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AP Automation Expert Rhonda Greene on Year-End Closing Best Practices

August 23, 2017
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AP automation expert Rhonda Greene has been in the accounts payable world for more than 20 years in various roles and has witnessed the transition from paper-based processes to completely automated AP and payment processes firsthand.

As a Solutions Consultant at AvidXchange, Rhonda enjoys sharing her best practices with other financial professionals to help them navigate day-to-day AP challenges. We sat down with Rhonda to discuss how AP automation is changing the accounts payable landscape, specifically the year-end closing process. Check out our discussion below.

As someone who worked in AP for more than 20 years, how has automation improved the accounts payable process?
Rhonda: The biggest benefit is cost savings. With automation, you’re able to take people that are doing data, filing, and other mundane tasks, and give them an opportunity to do things like account reconciliation or analysis. Instead of spending time stuffing envelopes, mailing checks, and hunting down approvers, automation makes the process efficient and frees up an accounting team to focus on high-level tasks that help the company.

Another huge improvement is getting rid of all that paper. This is important, especially for year-end, because the AP department is tasked with accounting for every single invoice for the calendar year and ensuring  they are entered correctly into the accounting system. Those that don’t get entered, we have to accrue. When you’re working with paper, that becomes a major challenge. I used to have piles of invoices sitting around that I would have to account for and accrue in a spreadsheet. With automation, all the invoice images are available in the portal. No longer do you have to run around the office, chasing down approvers, to see who has what. You can tell exactly where an invoice is and we can easily ensure that they’re all getting synced back over to our accounting system.

How have accounts payable automation solutions improved the audit process?
Rhonda: We used to dread the audit process. When auditors visit, they may spend 2-3 days or more looking at AP disbursements. They need to see a random sampling of invoices, proof of payment, etc. The AP department spends a lot of time pulling all these things out of filing cabinets, and sometimes – if an invoice was filed wrong for instance – these paper documents can be misplaced, and that’s a bad thing. With an AP automation solution, we can give auditors read-only access, and they can pull up invoice images as well as the cleared check image. Everything’s right there for them in the portal now. It’s improved the life of the auditor by making his or her job easier too!

What did the year-end closing process look like before automation?
Rhonda: Imagine mountains of paper. Again, paper adds all kinds of inefficiencies to the process. When you’re trying to manually route invoices for approval – walking them down the hall or sending a scanned copy in an email – you’re adding a lot of time to the process and increasing the odds of a document getting misplaced. It’s critical they’re all accounted for, so having everything in an automated system where you can see where they are at all times has drastically changed the year-end process.

Any memorable stories about those days before automation?
Rhonda: I remember spending my New Year’s Eve in the office many times – being there until 8 or 9 p.m. to make sure everything was wrapped up. That was life before automation. I’ve found that many difficult stories can be prevented with preparation. If you’re not thinking about year-end in September, you probably should be. You should utilize checklists and calendars to keep on schedule, so you’re not rushing around looking for invoices in January. Let your company know when the AP deadlines for entry and accrual are and make your life easier.

What does the year-end closing process look like after automation?
Rhonda: During year-end, you’ve got a lot of things going on. You’re trying to close the month and close the books, but you’re also trying to prepare yourself for the 1099 process. With the time savings gained by automation, you have the time necessary to do important year-end tasks like perform a final review of your vendor database. The reporting provided by an AP automation solution like AvidInvoice is a huge benefit too. I used to keep up with everything in Excel spreadsheets, but now I can run a report out of AvidInvoice that shows me all the invoices that have been received but haven’t been coded yet, so I can tell if I need to accrue for them or not. I can run a report, export that to Excel, and tailor it to my journal entry template and get it into the general ledger.

As an AP manager, how would you keep your team motivated during year-end?
Rhonda: You’re working long days, overwhelmed by deadlines, and sometimes morale can get pretty low. We would have a “Pizza Night” and things like that. We’d throw a “We Survived Year-End” party as a way to wrap up the whole experience. One year we even got t-shirts! You’ve got to laugh to get through it, you know? It’s a tough situation because you can’t really give everyone a week off or something, that’s not an option, but some of those scheduling issues are alleviated by automation. With automation, members of the AP team could take more time off around year-end that wasn’t available to us before because of the time we saved.

What is one thing that you know now that you wish you would have known years ago when managing an AP team?
Rhonda: That’s a good question. I think it’s something I eventually learned, which is to be as organized and regimented as possible. If you’re not prepared, if you don’t have a checklist or some sort of guideline to follow, there’s going to be some chaos. That’s the main thing, dedicating yourself to a strict regimen and sticking to it.

Let’s talk year-end closing best practices. Do you have any advice for master vendor file cleanup, 1099 maintenance, or accruals and thresholds?
Rhonda: When it comes to the master vendor file, if you stay on top of it, you shouldn’t have any problems. At my old job, we put new procedures in place around what was required to enter a new vendor into the file. We created vendor entry standards to ensure formatting was consistent across the board and matched exactly what was on their W-9. I always advise folks to clean their file regularly throughout the year to avoid these kinds of issues during year-end. Be sure to use the TIN Matching program that the IRS offers for free at irs.gov.

When it comes to 1099 maintenance, do your homework and stay on top of any changes made to the process. The government is always tweaking the procedure for 1099s. For example, the deadline to get 1099s sent out to vendors was January 31 – always has been – but you had an extra month to file with the IRS. For 2017, they changed that and made everything due on January 31, so there was a lot of scrambling around for people who weren’t prepared. Again, I can’t stress enough using the IRS website. I advise people all the time when I’m doing presentations, webinars, or just having conversations with AP professionals – that there are so many resources available for free, so why not take advantage of that?

As for accruals, you just have to make sure that everything’s accounted for. When you receive invoices, let’s say it’s January 5, you really have to look at the invoices to determine if they’re for the previous year or if they’re for the new year. If they’re for the previous year, you need to accrue them. It’s just a matter of being organized and making sure you’re submitting invoices to the proper periods.

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