Payables System
A Capstone Study
Presented to the Faculty of
Information and Communications Technology Program
Gardner College Diliman
In Partial Fulfillment
Of the Requirements for the Degree
Bachelor of Science in Information Technology
Presented by:
Reniane Madeleine T. Metica
Jessa mae M. Eribal
Rose Lynn M. Muros
Grezelle C. Beruela
Mitzi Coleen Grajo
Antonette Nichole A. Acorda
Introduction
In the field of financial management, the payables system is essential for ensuring that
organizations operate efficiently and maintain their financial integrity. As businesses
expand, the difficulties involved in managing payables become more pronounced,
necessitating a robust system capable of handling diverse transactions, vendor
relationships, and compliance obligations. The payables system extends beyond the
basic processing of invoices, it represents a strategic framework for managing cash
flow, optimizing working capital, and nurturing strong partnerships with suppliers.
The rise of digital technologies has significantly altered how organizations manage their
payables. Innovations such as automation, artificial intelligence, and data analytics have
become crucial tools, enabling businesses to streamline their operations, minimize
manual errors, and obtain real-time insights into their financial commitments. However,
despite these technological advancements, many organizations continue to face
challenges related to inefficiencies, limited visibility, and difficulties in managing seller
relationships.
This chapter intends to provide a detailed overview of the payables system,
emphasizing its vital role within the wider context of financial management. It will
investigate the challenges that organizations are currently facing, outline the goals of
the study, and discuss the relevance and scope of the research. By covering these
topics, this chapter establishes a foundation for a more comprehensive analysis of the
payables system and its impact on organizational performance.
Background of the Study/History
In the contemporary business landscape, effective payables management is vital for
sustaining a company's financial well-being. The payables system is a crucial aspect of
overall financial management, involving the monitoring and administration of amounts
owed to suppliers and creditors. An efficient payables system not only guarantees
timely payments but also fosters positive relationships with vendors, optimizes cash
flow, and improves the organization's overall operational efficiency.
The advancement of technology has dramatically changed how businesses approach
their payables management. Traditional manual processes are increasingly being
remove by automated systems that enhance operational efficiency, reduce errors, and
offer real-time visibility into financial obligations. This transformation has encouraged
organizations to evaluate their payables processes and adopt innovative solutions that
align with their strategic objectives.
General Problem
The general problem addressed in this study is the inefficiency and lack of
transparency in the accounts payable processes of organizations. Many businesses
struggle with outdated systems and manual processes that lead to errors, delays, and
drawn relationships with suppliers. This inefficiency not only affects the organization’s
cash flow but also impacts its ability to negotiate favorable terms with vendors,
ultimately delay overall financial performance.
Specific Problems
Manual Processing of Invoices Leading to Errors and Delays
Organizations often depend on manual data entry for invoice processing, which
increases the risk of human errors such as incorrect entries or misplaced invoices.
These mistakes can cause discrepancies in financial records and delays in payments,
ultimately affecting cash flow management. Manual invoice processing is error-prone
and time-consuming, leading to payment delays and financial discrepancies.
Ineffective Approval Workflows that Prolong Payment Cycles
The invoice approval process typically involves multiple stakeholders, which can create
bottlenecks if approvals are not streamlined. Delays occur when approvers are
unavailable or when there is confusion about responsibilities, resulting in prolonged
payment cycles and potential late payments to suppliers. Inefficient approval processes
can cause delays in payments, negatively impacting supplier relationships.
Limited Visibility into Accounts Payable Data, Hindering Cash Flow
Management
Many organizations lack real-time access to accounts payable information, making it
difficult for financial managers to track outstanding invoices and payment schedules.
This limited visibility can hinder effective cash flow management and lead to financial
miscalculations. A lack of real-time visibility into accounts payable data complicates
cash flow management and decision-making.
Strained Relationships with Suppliers Due to Late Payments and
Communication Gaps
Delays in invoice processing can lead to late payments, which may frustrate suppliers
and damage relationships. Additionally, poor communication regarding payment
statuses can create misunderstandings, loss trust and potentially causing suppliers to
reconsider their business relationships. Late payments and poor communication can
strain supplier relationships, leading to trust issues and potential loss of business.
Conceptual Framework (Current)
Input:
Invoice Receipt: Invoices received from suppliers in various formats (paper,
email, EDI).
Purchase Orders: Documentation that outlines the terms of the purchase.
Delivery Receipts: Confirmation of goods or services received.
Process:
Invoice Processing:
Manual or electronic entry of invoice data into the accounting system.
Verification of invoice details against purchase orders and delivery
receipts.
Approval Workflow:
Routing of invoices through multiple levels of approval based on
organizational policies.
Potential delays in approval can occur.
Payment Processing:
Scheduling and processing of payments (checks, electronic funds
transfers).
2. Record Keeping:
Recording all transactions in the accounting system for future reference.
3. Reporting and Analysis:
Generating reports to analyze payables data, cash flow, and vendor
performance.
Output:
Paid Invoices: Confirmation of payments made to suppliers.
Financial Reports: Reports detailing accounts payable status, cash flow
analysis, and vendor performance metrics.
Vendor Relationships: Status of relationships with suppliers based on payment
timeliness and communication.
General Objectives
To evaluate and improve the efficiency and effectiveness of the accounts payable
system in organizations, enhancing financial management and supplier relationships.
Specific Objectives
To analyze the current processes and practices in accounts payable systems
within organizations to identify inefficiencies and areas for improvement.
To assess the impact of manual processing and approval workflows on payment
cycles and supplier relationships.
To explore the role of technology and automation in streamlining the accounts
payable process and improving data visibility.
To propose a conceptual framework for an enhanced payables system that
incorporates best practices, automation, and data analytics.
To evaluate the potential benefits of the proposed framework in terms of
efficiency, cash flow management, and supplier satisfaction.
To provide recommendations for organizations on implementing the proposed
payables system framework effectively.
Conceptual Framework (Propose)
Input:
Automated Invoice Capture: Invoices received from suppliers, captured using
OCR and machine learning.
Purchase Orders and Delivery Receipts: Digital documentation for verification.
Process:
Automated Invoice Processing:
Automatic data capture and entry into the accounting system, reducing
manual errors.
Integrated Approval Workflow:
Streamlined, automated approval process with real-time tracking and
notifications for approvers.
Real-Time Payment Processing:
Use of electronic payment solutions for immediate processing of
payments.
Enhanced Data Analytics:
Utilization of advanced analytics tools to gain insights into payables data
and vendor performance.
Seller Relationship Management:
Features for better communication with vendors, including a vendor portal
for tracking invoice status.
Compliance and Risk Management:
Automated compliance checks and risk assessments to ensure adherence
to regulations.
Output:
Timely Payments: Confirmation of payments made to suppliers, enhancing
vendor relationships.
Real-Time Financial Reports: Up-to-date reports on accounts payable, cash
flow, and vendor performance.
Improved Decision-Making: Data-driven insights that inform strategic financial
decisions and optimize working capital.
The proposed framework will be based on current technological trends and may
require adjustments as new technologies emerge.
Scope
The Payables System aims to automate the company’s accounts payable processes .It
will handle the recording of supplier transactions ,scheduling of payments , monitoring
of due dates, and generation of basic payables reports .The system will provide features
that allow users.
Encode supplier invoices and purchase records
Keep track of outstanding balances and payment deadlines
Prepare payment vouchers and summary reports
Generate reports on payables status, including paid and unpaid accounts and
aging schedules
Implement basic user roles, such as admin and encoder
Limitations
The system will not cover complex financial tasks like tax calculations, bank
reconciliation, or full accounting system integration.
