Accounts payable isn’t a popular topic for any supply chain leadership, especially those in the African setting. Can you blame them though? Who loves money leaving their account or business?
However, it is still a very important arm of the supply chain operations, especially when dealing or cultivating relationships with suppliers. Your suppliers don’t want to be owed, and you want them to perform at their best. You might as well pay them to do so.
Managing the accounts payable for any supply chain or business can be cumbersome when unsure what to do. It doesn’t have to be. There are some tips that can help you make the most of your accounts payable operation.
1. Make electronic payments
If you think about it, why not? It makes the process seamless, faster, and more accurate. Everyone is also happy. I mean, you know how dealing with banks can be. Bypassing that entire process is a very attractive option.
There is this misconception that suppliers don’t want e-payments. Our study at supply chain nuggets suggests that is not the case. Suppliers want their money as fast as possible, however way it comes.
E-payments also help your supply chain eliminate errors and help your procurement and finance team save time. Everybody wins with electronic payments. Your suppliers are happy, and your process is simplified.
2. Automate the Accounts Payable process
The thing about modern supply chain is that it does so much more than its predecessors. Even the smallest supply chains are doing more transactions than many of them. This makes technology (with an emphasis on automation) a huge part of modern supply chain management.
And accounts payable is a big part of that system. The thing about using the manual or paper method in accounts payable is that the process is slow and can be riddled with errors. Plus, your suppliers do not appreciate the delays.
Automation also allows your team much needed relief from repetitive work or tasks, allowing them to do other productive tasks in the department. It will help promote a good working environment for them as well.
3. Standardize your Account Payable workflow
The efficiency of the accounts payable process for African supply chains depends on the workflow of the process. You do not want to deal with a complicated and disjointed accounts payable process, primarily because finding and matching payments can get too hectic finding and matching payments.
Standardizing your accounts payable process can reduce time, eliminate errors, and improve teamwork. Every team is only as good as the process they are in.
Accounts payable is one of the supply chain processes that easily gets out of control, making its standardization very important.
To effectively do these, you may consider the following tips: technology integration, centralizing the process, and automating it as much as possible.
4. Establish internal controls and limit access
The accounts payable process in African supply chains is highly susceptible to fraud. That may be the case for other global supply chains as well. But whatever the situation is, limited access and internal controls can curb fraudulent practices.
One way to accomplish this is by separating the duties related to accounts payable. Consider separating vendors if the team is quite large. These help you track or monitor the approved vendor’s list while looking out for fake vendors.
You also want to know the people in charge of each vendor. That way, you can trace any fraudulent activity. It is an easy way of finding out who is responsible. When your team is aware of the security checks, it also forces them to abandon any shenanigans.
5. Reconciliation
Accounts payable is a delicate process, so African supply chains must be careful. The pressure can be quite a lot for the people in the middle of the process. We also mentioned earlier that it can be complicated or cumbersome as well.
This means the process is prone to errors or mistakes even though people can intentionally carry out fraudulent activities. But whatever the case, there is a need for periodic reconciliation of the entire process.
It could be daily or weekly, but for best results, it has to be on a weekly basis at most. That way, you don’t make too many mistakes, making it difficult to trace. It also allows the auditing team to have less to deal with, which makes them more effective.
6. Create a safeguard for duplicate payments
The system to combat duplicates will often be the same as combating fraud but with one clear difference. The duplicate payment is often not intentional. However, when practicing manual and paper payment systems, chances are higher that your team will miss this.
In Africa, there are many times that suppliers, in a bid to make sure their invoices are received. They may send them more than once using different methods, such as mail and email. Or they might submit physically and still send an e-invoice.
Creating a way to ensure these mistakes do not happen will often involve tracking and monitoring the system. This will act as a sort of check and balance on the process involved.
7. Use KPIs to measure efficiency
KPIs are a great way for supply chains to measure success and efficiency in their operations. The good news is that African supply chains can also apply these to the accounts payable department. Although the KPIs might be quite different.
Think about it this way. Your KPIs serve as a measuring tool for the progress or efficiency of the entire accounts payable process. The challenge is finding the right KPIs that will correctly estimate the success of the process.
Some KPIs to look out for are:
- Invoice Processing Time
- Invoice Accuracy Rate
- Early Payment Discounts Captured
- Percentage of Invoices Paid on Time
- Accounts Payable Turnover Ratio
- Number of Invoice Exceptions
- Vendor Satisfaction
- Invoice Approval Cycle Time
- Percentage of Electronic Payments
- Late Payment Penalties
- Accounts Payable Cost per Invoice
- Number of Disputed Invoices
- Percentage of Three-Way Matches
- Automation Rate
- Cash Flow Forecast Accuracy
8. Pay suppliers early
When building supplier relationships, one of the most effective ways to go about it is paying suppliers early. Often, African supply chains forget that suppliers are individual businesses and that cashflows mean a lot to them.
Paying suppliers early is a great way to guarantee they take your business seriously and prioritize it. They will always want to deal with businesses that can pay them on time, allowing them the flexibility to do much more for their clients.
Countries:: Nigeria, Ethiopia, Ghana, Sierre Leone, Benin, Burkina Faso, Cote d’Ivoire, Togo, South Africa, Mozambique, Egypt, Niger, Senegal, Tanzania, Madagascar, and Cameroun.
Obinabo Tochukwu Tabansi is an ex-supply chain professional turned ghostwriter with a decade of experience working in different facets of the supply chain. Today, he lives his passion for writing on all things supply chain and helping clients from across the globe communicate their thoughts and solutions seamlessly. His blog, Supply Chain Nuggets, is Africa’s fastest-rising supply chain blog, helping professionals, business owners, and curious minds navigate the continent’s complexities.
