In this episode, we discuss how the payables function can be streamlined, so that the time associated with it as part of the closing process is minimized. Key points discussed are:
Create an accrual for receipts when there is a purchase order, so that receipts can be priced based on information contained within the purchase order. Works best when structured as an automated report, thereby eliminating calculation time.
Create a contract summary file and accrue whatever has not yet been billed to the company. This is useful when accruing for services billings.
Some accruals are more facts-based than others, so start with accruals that are solidly based on purchase orders, and then work down through less-certain payables accruals until you reach a point of discomfort with proceeding further, and stop.
Reduce the number of required payables approvals, so that invoices are processed more promptly.
Use evaluated receipts, where payments to suppliers are based on receipts, rather than supplier invoices.
Use procurement cards to minimize the amount of payables activity.
Set up a web page and have suppliers enter their invoices directly into your accounting system through the web site.