Accounts
Payables: An Insight into Best Practice
The
way organization manage their account payables, truly reflects its ability to
monitor its optimal cash flow requirements which would tend to aid company’s
day to day operations and contributes towards its continual existence. The
significance of opting best practice in relation to accounts payable, being one
of the significant business areas, helps organizations to build a constructive
working relationship with its suppliers thereof aiding the business in the
achievement of its desired objectives.
Looking
into the aspect of optimal cash flow requirement for any organization, the
creditor management practice would have a noteworthy effect in cost cutting for
the company with respect to interest paid on delayed payments, late payment
surcharge/plenty and the ability of the organization to obtain early payment
discounts will be gone astray. Organizations with proficient operational
systems are able to save a lot of cash, by managing their accounts payable with
fewer resources in relation to both cheap material and by injecting less staff responsible
for the processing and management of invoices. The American Institute of CPAs disclosed the
results of their recent survey which highlights Multinational enterprises
(MNEs) on average being able to process 12000 purchase invoices for every
accounts payable officer hired by the company on a yearly basis. These on
average are processed at an expense of $3.50 for each invoice. The result of
the survey further drills down details, highlighting best accounts payable
systems worldwide, being able to processes these respective invoices at a much
lesser cost of $0.30 each. This concludes that by having a prompt accounts
payable system, leading organizations are able to save $38,400 per accounts
payable officer working for the company on a yearly basis which is even higher
than the cost of the hired officer himself.
As to
the relations with the company’s vendors, creditor activities definitely affect
the trust between an organization and its vendors. Regardless of whether an
organization respects it’s settled upon installment terms by paying up the
amount, as acknowledged or not, the company needs to accomplish more to
construct a relationship of trust with suppliers or to find another one.
Moreover, solid relations with suppliers are critical to an organization on the
grounds that they give much needed credit facility, may offer new products for
the company to sell, and participate in client administration.
Opting
for the best practices would enable an organization to deal with its records of
payables in the light of numerous objectives. Firstly the organization would be
able to pay for the goods bought under a predefined structured approach,
providing the company with an opportunity to negotiate favorable time frame and
terms for the payment. Secondly, applying best practice would enable
organizations to guarantee the precision and genuineness of the invoices that
are to be paid, and most importantly would help sink in such a system that
would aid the process of managing accounts payable documentation with low cost.
Organizations
need to have strong internal control system in place in order to efficiently
process and manage accounts payable. This involves reviewing invoices before
they are actually paid to the supplier, having segregation of duties by
distributing tasks among different staff members such as the employee
responsible to keep the record of invoices should not be assigned to pay them
to the suppliers. Organizations which
tend to prosper in their business ought to maintain a constructive working
relationship with their suppliers as they are the major stakeholders’ directly
influencing business operations.
