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Invoices are a routine part of every business. While small businesses often manage manual data entry, paper invoices, and spreadsheets, this approach doesn’t scale. As businesses grow, so does the volume of invoices—often reaching thousands each month. Larger organizations require a dedicated Accounts Payable (AP) team to manage vendor onboarding, invoice processing, and payments. Despite being a critical function, AP is still an area where best practices and process improvements are often overlooked.
1. Centralize Invoice Receiving and Processing
Companies with multiple offices sometimes operate decentralized AP teams, leading to duplicated efforts and inconsistent processes. A centralized AP team offers several advantages beyond just cost savings.
Centralized invoice handling enables bulk purchasing from a single location, reducing per-unit costs compared to smaller orders placed by separate branches. It simplifies the vendor experience too—vendors deal with a single invoice process, regardless of delivery locations.
Additionally, a centralized team is typically leaner, easier to train, and simpler to align with standardized processes. Research shows that centralized AP teams save around $2 per invoice compared to decentralized setups, resulting in significant annual savings.
2. Implement Two- and Three-Way PO Matching
One of the most effective internal controls in AP is purchase order (PO) matching. It helps detect and prevent incorrect or fraudulent invoices.
- 2-way matching compares the invoice to the purchase order:
- Quantity billed ≤ Quantity ordered
- Invoice price ≤ PO price
- 3-way matching adds a third layer by comparing invoices to both the purchase order and the receiving report:
- Quantity billed ≤ Quantity received
Many companies prefer 3-way matching as it ensures accuracy by validating receipt of goods before payment, keeping PO data updated in real time.
3. Automate Wherever Possible
Manual AP processes are time-consuming, prone to errors, and lack visibility. Automation can transform the entire AP workflow by improving speed, accuracy, and transparency.
Accounts Payable Automation typically starts with Optical Character Recognition (OCR) to digitize paper invoices or extract data from email attachments. From there, automated workflows handle coding, approvals, and routing—often with no manual input required.
Most AP automation solutions integrate with ERP systems, ensure compliance, and provide real-time visibility. These tools have been shown to reduce downstream errors by 80–95%.
4. Outsource Data Entry to Trained Vendors
Instead of investing in costly software and infrastructure, many businesses choose to outsource their AP data entry to experienced vendors. These providers bring not only technology but also trained staff familiar with industry best practices.
According to a Deloitte survey, 41% of businesses have already outsourced their AP processes. Companies that do so report greater efficiency and faster turnaround.
However, it’s important to vet vendors carefully. Some firms pivoting from unrelated services like call centers or tech support may lack domain expertise in accounting. Lower costs may come at the expense of quality and process understanding.
To ensure smooth operations, formalize expectations with a Service Level Agreement (SLA). Clearly define reporting needs and workflow responsibilities. Businesses that implement customized, end-to-end outsourced AP processes often see a 59% increase in efficiency and cost savings between 30–50%, as reported by Aberdeen Group.
Looking to improve your AP process? Discover how centralized systems and automation can cut costs and boost efficiency; connect with our team today.
IDS Commander iTech2021
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