Ways to improve accounts payable in construction business
The accounts payable process can be a tricky one to navigate, even for construction companies and services.
The construction accounts payable process typically suffers from the same old problems that plague accounts payable when done with paper and spreadsheets.
Construction companies tend to deal with a lot of paper invoices. Dealing with so many paper invoices on the go will obviously lead to issues like missing documents, scrupulous expenses, data entry errors, and much more.
In light of this it makes sense for construction companies to look for a better way to deal with the accounts payable process. And, we’re going to be discussing exactly this - how to improve the construction accounts payable process.
What is accounts payable in construction organizations?
Construction companies usually pay their bills only once they receive payments from customers. They wait until payment is received to cover project costs instead of paying for them out of pocket.
This means that for a short period of time invoices do sit around unpaid. In construction accounts payable (AP) includes all the bills that you have received from contractors or vendors that you are yet to pay.
Essentially, accounts payable include a company's responsibility to pay off debts that are short-term. This payment covers all types of costs you incur, including direct, indirect, and overhead costs.
Outstanding bills will, over time, fluctuate. However, invoices for overhead costs and general business expenses will be received on a regular basis.
It is essential that you keep track of your accounts payable total because you should strive to ensure that enough cash flow is being brought in to cover expenses.
What steps are involved in the construction accounts payable process?
1. Create your chart of accounts
The chart of accounts creation is the first step involved in the construction accounts payable process. You’re going to need a proper chart of accounts before you can even consider starting to improve the AP process.
2. Set up vendor terms & details
Next, you must set up vendor terms and details. For example, how much time do you get from suppliers or vendors to pay bills? This will vary depending on the vendor or supplier you are working with.
3. Ensure invoices are accurate
Ensuring invoices are accurate is also involved in the construction accounts payable process. Make sure all details related to the service availed are mentioned clearly in the invoice before entering the same into your system.
4. Initiate invoice payments
The last step is where you make the actual payment. This is done either by electronic payment or by issuing a cheque for the amount due on or before the due date specified.
Ways to improve the construction accounts payable process
1. Have a Single platform and dashboard
Using a single, unified platform or dashboard-based construction accounts payable application to manage accounts payable can give you a high degree of control over payments.
2. Paperless invoices
Paperless invoices mean lesser time spent sifting through piles of invoices and lower probabilities of human error, duplicate payments, and invoice discrepancies.
3. Keeping track of invoices
Tracking your invoices can help you avoid missed or delayed payments and also help you cut down on duplicate invoices. It can vastly improve your construction accounts payable given that most of the issues arise due to a lack of visibility.
4. Having accounts payable routine
Sticking to a routine is a nearly fool-proof way of making sure your invoices are paid on time, without any delays.
Conduct accounts payable reports on a routine basis and proceeds to pay your dues on a timely basis to improve the construction accounts payable process significantly.
5. Automating manual tasks
Manually processing accounts payable takes a lot more time and resources than it will if you have an automated system in place for your business.
With an automated process, you’re not only going to save on time and resources but you will also have more time and resources at your disposal to dedicate to more value-generating tasks.
6. Gather past data
Gathering and analyzing data on past performance over a specific period of time can give you in-depth insights into how the different aspects of your business have been or are performing.
It can also give you information on channels of business expenditure that you might need to cut off in order to improve your construction accounts payable process.
7. Introducing KPIs
KPIs or Key Performance Indicators are markers used by businesses to measure performance over time. By introducing KPIs you can introduce certain standards of performance for your business enterprise.
Setting standards means there are certain levels of output that your teams will have to maintain. This can significantly help you improve your accounts payable process because it will help you set a baseline for what counts as good performance.
How can Volopay help better manage the accounts payable process?
Volopay is an expense management system that is capable of managing the entire accounts payable process for a business.
It also works as a construction accounts payable application that can streamline the accounts payable process for construction businesses. Here’s how Volopay can help better manage the accounts payable process:
• Invoice management tools of Volopay can help you reduce manual work and process invoices faster for quicker vendor and supplier payments.
• A vendor management platform can help you get better insights into your business’s spending patterns at a vendor level and at the same time help you maintain healthier vendor relationships.
• It is very simple to schedule international payments with full information about the charges associated with the payment for full transparency on Volopay.
• You can monitor all your future payments from a unified dashboard and receive real-time notifications and email alerts whenever a bill is due or processed.
FAQs
An automated AP system streamlines spending for construction companies by taking out the issues associated with a paper-based system like manual data entry errors, duplicate payments, and so on.
Volopay is an expense management platform that is capable of managing and processing invoices entirely automatically. You can receive the invoice on the platform and let the system handle the processing, reporting, and reconciliation.