Achieving Next-Level AP Efficiency in SAAS B2B Firms: Best Practices
For a rapidly growing SaaS B2B firm, Accounts Payable (AP) efficiency is crucial to control costs, avoid delays in closing the books, and ensure timely and on-budget payment of bills. However, there is foundational groundwork that must be laid before layering in efficiency-boosting processes. The name of the game is building a secure holistic solution that eliminates repetitive manual actions. Here are the key areas to focus on (expense and travel management are excluded from this article and will be covered in a separate post):
Laying the Foundation for an Efficient AP Function:
IT Infrastructure & Cyber Security: A robust IT infrastructure is the backbone of any modern AP function.
Separation of Duties & Role-Based Permissions: This ensures that no single individual controls all aspects of any critical transaction, reducing the risk of errors or fraud and putting the company on the right track for eventual SOX compliance.
Vendor Risk Management: Assessing and managing potential vendor risks is crucial. This process ensures that the company collaborates with trustworthy and reliable partners.
Policies and Procedures: Clearly defined and regularly updated policies and procedures provide a roadmap for the AP function, ensuring alignment with the company's strategic goals and compliance requirements.
Employee Training: Continual training is key in equipping the Accounts Payable team, requesters, and managers with the latest best practices and tools, which in turn enhances their efficiency and accuracy. It is advisable to configure the system with validations that can prevent invalid data entry while encouraging the desired behavior from a user experience perspective.
Key Functional Components for AP Excellence:
Budgeting and Real-time Alerting: Implement a robust budgeting system that tracks actuals against budgeted values leveraging live segmented data synched from NetSuite. Consider synching budgets back into NetSuite and configuring real-time budget alerts. This ensures that discrepancies or over-expenditures are immediately flagged, allowing for timely corrective action.
Vendor Management with Self-Service Vendor Portals: Streamline vendor interactions by offering a self-service portal. This not only empowers vendors by giving them access to relevant information but also reduces the administrative load on your AP team. Also, coordinate with your compliance team to ensure that local regulations are adhered to, such as requirements around verifying vendor contact and bank details.
AP Dashboards and Notifications: A comprehensive dashboard gives stakeholders real-time visibility of all AP-related metrics, status updates, pending actions, and notifications.
Use of POs to Frontload Approvals: By using Purchase Orders, approvals are frontloaded to avoid approval delays when the bills finally arrive, ensuring that cash outflows are projected accurately. It also offers a validation layer, matching vendor bills against pre-set expectations.
Purchase Requisition Process: Before generating a PO, a purchase requisition process can be used to formally request and justify the need for a purchase, ensuring that all expenses are pre-approved and aligned with the budget. Automating automatically converting requisitions into purchase orders can save on data entry.
Automated Bill Capture and Coding: Utilize Optical Character Recognition (OCR), Machine Learning (ML), and Artificial Intelligence (AI) capabilities to automate the process of bill capture and coding to minimize human errors and expedite the billing process.
Automated Purchase Order Matching & Exception Routing: The goal is to match every bill to its corresponding purchase order (PO) to avoid the need for redundant approval of expenditures that have already been approved. Any standalone bill must undergo a complete approval process. Bills that are linked to POs and match their respective POs should not require departmental approval, as they meet the expected requirements. However, Accounting should still review them. Any bills with discrepancies or exceptions, such as out-of-threshold amounts and quantity variances, should go through the full departmental approval process.
Approval Workflows & Reapprove Triggers: Design workflows that reflect your company's approval hierarchy, within reason. Incorporate triggers that necessitate reapproval if there are changes to the bill. Avoid overcomplicating the approval process, as this can lead to excessive system complexity and decreased ROI. For example, convoluted approval hierarchies not supported by built-in NetSuite functionality can lead to the need for dedicated AP platforms and additional integrations at substantial costs. Ensure that the gains justify the incremental costs.
360-Degree Cash Forecast: Implement a comprehensive cash forecast system that provides a 360-degree view of all inflows and outflows, aiding in better financial planning.
Batch Payment w/ Bank Integration: Integrate your AP system with your bank for seamless batch payments, reducing manual efforts and errors.
Remittance Communications: Ensure vendors receive timely notifications of payments, transaction details, and any related adjustments. This transparency and clarity foster trust and reduce potential disputes.
Centralized Purchasing and Inter-Company Elimination and Netting: Centralize purchasing to leverage volume discounts and streamline processes. Implement inter-company elimination and netting to simplify inter-company transactions.
FX Gain/Loss Automation: With businesses going global, it's essential to automate foreign exchange gain/loss calculations to ensure accuracy.
Automated Bank and Credit Card Reconciliation: Automate reconciliations to ensure that your books match bank and credit card statements.
Project Expenditure Tagging: Tag expenditures to specific projects, aiding in accurate project costing and profitability analysis.
Fixed Asset Creation and Management: Automate the process of fixed asset creation and lifecycle management, ensuring accurate asset tracking and depreciation calculations.
Expense Accrual: Implement systems to accurately accrue expenses, ensuring that they are recorded in the correct accounting period.
Expense Amortization: Automate the amortization of expenses over their useful life, ensuring compliance and accuracy.
Memorized Transactions: Use systems that can memorize and automatically record recurring transactions, reducing manual inputs.
AP Aging Reports: Regularly generate and review AP aging reports to get insights into outstanding payables and manage vendor relationships effectively.
By implementing the above foundational and functional components, your SaaS B2B firm will be well on its way to achieving truly next-level AP efficiency.