OnPay Solutions Blog

    6 Wastes That Kill Efficiency in Your Accounts Payable Department

    26 January, 2018

    Being great at what you do means being as efficient as possible. Accounts payable and accounts receivable departments can be full of inefficient processes that can hold a company back. In this article, we will help identify the six wasteful areas and activities that can kill your business efficiency.

    According to a study published by the experts at Triaster, "The 7 Wastes Killing Efficiency: How to Identify your Wasteful Processes", in order to be efficient, you have to understand the differences between activities and deliverables.

    Activities are simply the things we do.  They often cost money, take time, and require management. Activities lead to deliverables. 

    Deliverables are the outcome or consequence of performing activities. Once the activity is completed, they become deliverables.

    In an accounting department, you must always be asking the question, "Does this activity add value? Is it non-value adding or necessary non-value adding?" This process is called the value-stream approach.

    An example of a value-stream approach in accounts payable would be the check print and mail process. “Pay the Vendor” is a clear value-add that benefits the business.

    Reprinting a check because the wrong check stock was used or the address is incorrect is non-value adding. This is “rework” and your company does not want to pay for the mistakes of their staff.

    “Printing Checks” is arguably a necessary non-value adding activity. 

    While check printing is seemingly necessary, electronic payment methods such as ACH and virtual credit cards offer better alternative payment methods at a much higher rate of efficiency.

    Here are 6 key wasteful activities in the accounts payable department:

    1. Delays - Delays in providing the vendor with information, service and payment.
    2. Duplication – Hand signing checks, printing checks on multiple bank accounts with repeated data.
    3. Unnecessary Movement - Creating a negative vendor experience through unnecessary paper based points of communication.
    4. Unclear Communication - Creating a confusing vendor experience through unclear payment methods, notifications and remittance data.
    5. Errors - Vendor receives the wrong payment amount, or a check is mailed to the wrong address.
    6. Opportunity Lost - Treating the vendor poorly, or not recognizing opportunities to 'go the extra mile' by offering electronic payments. Failing to create vendor evangelists who could ultimately create referrals.

    These six activity wastes provide a good foundation for identifying inefficiencies and process breakdowns in your accounting and accounts payable departments.

    Converting your accounts payable payments to an electronic alternative will solve many wasteful activities and provide your vendor with a much better payment deliverable.

    Improving the following six wasteful activities: delays, duplication, unnecessary movement, unclear communication, incorrect inventory, errors and lost opportunities are the best ways to more efficiently run your accounts payable department. 

    Learn more about improving accounts payable efficiencies:

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