Most Common Accounts Payable Challenges and Solutions

Your accounts payable department receives invoices from various vendors.
You will have no idea what action to perform – whether to pay or not.
This is a common issue in accounts payable across the world, getting that details of who purchased what, why, and whether you should pay invoices or not.
Accounts payable department comprises of various, disconnected systems and processes.
Traditional methods of processing invoices would result in errors, which can affect companies in two ways – financial and time.
Overpayments, duplicate payments, and invoice payments are some challenges of accounts payable.
These would cost your company a lot of money.
Tracking invoices, purchase orders, or transactions manually can be burdensome.

Key accounts payable problems

The accounts payable process comes with many errors.
Some of them are as follows:

1. Unauthorized purchases

Unauthorized purchases can collide with your budgeting system.
Every company defines rules about purchases and spending; however, these rules can be guidelines and may not work properly, resulting in unauthorized purchases.

2. Paying invoices before receipt

Paying invoices before receiving the product is a problem.
Staff members approve payment for all invoices as they receive, without checking whether the product or service is delivered.

3. Duplicate payments

Some vendors may send duplicate invoices, especially if they miss to send invoices.
Now that you have two invoices around the office, it is easy to pay all quickly without checking.

4. Matching errors

Matching errors can be difficult, especially when you are following traditional means of matching processes.
How many products did you receive? How many defective products are there? Are there 14 items or just 13?
You have no way of finding out what exactly is the number.
You have to investigate what exactly is the number and chase resources to find out where the error has occurred.

5. Data errors

Errors in data are the most current accounts payable problem.
Data errors are inevitable if you are doing it manually.
Managing the accounts payable department is overwhelming. 
Accounts payable problems are tough to overcome; however, most AP problems can be overcome with a little help from automation systems.
This article helps you take a look at the top 9 challenges in accounts payable that can have a profound negative impact on the organization as a whole.

Key accounts payable challenges

Most Common Accounts Payable Challenges and Solutions

1. Poor Data Entry

Data entry errors are one of the biggest problems in accounts payable processes.
Manually entering data from invoices is time-intensive and prone to mistakes.
Even simple errors could cost more for your company.
Using excel or other programs for accounting would result in errors in your spreadsheets.
Finding faults and correcting them would require you to spend a significant amount of time.
Automating accounts payable processes eliminates all the errors from the entire process.

2. Delayed processing

Manual invoice processing takes time; automation increases the invoice processing time by five times.
Speeding up your invoice processing through automation would result in improved processing, decreased costs, leverage early payment discounts, and avoid penalties.
Automating accounts payable processes would allow employees to make more time to focus on other things rather than spending time on administrative tasks.

3. Inefficient Storage

Organizing records manually takes too much time, as you have to spend time on manually filing and storage.
Digital data storage can be efficient as it can scale your company’s needs.
Document management records everything so it can be easy to search and organize.
Also, it is the most secure way to store your information.
Storing data electronically backs up all the important information, so you don’t have to worry about data loss.

4. Missing invoices

Losing track of invoices is a common problem; your invoices might be lost permanently or misplaced either.
If you can’t track information, you will be taking this farther behind processing invoices.
AP department will have to spend time with suppliers for lost invoices to issue invoices again.
You will have to face problems with inconsistent paper trails when auditing.
Accounts payable automation resolves these issues and eliminates paper all through the invoice-to-pay cycle.

5. Not preventing Fraud

Identifying and preventing fraud requires you to understand how fraud works, tight controls and constant monitoring.
However, implementing anti-fraud controls is hard to do manually.
Technology can help fight fraud; with automated accounts payable software, you can set up custom controls that enforce company policies and notifies you of any suspicious invoice activities.

7. Invoice exceptions

Not all invoices are perfect; there are always some invoices with discrepancies.
Handling these invoices requires you to spend some time.
Speeding up processing with automation would give you the additional time you need to handle exceptions.
Automation makes it easy to reconcile discrepancies easily.
The more you use the software, the better you will get at identifying which invoices need human intervention.

