Every organization should keep the cashflow going to run its operations smoothly without delays. You have to check outstanding invoices and pay your vendors on time. There are several accounts payable problems that obstruct your cashflow and hinder your operations. This article throws light on accounts payable issues that cost your business. You will have to eradicate these problems to save money:
Data errors is one of the most common accounts payable issues, resulting in huge loss. This is often associated with lost invoices, poor data entry, data inconsistency, and more. However, employees might interpret the data differently, leaving room for mistakes and ambiguities. Manual processing is time-consuming and requires employees to spend more time in validating the data, which can be spent on other tasks in the organization. This leaves room for data entry errors, and even a small mistake would cost hundreds to thousands of dollars.
Your AP staff may enter the wrong PO number or misplace a few numbers in a payable amount. This can cost you more as you could pay more than the actual cost or double for the same order. If you are still relying on manual processes to keep track of purchase orders, you may lose track of invoices. You will have to track due payments and fall behind the invoice processing.
Human errors can result in a lot of hassles that disrupt the cash flow in your organization. Around 54% of enterprises enter their details manually, and automating invoice processing can solve the major issues. AP automation can reduce invoice processing costs by five times.
Weak Fraud Controls in Accounts Payable
Fraud is more common in accounts payable as money leaves from your company. According to the Association of Certified Fraud Examiners, around 29% of businesses and 18% of large enterprises have been experiencing accounts payable fraud. Small businesses were more susceptible to fraud as they don’t use a centralized AP solution. Lack of internal controls is ought to be the reason for AP fraud. The best option is to invest in an AP solution that can detect fraud on time.
- Monitoring transactions to identify abnormal spending
- Customization to allow file access to certain individuals
- Encryption account information so only authorized personnel can access the data
- Avoiding double-payments for invoices
Auditing and document tracking
AP departments prefer to batch invoice processing instead of processing several invoices serially. While this simplifies the process of retrieving information from a single source, it would result in a lot of issues with auditing and document tracking.
Batch processing creates a singular paper trail for your invoices instead of an individual paper trail for each invoice. This becomes a problem when you want to track a single record. Auditing becomes a challenge as you don’t have a proper audit trail for each invoice.
The auditing process becomes time-consuming, not to mention auditing errors. This means you will have to bear the loss in terms of man-hours and penalties.
Delayed or inaccurate payments is another issue in accounts payable. This could even result in additional expenses that could cost your business more. You may miss early payment discounts due to delayed payments. Several missed discounts could translate into thousands of dollars. You might need to pay for late fees, resulting in additional expenses that can be avoided.
Inaccurate payments could result in errors in invoice data entry. Misplacing numbers could end up paying a lot more than expected. Lengthy approval cycles might result in late payments and missed discounts. Accounts payable automation can help avoid these issues. Automation can significantly reduce approval cycle times and cut down the manual work and automate repetitive activities. The system will automatically send out purchase requisitions, which minimizes the time taken to approve invoices and make vendor payments.
Maintaining Supplier Relationships
Good vendor relationships make a difference in AP operations. Vendors don’t want to deal with businesses that make late payments or delays billing approval. This could result in significant delays and would lead to bad deals and service. AP solution can help resolve this by processing invoices on time, avoiding late payments, and ensuring efficient communication with vendors.
You can eliminate all the inefficiencies and discrepancies when you implement accounts payable software. AP software can help you with streamlined cash flow, improved compliance, and effective supplier relationships.
Author Bio : Marissa Levin is a marketing consultant, freelance writer at SutiAP, who regularly writes articles on Business, Finance, ERP, and Cloud/SaaS trends