Despite its optimal performance, accounts payable (A/P) nevertheless face difficulties. There is always a significant amount of labor that needs to be done, either manually by your staff or electronically through automated accounts payable process automation, even though your company can take steps to help expedite and simplify these activities.
However, although accounts payable is only a small portion of your entire accounting procedures, flaws or restrictions in these concentrated operations might lead to more significant issues. On the other hand, your general finance activities' priorities and procedures may cause problems or disruptions for your A/P task.
These are the main issues with accounts payable that companies face, along with some best practices for handling them.
The Top 5 Accounts Payable Difficulties
Think about the conflict that exists between your accounts payable and your purchasing operations. Even while both processes are a part of the larger procure-to-pay process, they each have their own set of priorities that, if ignored, can irritate both your suppliers and internal staff.
Although difficult, it is possible to accommodate this persistent stress. However, it necessitates precise guidance, effective procedures, and occasionally, IT expenditures. On the other hand, neglecting this tension frequently results in the following problems.
1. Mistakes in the documentation
Regrettably, paperwork can be easily overlooked or lost, especially when it involves actual paper. Furthermore, an unpaid invoice is frequently the result of a missing invoice, which can result in fines and damaged vendor relations.
On the other hand, errors might be made by your suppliers' and vendors' accounts receivable (A/R) teams; for example, they may submit an invoice more than once. Therefore, before your company pays twice for identical items, your accounts payable department needs to be able to swiftly and simply identify and address these duplicate invoices.
Electronic records are the answer.
Errors in paperwork can be minimized with the use of an electronic invoicing system or a comparable payment site. It is quicker and simpler to communicate electronic invoices and related documents that your suppliers send to your company directly in an electronic format with your back-end accounting systems.
Similarly, your finance personnel will be able to identify inconsistencies, like deliveries for which there is no accompanying invoice or duplicate invoices, far more easily when working with data rather than actual paper records.
2. Irreverence
There's always someone wanting to take advantage of you and take your money. Furthermore, based on data gathered by the Association of Certified Crime Examiners (ACFE) for their 2020 Global Study on Occupational Fraud and Abuse, it is most likely that one of your regular employees committed the crime (representing 41% of analyzed cases) when you are the victim of fraud. To make matters worse, the accounting, finance, and purchasing divisions of the companies were the source of 24% of these fraud incidents.
Of course, there is also a constant threat from outside parties. Your company needs to be on guard against this fraud because there are countless ways to do it, like check fraud, light or defective shipments, and fraudulent invoicing.
Security controls are the answer.
Although you can't expect scammers to go away from you, you can safeguard your business using a variety of security programs and rules. For instance, you can assign different individuals or departments to different authorities for different phases of the procure-to-pay cycle.
You want to prevent fraud, so the person in charge of scheduling a purchase shouldn't also be the one approving the last payment. In a similar vein, unless you don't mind maybe paying money to phony accounts, the person in charge of adding new suppliers to your accounting systems shouldn't simultaneously be the one who approves the checks that are issued to them.
Additionally, you should take steps to uncover external dangers in addition to internal misbehavior, which can be found through routinely examining and auditing your payments. These initiatives will usually center on making sure the information on the shipments you receive matches the bills that go with them.
3. Concealed information
A/P procedures often involve several verification checks to verify the validity of a requested payment. Additionally, in order for these verifications and your entire accounts payable process to function properly, your staff members responsible for accounts payable must have full access to all data and records created following the initial purchase.
This is an accounts payable difficulty since the information is frequently dispersed across several sources, necessitating hours of work by employees to search through filing cabinets, applications, or both to find the relevant information.
Centralization is the answer.
Many of the data-related issues that arise in your accounts payable operations can be resolved with effective platform integration across all of your interconnected financial systems. Not only may specific shipments or transactions be easily found and searched for, but data is frequently available from any of the integrated systems, eliminating the need to search across several applications. In addition, you can expedite and improve the accuracy of your payment verifications if your integrated A/P platform has 2-way or 3-way matching capabilities.
Furthermore, your organization can quickly report on and gain insight into company-wide operations by establishing similar procedures across departments and regions, enabling key decision-makers to make better decisions.
4. Differing priorities
Your A/P employees oversee much more than just settling overdue invoices, as you are aware. One of these crucial responsibilities is assisting your company in appropriately managing its cash position by scheduling payments. Problems arise, though, when these decisions do not satisfy every interested party.
For instance, your suppliers may be getting increasingly irritated while your purchasing department is thrilled about your large cash reserves since you've been putting off paying invoices until the last minute. Furthermore, after adding up the higher cost of the product due to missing early payment discounts, your general accounting staff may become irate.
In a similar vein, you need to balance the time and effort needed to complete these tests against the complexity of your verification efforts.
The answer is dialogue.
When competing agendas impede your accounts payable endeavors, it usually signifies a basic failure in worker communication. Regardless of the size of your finance team, organizing frequent cross-departmental meetings to discuss present and future objectives, especially those needing greater collaboration, is a crucial component of accounts payable administration. After all, unless your A/P team is aware of the pertinent investment or financing plans in advance, they won't know when to postpone making some payments to accumulate the necessary cash reserves.
5. Hesitant procedures
Even though they are preferable to missed payments, late payments can still be expensive for your business and damage your reputation. Additionally, your company will be less likely to benefit from any early-payment incentives that may have been arranged with the vendor the quicker your accounts payable department receives, verifies, and pays a filed invoice.
Slow accounts payable procedures are frequently caused by manual workflows, staff delays, pointless or redundant steps, or validation problems.
Workflow automation is the answer.
Of course, being able to automate accounts payable activities can help with many of these difficulties, at least in part. You can complete your business-critical A/P duties around the clock and stay clear of typical process bottlenecks because the majority of your verification and processing operations are performed without the need for human interaction. In a similar vein, fewer human touches to your financial data reduce the possibility of errors or inadvertent changes.
Businesses frequently evaluate their internal workflows while automating these crucial tasks to eliminate pointless process steps that could further delay payments.
Work365: Finance Professionals' Go-To Software for Automating Accounts Payable
Regardless of the accounts payable problems you are attempting to solve, automation is probably going to be able to reduce or even eliminate them. Your company may usually save time and money by eliminating the human element from these more mundane tasks, allowing your A/P personnel to concentrate on more important projects.
Work 365 is a subscription billing automation for Microsoft partners and software vendors.
