts payables is crucial when looking for workflow capital. Being able to choose when to take advantage of early payment discounts is just one example.

Reinforce how your team processes your accounting reports using these steps:

  • Authenticate invoices with their associated purchase orders and terms of the supplier contract to guarantee accuracy 
  • Automating the reconciliation process will enhance day-to-day reporting efficiency and keep it current
  • Resolve all unreconciled items in a reasonable amount of time—try to keep the same people reviewing the reconciliations to avoid potential duplicate or overpayments
  • Attach journal entries before the cut-off dates of the reporting period
  • To keep your accounts payable system accurate, apply payments for each invoice on the date you make your payments
  • Track all payments you make, not just the ones going to your suppliers
  • Choose a payment method that has the lowest fees

Interested in Streamlining Your District’s AP Processes?

Getting tough with AP procedures, having clear processes, and following accurate ways of measuring can significantly improve your chances of freeing up cash flow and having more working capital.

Automated EDI technology makes AP processes easier and more accurate by cutting out potential for human error. Automated technology improves your relationships with suppliers, giving you more leverage when negotiating contract terms.

When a school district buys-in to a working capital culture, there’s only growth and success in their future. Book a demo today to see how Edsembli | FIN can set you up with cloud-based automated technology designed specifically for schools.


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