The Ultimate Guide to Accounts Payable Process Documentation

Accounts payable process doesn’t end by paying vendors on time. Accounts payable process documentation is an important function to ensure compliance and visibility into your processes. 

Most companies document their accounts payable processes either manually on paper, or directly into an accounting software. In this blog, we’ll discuss the process of accounts payable process documentation and the benefits of going digital. 

Accounts payable documentation process

Accounts payable process involves various documents at each step. All accounts payable documents are important and need to be held on to for the future. Here are some documents encountered in a standard procedure: 

Purchase requisition

A purchase requisition is a request for purchase of goods or services required by the company. This request needs to be approved by the department head and the procurement team to be processed. Purchase requisition is an important document in determining the source of purchase request. 

Purchase order

After finalizing a purchase, a purchase order containing the type and quantity of goods or services required is sent to the selected vendor. The purchase order is an important document, and is used in two-way matching to ensure the correct amount is being paid to the vendor. 

Receiving report

The vendor sends a receiving report to confirm the quantity and type of goods delivered. A receiving report can be used as a reference to ensure that the goods mentioned in the purchase order have been received. Receiving report is used in performing three-way matching. 

Invoice

An invoice is sent by the vendor after goods have been received. The invoice contains details about the purchase, as well as a deadline for paying the invoice. Invoice can be considered one of the most important documents and are used as reference for accounts payable spend. 

Payment confirmation

After an invoice has been paid and received by the vendor, the invoice is marked as paid. The payment is released after performing invoice matching and adjusting credit notes, if any. 

Importance of accounts payable process documentation

Visibility into funds

Maintaining accounts payable documentation can help you gain visibility into funds going out of your company and help you assess and plan for the future. Having your accounts payable spend documented can help budget future expenses with more accuracy. 

Compliance

Correctly documenting your processes can help in creating an accounts payable audit trail. Having a well documented trail can help simplify both internal and external audit procedures and ensure compliance with government standards. 

Cost savings

Accounts payable process documentation also helps you track accounts payable spend in real time. This can help you track expenses in real-time and derive useful insights for cost saving. Invoice matching can also help you ensure you're not spending a penny more than you need to. 

Avoid fraud

With vendor fraud becoming more rampant day-by-day, accounts payable process documentation can help identify culprits both internally and externally. It can also help identify duplicate payments and correct any mistakes before the payment goes out. 

Challenges with paper accounts payable process documentation

Managing large volume of paper documents

For a company that processes thousands of invoices weekly, managing paper documents can come with additional inventory costs. This can be heavy on the company’s pocket and the costs might increase upon scaling business processes. 

Losing documents

Managing paper documents can lead to missing documents and files. Invoices can go missing after traveling from desk to desk in the approval process, or documents can go missing while performing an audit. Missing vendor invoices delays vendor payments and requires the company to pay a hefty fine. 

Time-taking process

Accounts payable documentation inventory is a very time consuming and meticulous task. This takes away time which could have been spent on performing more strategic tasks for the company. 

Security issues

Storing paper documents in a warehouse can lead to thefts or unauthorized access to these places. Storage units can easily be broken into and by the time the theft is caught it might already be too late. 

Why should you consider digital accounts payable process documentation

All documents on one platform

Cloud-based accounts payable documentation storage can help you access all documents on a single platform with a single login. This saves time spent tracking down and accessing documentation or manually searching for relevant documents in your accounting system. 

Efficient audit trail creation

Managing AP documentation on a cloud platform can also help create an efficient and clean audit trail for audit professionals to follow. 

Automated invoice matching process

Digitizing accounts payable documentation can also help you automate your invoice matching process. Having all transactional documents like invoices, purchase orders, receiving reports and inspection slips at one place facilitates a faster matching process. 

Real-time AP dashboards

Having all your documents on an online cloud platform can allow you to set up real-time reporting to gain complete visibility over your accounts payable data. Some AP automation software, like ClearTech provide real-time AP, spend and savings dashboard for finance leaders and accounting teams to easily assess and monitor their finances. 

Benefits of accounts payable automation

Accounts payable automation is a great tool to ensure all your accounts payable documentation is stored in a single platform, while making your accountants’ life easier with automated data capture, approval routing, invoice matching, approvals and payment run creation. AP automation solutions have become a necessity for finance teams to control costs efficiently and effectively. Here are a few benefits AP automation can provide your company: 

Increased productivity

Having to spend less time on mundane tasks like invoice data entry, manual invoice matching and tracking down approvers can help increase your accountants’ productivity. This allows them to focus on more strategic tasks to improve costs and budget better.  

Timely payments

A good AP automation software will also help you pay your vendors on time by effectively capturing invoice payment terms and notifying when an invoice is due. ClearTech AP solution automatically creates payment runs based on due dates and payment method, to ensure your invoices are paid on time. 

Complete visibility

With the help of interactive real-time dashboards and easy document access, you can get complete visibility into your company’s finances, allowing quick strategic discussions and changes. You can also get insights into duplicate payments. 

Protection against fraud

Storing sensitive documents on a cloud platform with gated logins can also help protect your business against internal fraud. Having vendor’s payment and address information at hand can also help you quickly check payment details present in an invoice and safeguard your business from invoice fraud. 

Conclusion

• Accounts payable documentation is the process of carefully noting and storing all documents involved in the accounts payable process. 
• Invoices, purchase orders, receiving reports and inspection slips are some important accounts payable documents. 
• Accounts payable documentation process is essential to provide finance teams complete visibility over their spend, maintain compliance with government standards, save money and ensure secure processes.
• Managing these documents manually in a warehouse or a storage unit can pose multiple challenges such as high inventory costs, loss of sensitive documents, theft and other security risks. 
• Digitizing the AP documentation process can help manage all documents on a secure platform and create an efficient audit trail. 
• Adopting an end-to-end AP automation solution can give the added benefit of automating invoice matching processes and provide real-time dashboards for all accounts payable spends.