Every business small, medium or large business runs into its own set of Accounts Payable challenges, especially as the volume of transactions increases and business grows or during the adoption of new technological advances or AP methods.
These challenges in the early stages reduce the efficiency of the AP process, make it difficult to achieve the strategic goals and over the long-run may turn into AP problems that manifest in the form of raising invoice processing costs, penalties and fines, payment discrepancies or sometimes even fraud.
Having worked with hundreds of small and medium businesses in every stage of business growth and Accounts Payable levels, our Accounts Payable Specialists at Outsourced Bookkeeping are aware of all the possible challenges that are encountered in an AP workflow. And if you are an Accounts Payable professional looking for information on common AP challenges to avoid them before-hand, we are here to help.
Here are 5 most common Accounts Payable Challenges faced by businesses in their AP workflow:
Database Errors – Incorrect data & manual data entry:
Though errors due to manual data entry are one of the most common in the accounting industry, Accounts Payable takes the most brunt given the payment mistakes can be costly. Errors increase processing time & costs, decrease productivity and impact cycle times since manually verifying them again can be a burden for an AP department with re-work.
In a few cases, incorrect data can also be due to out-of-date master data which can be fixed with periodic review. As for manual data entry errors we advise you to switch to an automated AP system with better image processors is an obvious step to avoid these errors and save time & money.
Missing Documentation:
If manual data entry errors are the most common AP challenge, missing documentation is not far behind in the list.
Notorious for lumps of paperwork, the accounting industry runs on documentation and missing or misplaced documents can cause a stir in every accounting department. For example, misplaced invoices can prolong the invoice processing, misplaced goods receipts can result in loss of discount offers on payments, a missing purchase order may lead to duplicate orders of unauthorized payment. Most commonly, missed documents can cause audit problems too and the list is endless.
Data Management Problems:
The manual AP process does result in clunky records and storage problems but semi-automated AP process sometimes can suffer from data management problems. In addition to standard AP processes, managers are responsible for streamlining the operations, taking advantage of discounts offers from payments, track and manage payments methods, cash flow forecasting, vendor management, all while overseeing the operation and managing AP resources. All these responsibilities mean a large volumes of data, multiple reports to analyse which can be quite a task for AP managers without expert assistance and streamline work-flow.
Slow and Inefficient Invoice Processing:
Manual data entry, un-streamlined workflow, missed documentation can result in slow invoice processing. The longer a business takes to process an invoice higher the chance of losing an invoice which is why businesses with slow invoice processing most often happen to be victims of misplaced invoice, it’s an endless cycle that is results in many problems. For example, this missing invoice documentation can trigger a chain reaction in AP resulting in late payments, penalties, delayed goods, strained vendor relationships and also loss of leverage in negotiating better payment terms in the future.
Payment Methods:
Not all vendors and suppliers or contractors accept the same mode of payment options; few vendors may need direct deposits and others may insist on paper checks and so on, it goes. When there are multiple payment methods you must adhere to, it becomes a challenge for an AP manager to come up with a centralized payment hub that securely automates all the payments with the right integration.
In addition to payment methods, duplicate payments is another AP problem that often causes a lot of mishaps. More often than not a supplier sends a second invoice if the first invoice is quickly paid and this can result in double payments. This can happen often when there are multiple branches that end-up paying the same invoice and in most cases, the money gets lost forever if the problem is not fixed as soon as possible.
Every problem that arises in an Accounts Payable can further impact other processes kicking-off a domino effect that results in a slow, in-accurate and unhealthy Accounts Payable process which significantly impacts working capital while ruining a business’s reputation. If you are a small and medium business that cannot afford dedicated AP specialists or an AP department you can quickly avoid all the above problems by outsourcing Accounts Payable Services to back-office accounting firms like Outsourced Bookkeeping.
Having provided Accounts Payable Services for hundreds of small and medium businesses, our Accounts Payable specialists at Outsourced Bookkeeping are experts in charting and executing the right Accounts Payable strategy for your business. You can contact us here: https://outsourcedbookeeping.com/