How Purchasing Should Work With A/P
PurchTips edition #170
Is Your A/P Department a Help or a Hindrance?
When Accounts Payable (A/P) and Purchasing work well together they can improve cash flow, strengthen supplier relationships, and increase savings. Negative synergy between these two departments often leads to problems that increase supply costs and jeopardize deliveries. Use the tips below to improve your relationship with A/P as well as purchasing performance.
Improve Order Accuracy and Invoice Matching - A recent Aberdeen survey of 150 companies found that the average company manually processed over 300,000 invoices per year. This high volume of data entry leads to invoice keying errors which can slow payments to your suppliers. You can help improve order accuracy by making suppliers repeat PO numbers back to your buyers when placing phone orders. Include a clause in your contract requiring suppliers to match invoice line numbers to the line item numbers on your purchase order. Offer your support in enrolling suppliers into electronic invoicing and payment initiatives which promise increased accuracy, decreased A/P labor and improved procure-to-pay cycle times.
Change Payment Terms to Match Company Needs - Changing economic conditions and your company's cash flow situation can demand that you change your standard payment terms with suppliers. Work with A/P and conduct regular analysis to determine optimal payment terms. Use this analysis to revisit decisions such as whether or not to take advantage of early-payment discounts from your suppliers.
Optimize Buying Channels - You can help minimize the number of non-PO transactions processed by A/P by publishing and enforcing preferred buying channels (e.g., eProcurement, ERP system, etc.). Guiding your spend into the proper channel ensures that each expenditure has been given the appropriate review. Plus, the visibility provided can help you reduce your maverick or off-contract buying. Just be sure to keep A/P in the loop if you anticipate significant changes to their workload.
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