What’s The Difference Between Proactive and Reactive Accounts Payable?
Is your accounts payable reactive or proactive?
This might not be a question you’ve spent much (if any) time thinking about, but it can have a significant impact on how well your AP department functions. In this article, let’s take a look at the difference between reactive and proactive accounts payable, as well as how you can take a proactive approach in your company.
The Reactive Approach
Many accounts payable departments measure success by how well the department meets invoice deadlines. Their metric for success is whether or not they pay invoices on time. This is a reactive mindset.
In reactive accounts payable, the department responds to invoices as they come in and handles other issues as they arise. They devote so much time and resources to managing invoice deadlines that there isn’t much left over for other important tasks.
This means that accounts payable often gets blindsided by unexpected issues. If an audit requires documentation, AP has to go back and clean up the paperwork they didn’t have time for earlier. If there are cash flow problems, AP isn’t prepared and scrambles to negotiate extended pay periods. Reactive accounts payable departments don’t prepare in advance for any problems that might come up.
The Proactive Approach
A proactive accounts payable department looks beyond simply paying the bills. They’re on top of cash flow and payment management. They’re keeping complete files organized so paperwork is easily accessible when needed. They work to strengthen vendor relationships before any problems come up. And they’re also managing deadlines well enough to take advantage of early payment discounts.
Clearly, in order to have time for all this, a proactive AP department must be doing something differently than reactive AP departments. This is where automation comes in. With an automated accounts payable system optimizing invoice processing, the AP team is free to focus on proactive activities.
With automation, employees no longer have to manually enter invoice information, push invoices through the approvals process, track deadlines, or file paperwork. This all happens automatically for up to 90% of the invoices (certain exceptions invoices still require a human touch). Plus, organizations that fully automate accounts payable processing save an average of $14.93 per invoice processed.
Making Your AP Proactive
When you automate the accounts payable process, you’re giving your AP team the tools they need to take a proactive approach. Quality AP automation software lets you automate the entire invoice-to-payment process instead of just a few steps. It’s also highly customizable, so you can proactively enforce your company’s compliance standards while processing invoices.
NextProcess’ AP Automation Software offers a complete solution for automating your accounts payable department. If you’re ready to take AP to the next level, click here to get in touch with us and we’ll set up a demo so you can see our software in action.