How to Write an Accounts Payable Procedure?

accounts payable

The cash cycle is undoubtedly the most crucial process to optimize for any company, from when money’s spent to when it is received. Let’s now connect this to accounts payable (AP), which is the event that settles the purchasing liability. It is inventory that must be manufactured to meet demand. Sales generate demand. This results in accounts receivables which can be converted to cash. In accounts payable, however, the main goal is to increase the asset’s size while maintaining a good credit rating and speeding up the process.


Accounting Procedures Design Techniques and Accounts Payable

Reduce or eliminate the usage of paper

The largest component of any purchasing and payables team’s cost structure is paper. This includes small-dollar purchases and follow-up on purchase orders. It also includes vendor payments, delivery, tracking, and receipts. It is possible to save money by using electronic invoices, supplier self-service, vendor files in central locations, automated workflows that allow for electronic or imaged bills, as well as payment methods like EFT and business credit cards.

Minimise Errors

Invoice fraud, over payments, payments to the wrong vendors, forged bills, late payments, and other irregularities are all common in payables. Audits, written procedures, error control, and errors can all help to reduce these errors.

Training employees

Your accounts payable (AP) staff should receive regular formal training. They will be able to recognise fraud more effectively, negotiate better, and understand the economics of payables.

Reviews of Purchases

Purchasing is an ongoing process and requires constant review. You should consider the following transport costs: expedited fees; odd lot penalties; new pricing; consolidating vendors; adding new vendors or buying group members; and payment terms. Keep in touch with your suppliers to optimize the process. To account for environmental changes, it is important to review everything and keep track of them.

You can extend the payment terms

Payout terms should be determined based on receipt of goods/invoices. This could add up to a week to your terms or 25% to 30-day terms. Electronic funds transfers can be used to make immediate payments. This will allow you to pay your bills more quickly and won’t affect your credit score.

Get Discounts on Payments

You might consider it if there are 2%/10 net 30 terms. This means you’ll get a 2% discount if your payment is made within 10 days instead of the usual 30 days. This gives you an 18% return on capital. This is a good rate for many businesses. 

Integrate ERP (enterprise resource planning) systems

Enterprise Resource Planning automates purchasing and payments, which allows businesses to achieve more with fewer people. E-Invoice matching applications also reduce time and simplify the process of retrieving paperwork. An ERP system will save your company $300 million per year in annual revenue.

Keep in touch with suppliers

To optimize the process, communicate with suppliers. Invoices can be submitted electronically to suppliers. This will help you save time, money, as well as waste.

Resolve Conflicts

Usually, suppliers have disputes because of issues with their purchasing/receiving processes. If you have disagreements with suppliers, ensure that your purchasing processes are accurate. You won’t be forced to pay for any of your errors.


Time was and is critical. It is up to you to take responsibility for it. It is important to know the four components that make up the cash-to-cash cycle. Also, learn how they affect your company’s working capital.


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