7 Accounts Payable Challenges That Could Put Your Business in Jeopardy 


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Thursday, February 2, 2023

The majority of finance professionals are aware that manual accounts payable (AP) processes are riddled with issues. It’s crucial to ensure your AP department is aware of these challenges and take steps to mitigate them before they damage your business and its reputation.

Article 6 Minutes
7 Accounts Payable Challenges That Could Put Your Business in Jeopardy 

Most AP issues arise due to outdated practices including paper-based invoicing and manual data entry and storage. Not only are these processes time-consuming and labor-intensive, they often lead to increased costs, invoicing errors and strained supplier relationships. When these issues add up, it can cause significant problems for your business.

The implications of accounts payable issues

AP processes are critical for maintaining positive cash flow and vendor relationships. For these reasons, errors and inefficiencies can have a lasting impact on a business’s revenue and profitability in the long run.

Research from IOFM shows that companies that manually process fewer than 20,000 payments per year have an average cost per invoice of $15.97, compared to the $12.98 cost for those who employ automation. Furthermore, 24% of those businesses that rely on manual processing pay their purchase order-based invoices on time, and 30% agree that late payments cause major problems for them.

Larger companies stand to make significant savings with automation too, with those processing 20,000-100,000 payments per year with automation having a median invoice cost of $4.24 compared to the average cost of $6.10 for those relying on manual processes.

Most common accounts payable problems and solutions

Here are some of the most common AP challenges that plague businesses that rely on manual processes and solutions for overcoming them.

Problem: Poor data entry

Mistakes are unavoidable, no matter how careful and reliable your AP department is. However, if you’re still heavily reliant on manual processes, you may find that your data entry is prone to errors. In addition to an increasing number of underpaid or overpaid invoices, poor data entry can result in various other problems that can cause financial issues that impact your business’s bottom line and the level of trust clients have in you.

Solution: AP automation

AP automation solutions can improve accuracy by up to 99% by reducing the potential for data entry errors and removing the need for human intervention. The software converts paper invoices into a digital format and pushes the data into a virtual workflow. Some solutions utilize machine learning and artificial intelligence to improve accuracy to further reduce the potential of data entry errors.

Problem: Slow manual processes

Inefficient manual processes pose significant challenges to financial accuracy, increasing the potential for error, reducing transparency and wasting your company’s valuable time and resources. In fact, 33% of finance professionals say they spend between 50% to 75% of their time collecting, entering and validating data.

Paper-based, manual invoicing results in slow processing time, increased data entry mistakes and lengthy approval periods. But as your organization grows, finding the right automation solution is important to reduce hours spent on labor and time-intensive manual processes.

Solution: Implement AP automation software

Eliminate slow manual processes by implementing AP automation software. This can offer increased visibility into your company’s AP processes, improve efficiency and reduce errors. It also provides you with an audit trail of all activities so any missing or unpaid invoices can be accounted for.

Problem: Missing Invoices

Sometimes invoices get lost or details go missing. Manual AP processes can exacerbate this risk by reducing visibility across your organization, leading to problems between managers, purchasers and suppliers. When invoices go missing it can cause payment delays and inaccurate financial reports, as well as issues for your business down the line.

Solution: Automate workflows

Moving away from manual data entry and paper-based processes is one way to mitigate the risk of missing invoices. AP automation software increases efficiency by giving AP teams greater visibility into payments by automating workflows, helping to keep everyone involved accountable.

Problem: Exception invoices

Invoice exceptions pose a considerable challenge to operational efficiency in AP departments. This is due to the fact that they require manual effort to address and remedy, which can eat up time, cost resources and delay invoices processing time. Managing exceptions can also put additional strain on suppliers as they may need to answer questions or provide more information.

Solution: AP automation software

If your company receives hundreds or thousands of invoices every month, it’s likely that you’ll incur a number of invoice exceptions. AP automation software can prevent this by streamlining your accounting workflows and creating digital connections with suppliers. This means there will be less room for manual data entry, increasing speed and accuracy to keep everyone involved happy.

Problem: Fighting fraud

Invoice fraud, which focuses on stealing money from merchants, is on the rise with nearly one in four companies stating that fraud and compliance issues are among the main challenges that AP faces today. In the US, companies are losing an average of $300,000 per business annually to fraudulent invoices.

It’s a threat that can often go unnoticed and many businesses aren’t even aware that this type of scam exists. But fraudsters are getting more sophisticated in their tactics and these attacks can have disastrous consequences for organizations, which is why it’s important to take steps to prevent invoice fraud from occurring.

Solution: Review manual processes and increase awareness and security

Increasing awareness is key to minimizing the risk of invoice fraud, but it’s also important to review manual processes and increase security. One significant benefit of implementing AP automation is that it effectively reduces the threat of invoice fraud. Making payments electronically using an AP automation solution enables you to spot invoice and payment fraud attempts and prevent them.

Problem: Inefficient document storage

Relying on cabinets and boxes for storing your paper invoices is inefficient and often results in AP teams having to dig through piles of disorganized documents to find what they need. Not only this, it can also lead to increased storage and labor costs, as well as more stress when the time comes to conduct an audit.

Solution: Electronic document storage

Electronic document storage is the most effective way to solve this problem. By saving all your accounting documentation in a central cloud storage location, you can streamline workflows and make invoices and other financial information more easily accessible for everyone involved.

Problem: Double payment

There are many reasons double payments may occur, but this issue is mostly caused by manual data entry. When supplier and invoice information is entered inconsistently or incorrectly it can lead to an invoice being paid twice. This may also occur if a company relies on various financial applications as opposed to a single integrated system.

Solution: Implement AP automation technology

One way to avoid duplicate payments is to - you guessed it - implement AP automation technology. By minimizing the need for manual data entry and providing increased visibility across your financial department, there’s decreased likelihood of mistakes being made.

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