8. Chaotic Record Management

 It is difficult to find invoice records if you are filling data manually.
Manual record-keeping takes time to search through if you don’t know what you are looking for.
With electronic records, you can use keywords to pull the data you need in a few clicks.
AP software stores data about every event and processes invoices automatically, storing all the records in a searchable format.
This improves invoice processing, and handling audits using automation can help you track invoice processing.

9. Manual follow-ups

Follow-ups can be the most frustrating thing of all.
Majority of businesses have to rely on manual follow-up processes.
This includes follow-ups through emails and calls to get approvals and resubmit invoices.
Automation can help with this. Automatic notifications and alerts remind every employee regarding submission, approval and payment processes.  

10. Lost money

Not processing invoices efficiently will make you lose money.
The more time you take to process an invoice will make your costs go high.
Labour costs account more to process an invoice.
Another issue that comes up is inaccurate records, duplicate payments, or overpayments.
Missing payment deadlines is another problem that makes you lose more money.
This would result in payment penalties, the common accounts payable problems.
Not paying vendors on time would ruin your relationships with vendors.
Automation would eliminate human errors and minimizes your chances of losing money in the AP process.

11. Manual follow-ups

Following up, vendors and managers are one of the most frustrating tasks.
The majority of businesses rely on a manual follow-up process, which includes invoices getting approved, resubmitted or adhering to defined criteria.
Automation can help with all this.
The following section will help you solve the problems mentioned above that will help run your AP department efficiently.

Sorting accounts payable problems

Most Common Accounts Payable Challenges and Solutions
Following are the seven things that can help improve accounts payable process:

1. Three-way matching

The three-way matching mechanism helps ensure invoice payments are done accurately.
AP automation solution allows you to increase the speed of matching and processing documents.
Any discrepancies in purchase orders, receipts, and invoices can be identified easily.
The 3-way matching process can help prevent overspending for products/services you haven’t received.

2. End-to-end visibility

View the complete process – who ordered what, authorization, matching slips, and when the invoice was paid – without having to send an email.
This way, you will have everything you need, including whom you should contact for any questions.
End-to-end visibility will make your life much more comfortable, including the auditing process.

3. Integration

Ensure your accounts payable systems integrates within and out of your accounting system.
This eliminates duplicate data entry that comes with a non-integrated system.
Integration would allow you to connect with third-party solutions to facilitate data transfer seamlessly.
This eliminates the need for switching between the solutions and you don’t have to remember passwords of multiple systems.

4. Stop using excel

Excel can help get your work done, but it’s not built to give you a complete picture of the source-to-pay process.
Using excel to track accounts payable means manual data entry, which is an error-prone process.
Switching from Excel to an automated purchase order system is a good means to reduce errors in accounts payable.
This way it becomes easy to track invoices and purchase orders in a click without having to soft through paper records.

5. Stop using paper

Automating the end-to-end procurement process eliminates tedious paperwork, and replacing with electronic records makes it easy to track, use, and manage accounts payable processes.
SutiAP software can set-up automatic reminders that can trigger invoice approvals, submissions, and missed payments.
You don’t have to chase employees for approvals; automatic alerts do that job. 
Also, the self-vendor portal allows you to update your information and check on invoice processing without going to the AP department.

6. Optimizing accounts payable processes

All can start with missing a utility bill and escalates quickly to the production line.
Not streamlining your AP process will let you fall behind invoices, which disrupts your supply chain processes, and you won’t be able to negotiate for price variances from your vendors.
And, inaccurate invoice data drives serious problems.

The bottom-line

So, now you are well aware of the most common challenges and the proven methods to improve the process efficiency.
Automation can help improve your AP process.
Choosing the right solution that can help simplify the accounts payable process, and that meets your needs could benefit your organization as a whole.
Also Read: Benefits of Accounting Software For Your Business


Navrajvir Singh
Navrajvir Singh
Entrepreneur. Strategist. Think Tank.

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