In today’s times, organizations have a considerable number of business processes happening at the same time. Therefore, accounts payable departments are responsible for more than just payments.
It is important to note what the challenges in the accounts payable processes could be. Accounts payable managers and team members are humans after all, and human error can be a problem in manual procedures. There are reports that state 3.6% of invoices by suppliers may have errors in them. Let’s find out what other challenges can come their way.
Eight Challenges Faced by Accounts Payable Team
1. Slow Processing
One of the most known challenges in accounts payable department is that this process is a manual, paper-based procedure. It involves documents traveling from one department to another. Companies are lagging behind in creating purchase orders or clearing accounts. So late payments can happen, and therefore, vendors and suppliers would end up having a not-so-favorable outlook towards your organization.
2. Manual Input Leading to Errors
One of the biggest challenges in the accounts payable process is having errors in invoices. Invoices are supposed to match the purchase order, and they should be able to give a clear idea of – goods or services have been received or not. However, for a department that works manually, there may be some discrepancies, data entry errors, or missing information.
3. Exceptions in Invoices
Most invoices have an exception – this could include information that is incorrect or not matching to previous invoices from one or many vendors. Research has stated that up to 20% of invoices can contain incomplete data. This is where automation can help speed up processes.
4. Chances of Fraud
Manual cash flow processes can be the cause of fraud and theft. Check frauds, scams via email, and similar business theft can lead to invoices that look authentic. If the company has not gone in for accounts payable invoice automation, then the teams need to be on guard for fraud.
5. Invoices Being Paid Before Delivery
If AP processes are being handled manually, that may lead to more invoices coming in than your employees can handle. An enthusiastic team member may pay the supplier – without checking if goods have been delivered already. Also, if a bill is paid before it’s due, this may reduce cash flow to the source company.
6. Invoices Being Misplaced
Manual AP processes can lead to invoices disappearing. Unpaid invoices could cause problems in accounting and if this is a liability that is seen late on the balance sheet, then the company would not have enough information about what the company’s financial position is.
7. Purchases That Haven’t Been Authorized
Now an employee may have noticed that a product has been purchased, but its PO or Purchase Order has not been approved. Therefore, there may be an unauthorized purchase done to ‘save time’. All this will be negated by the use of accounts payable automation software because there will be an efficient method of checking if invoices have been collected in the right form.
8. Duplicate Payments
Since data entry was being done manually for a while, there could be wrong invoice amounts, wrong details for contact information entered. These can lead to duplicate payments being done by the company.
This can also happen if the company uses multiple financial applications.
These are the common accounts payable challenges that companies would face and therefore, automation in accounts payable processes has really helped them in a big way. This has especially been seen in the processes used by Easy Access.