Cost-cutting is an important measure for many businesses to stay profitable in the recessionary economic period. This is the reason why organizations are always open to ideas that can enable them to operate their business functions in an efficient and inexpensive manner.
In the endeavor to keep the business costs at a manageable level, the accounts payable department could prove to be an important sector to implement some cost-cutting ideas. Here are the 30 practical cost-cutting ways for your AP department, helping you to reduce your business costs to a significant level:
1. Do you have uncollected credits? Many organizations have uncollected credits and cash advances that the AP department can collect in time to keep the financial health of an organization to the best level.
2. Are you paying freight charges to your vendors? Many vendors include freight charges to their invoices, and which may prove costly for you. Instead of paying freight charges to the vendors, you may prefer to pay it to the carrier directly to save on costs.
3. Do you have an electronic record-keeping solution in place? Try to store documents electronically. It will save your paper costs and you also won’t have to rent a large storage area for storing documents.
4. Do you have centralized operations? You can centralize your operations with automated payable and approval systems to help achieve a long-term cost saving.
5. Look at your invoicing system. In many organizations, invoices are sent to the individual business units and then it is forwarded to the AP. It prolongs the process and involves both time and cost. To reduce cost, invoices need to be sent to AP directly.
6. Can you scan your invoices? If you scan your invoices and destroy the paper invoices, it will eliminate the cost of storing paper invoices. Moreover, unlike e-invoicing, it doesn’t require an involvement of your vendors.
7. Can you use OCR software? After scanning of your invoices, you can use an OCR tool to catch the characters. It will reduce your data entry costs.
8. Have you implemented an Automated Work-flow system? It improves the invoice handling and approval process to help save both time and money.
9. Do you have an Interactive Web Response (IWR) system in place? With the help of an IWR system, you can provide payment related information to vendors via the web. It reduces the involvement of AP professionals and they can focus on important tasks.
10. You can also have an IVR in place. Using an interactive voice response system, you can provide vendors with all necessary information through recorded voice, and your AP professionals need not to attend calls.
11. Do you have an e-payment system in place? An e-payment system could prove a significant cost-saving idea than paying through checks.
12. Do your vendors accept payments electronically? You can persuade your vendors to accept payments electronically. This will save your cost and will reduce your efforts too.
13. Do you release checks for T&E expenses? You can directly deposit T&E expenses than issuing checks. This will save costs and employees will also receive reimbursement rather quickly.
14. Do you use laser checks? Instead of using separate pre-printed stocks for different businesses, you can maintain one laser check stock. It will help you to reduce the cost of loading checks.
15. Do you have a p-card program in place? When the incoming invoices are below $2000, you can implement a p-card program to reduce the processing cost.
16. Have you implemented an e-invoicing? The process of e-invoicing requires less number of staff and you can use it to reduce the number of employees in your AP department.
Also read : Latest e-Invoicing Trends [Infographic]
17. Are you missing early payment discounts? Many vendors can give you early payment discounts. So, you can grab some discounts by releasing payments a little earlier.
18. Implementing Dynamic Discounts. The dynamic discount keeps on decreasing until the invoice is paid. You can save costs by paying as early as possible.
19. Does your AP work in tandem with your procurement? It’s important that your sourcing departments develop a rapport with the AP so that contracts can be finalized and payments released with greater transparency. This will enable you to take the best advantage of the early payment terms or discounts.
20. Do you track the expenses? With the help of tracking metrics, you can identify unnecessary tasks and processes in your organization. You can discover those redundancies and can address them to eliminate the cost.
21. Do you have a Metrics Room in place? A metrics room in an organization can list out all measures to reduce costs and improve productivity. Employees can pursue those measures to help save organizational costs.
22. Do you have p-card settlement in place? When you pay invoices through p-card settlement, you may receive significant rebates.
23. Have you implemented activity management tool? This tool will analyze the activities and processes to help discover redundancies to address them to save costs.
24. Do you use blanket POs? Blanket purchase orders can lock in prices for a specific period of time. This can control costs from escalating and can be used in cases of the lease agreement and contract labors.
25. Keep a track of over-billing. An e-invoicing could be the best measure to control any type of over-billing and keep the cost at a manageable level.
26. Do you have fraud detection software? You can use such software programs to identify unscrupulous vendors and their duplicate bills. This will make sure that you won’t release payment again and again for the same thing.
27. Do you make payments after the purchase department’s approval? You should have a system in place to ensure your purchase department’s approval before releasing any payment. This will eliminate any discrepancies related to disbursing payments.
28. Do you check expense reimbursement properly? You need to make sure that all expense reimbursements reveal the important information, such as date, amount, purpose etc. This will help identify any fraud.
29. Do you use Positive Pay? This is a system that can help detect any check-related fraud. It records all dates, amount, and payee names on a printed check and forwards it to the bank for matching and releasing payments.
30. There is also Reverse Positive Pay. Here, banks pass on the particulars of the check presented for payment to AP. The AP then verifies the check information and approves it for releasing payments.
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