An accounts payable is a type of account in a company’s general ledger that represents the money a business owes to its creditors. Accounts payable management is then the process of streamlining and automating an organization’s accounts payable processes, so as to clear any outstanding debts or liabilities. It includes optimizing working capital, reducing late payments, improving supplier relationships, and improving purchase contracts. All of these processes are used to control the financial status of a business.
In a long term care facility, accounts payable management—performed using a long term care software system—is critical, as facilities need to make the most of their limited funds. There are multiple benefits to accounts payable management in long term care, including:
- Stronger credit ratings and better relationships with vendors
- Timely payments that ensure the consistency of care for nursing home residents
- Avoiding overdue charges and penalties
- Easier tracking of invoices
- Smoother cash flow management
- Elimination of fraud and theft
Switching to a Paperless Accounts Payable
The move to paperless documentation of accounts payable has been, in large part, the result of efforts by the government. On February 17, 2009, the HITECH Act, which was a part of the American Recovery and Reinvestment Act was signed into law. The goal of the HITECH Act is to promote the adoption and meaningful use of health information technology.
The HITECH Act has encouraged the move to paperless accounts payable by providing incentives for eligible professionals and hospitals that demonstrate the meaningful use of certified EHR technology. Unfortunately, long term care facilities were excluded from the incentives provided by the HITECH Act. However, this did not deter administrators, as they realized the advantages that paperless accounts payable and EHRs could offer their facilities. These advantages include:
- Time efficiency
- Cost savings
- Data security
- Increased speed of data storage and retrieval
Nursing home administrators interested in making a move from paper to nursing home software for accounts payable management may find the following tips offered by Plate IQ helpful:
- Plan out the process: Decide which tasks will be completed manually and which tasks will be automated using the software. Automate as much of the process as possible so as to effectively maximize the use of the software after it is implemented. Also, at this stage, the administrator should consult with the accounting staff to better understand their specific needs and requirements.
- Digitize all existing accounting records: Digitizing existing records helps to ensure a smooth transition to paperless accounts payable. All documents should be scanned and saved electronically in a centralized location prior to selecting an accounts payable software system.
- Select a software vendor: Once all the records have been digitized, it is time to choose a software vendor. When selecting a vendor, it is important to consider factors such as price, features and functionality, user-friendliness, customer support, and integration capabilities. Ideally, nursing home and SNF administrators should choose a long term care software provider that offers EHR and financial modules for all their software needs, as they can save on costs and time spent on training.
- Customize your software to your needs: Customization is dependent on the software provider and its capabilities. Some senior living software providers offer high levels of customization, resulting in facilities saving hours, improved work processes, and increased nurse retention.
- Train staff and scale the use of software as needed: An administrator cannot neglect the training of all accounting staff on how to use the accounts payable software. In addition, as the business grows, it is essential to scale the use of the software and the training accordingly.
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10 Accounts Payable Automation Best Practices
Accounts payable automation is an effective way for long term care facilities to improve their accounting on the condition that they know how to implement and utilize the technology. Below, we list some accounts payable automation best practices that long term care leaders can implement to improve accounts payable management.
1. Go Paperless
The importance of accounts payable management lies in its ability to allow for payments to be made on time to external providers of goods and services. In long term care, this means that resident care standards remain consistently high.
Nursing homes that employ paperless systems such as long term care EHRs enjoy the benefits of automating their processes. For accounting staff in an SNF, a paperless accounts payable increases work efficiency, reduces costs, and improves workflows.
2. Prioritize and organize invoices
Not all invoices are created equal; in long term care, some invoices will be more urgent than others. Accounts payable automation systems allow for the creation of workflows where invoices are organized according to their urgency.
One of the paperless accounts payable best practices is to organize invoices according to the due date, with the payment terms clearly specified. This is beneficial for three reasons:
- It allows the accounts payable department to prioritize the most important invoices.
- It allows for more efficient use of resources, as accounts payable staff concentrate their efforts on the invoices that require the most attention and continue down the line.
- It cultivates a good relationship between external providers and the long term care facility.
3. Streamline workflows
Accounts payable automation systems help to streamline workflows by automating the accounts payable process. For instance, long term care providers with multiple facilities can choose to have a centralized location for the accounts payable while processing the records for the other sites in the same location. This means that the accounts payable staff can focus on other tasks, such as analyzing the data and looking for ways to improve processes.
4. Use KPIs for performance analysis
Key performance indicators (KPIs) are a valuable tool used to measure the performance of the accounts payable departments. Some of the most significant KPIs that a nursing home financial department uses are:
- Percentage of invoices paid on time
- Number of late payments
- Dollar value of late payments
- Dollar value of early payments
- Accounts payable turnover ratio
- Days sales outstanding (DSO)
5. Make use of fraud detection tools
Facilities should consistently implement fraud detection tools, which identify errors and discrepancies in invoices so that the accounts team can be notified for further investigation. Fraud detection tools can also be used to monitor accounts payable staff in order to identify any potentially fraudulent activities.
6. Prevent duplicate payments
If duplicate payments are not corrected, it can prove to be quite costly for nursing homes. To prevent this, nursing home administrators should ensure that all invoices are entered into the system correctly and that the nursing home software is set up to flag any duplicate invoices and payments automatically.
7. Implement user controls
User controls are an important part of accounts payable automation, as they ensure that only authorized users have access to accounts payable information and functions. User controls include:
- Role-based access control: This ensures that only accounts payable staff have access to accounts payable information and functions.
- Transaction authentication: This ensures that all accounts payable transactions are authorized by a designated staff member.
- Audit logs: This helps to track all accounts payable activity and can be used to identify any potential fraudulent activity.
8. Standardize facility payments terms
Standardization of payments is an accounts payable management practice in which the nursing home and its external suppliers agree on payment terms. This means that there is an understanding that all invoices should be paid within a specified time frame. Should late payments occur, both parties can agree on payment penalties.
Standardizing facility payment terms can improve cash flow as well as relationships with external providers. They also help to ensure that accounts payable staff are not overburdened with invoices that need to be paid urgently.
9. Keep track of and solve payment disputes
Disputes between nursing homes and their external suppliers are not uncommon. To avoid these unnecessary disputes, it is important to keep track of all invoices and payments. If a dispute does arise, administrators should seek to solve it as quickly as possible. This can be done by working alongside the supplier to resolve the issue.
10. Update supplier information.
Supplier information can change over time (acquisitions, contact changes, location changes, etc). It is, thus, important to keep accounts payable staff up-to-date with the latest supplier information to avoid any potential problems.
This can be done automatically by using an accounts payable management software that comes with a supplier portal, which is an online platform that allows accounts payable staff to view and update supplier information. Supplier portals also improve the accuracy of accounts payable data, the efficiency of accounts payable processes, and the communication between accounts payable staff and suppliers.
The Impact of Accounts Payable Management
Accounts payable management is a critical component of managing any nursing home. Nursing home administrators should consider implementing accounts payable automation, as it will improve the efficiency and accuracy of the accounts payable process. Implementing accounts payable best practices usually improves decision-making, prevents fraud, and improves relationships with suppliers. In addition, accounts payable automation helps prevent duplicate payments and tracks payment disputes so that they can be more easily resolved.
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