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Major Challenges of Accounts Payable Processing and How to Overcome Them


The accounts payable department is an important section of any corporation that manages day-to-day commercial operations. It is in charge of monitoring cash flow, protecting against fraud, and maintaining vendor relationships.

However, inherent difficulties in accounts payable generate unnecessary disturbances in the firm operation, delaying payment and collecting unpaid receipts. In this post, we’ll look at the challenges of Accounts Payable processing and how to solve them.

Accounts Payable Issues

Many accounts payable challenges stem from antiquated procedures like paper-based invoice processing, check writing, and keeping manual records or one-time spreadsheets. These behaviors can make it more difficult to keep expenses under control, monitor expenditure, and maintain supplier relationships.

Accounts Payable Issues

According to the JPMorgan 2019 AFP Electronic Payments Survey, despite the fact that check writing for business-to-business transactions has been slashed in half since 2004, corporations still make 42% of business customer payments by check. Checks are slower and more expensive to handle than electronic payments, and they are more vulnerable to fraud.

Challenges of Accounts Payable Processing

At least one of the concerns listed below happens regularly in the AP processing department, and it becomes more common as the department’s workload and volume rise. Some of these problems are caused by human mistakes or poorly established processes.

Others are due to technological challenges. All of these elements have the same impact on the productivity of your staff. When difficulties pile up, they can be harmful to your company. Here are some potential points to consider:

1. Duplicate Payments:

Duplicate payments can occur for a variety of reasons, the majority of which are connected to manual data entry. Inconsistencies in manually entered supplier information, invoice amounts, or coding might result in the payment of a single invoice twice. Duplicates may be less common in small businesses where one person handles all payments, but this is not a scalable approach. Automation and best practices are required for growth.

2. Matching Errors:

Accounts payable departments often do three-way matching to ensure bills are paid correctly, ensuring that each invoice matches the purchase order and that the goods or services were really received. Disagreements arise regularly and take time to resolve. Data entry mistakes and missing or erroneous billing information are regular offenders, as is the fact that essential papers may have been created in a range of systems and formats.

3. Slow Processing:

Paper-based, manual processes result in lengthy approval times while papers are moved between departments, resulting in delayed payments-especially if corporations still send checks by mail. Slow payments can also harm your company’s credit rating, making it more difficult to secure favorable conditions from suppliers and lenders.

4. Fraud & Theft:

Check fraud is still a serious issue, but email frauds are also prevalent. Criminals impersonating executives or suppliers email authentic-looking bills or other payment demands in so-called business email compromise fraud. Accounts payable personnel must be continually vigilant for accounts payable fraud.

5. Disappearing Invoices:

It’s all too easy for invoices to get lost in the shuffle of paperwork. Aside from causing problems with suppliers, an unpaid invoice might generate accounting issues. The obligation appears on the balance sheet late, and the expenditure does not appear on the current income statement, giving management false information about the company’s financial status.

Accounts Payable Solutions

Accounts Payable Solutions

Managing Accounts Payable operations successfully is by no means a simple feat. However, you may overcome the toughest issues in Accounts Payable by implementing a number of smart steps.

Digitize Paper Data

By eliminating stacks of paper bills and laborious data input, processing time and error rates may be dramatically reduced. Electronic invoices may be integrated into accounting software, and the remaining paper invoices can be scanned and digitized using optical character recognition.

Invoices may then be tracked by accounting software throughout the whole AP process. It is also a good idea to pay bills electronically. It is less costly, easier to automate, and less error-prone than writing checks by hand.

Early Payment Discount

Obtaining early payment reductions from suppliers might aid with cost control. However, accounts payable and procurement teams must weigh the benefit of supplier discounts against the impact of early payments on cash flow. Companies with sufficient cash on hand might save 1% to 2% off the overall charge by paying within 10 to 15 days. However, making early payments might hold up funds that your organization could utilize elsewhere. AP automation can save you from missing cut-off dates to secure negotiated pricing.

Account Payable Automation

Although a completely automated procedure can eliminate the need for manual data entry at any point, approvers may still be required to sign off on payments with a mouse click. AP automation software often includes dashboards and analytic tools to assist finance departments in managing the AP process and diagnosing issues. Data can also be evaluated to look for exceptions and other irregularities, such as multiple payments, illegitimate transactions, and fraud.

Streamline Workflow

Software may be used to define efficient procedures and workflows that route invoices to the appropriate individuals at each level of the AP process. Every AP team should have a clear protocol that includes invoice recording, matching with purchase orders and products received, authorizing invoices, and scheduling payments.

Summing Up

Your accounts payable staff may feel like they’re balancing a healthy cash flow and managing supplier relationships. Meeting these objectives might be difficult, especially if the organization uses inefficient processes like manual record-keeping and sending checks.

While reducing paper-based procedures and implementing some AP automation might help balance competing interests, one thing is certain: AP staff are extremely busy. Except for payroll, AP manages all of a company’s short-term liabilities in many cases. The complicated mission of the AP team also includes tight cooperation with numerous business lines and departments, particularly the buying department, as well as relationships with vendors.

After all, without raw resources, business comes to a screeching end. As a result, AP clubs must be at the top of their game.

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