Is your business falling victim to costly inefficiencies and mistakes when processing invoices? Here are three of the most common problems, and how to avoid them.
When it comes to accounts payable (AP), not only are inefficiencies frustrating, they can cost the business significantly and increase the risk of inaccurate payments that fall out of compliance.
Speed, accuracy, and compliance are the keys to effective AP processes.
Many businesses aren’t even aware of how the process can be streamlined and made more effective; they’re stuck on the AP merry-go-round.
It is crucial that they understand where their processes might be falling short, to determine how an automated system can help.
There are three indicators that businesses might be caught on an AP merry-go-round:
1. Having a paper-based invoicing problem
Businesses that still receive paper invoices are prone to inefficient processes.
Often invoices are sent by both email and post, increasing the chance of paying duplicate invoices.
Additionally, some invoices can go to the AP department or to the person who ordered the goods or services; there is no consistency.
Businesses can waste time and resources checking the accuracy of all information on the invoices, and keying data into spreadsheets or ledgers. This process is open to error.
Recent research has found that a single invoice ties up an average of 15 people on its journey across the business.
While each individual holds on to the invoice, the payment process becomes more protracted and there is often little visibility into who has the invoice at any particular time. This can damage supplier relationships.
If invoices are handled in a haphazard way, the business may be at risk of paying inaccurate or fraudulent invoices, or being late with payments.
2. Relying on same-day payments
Businesses with inefficient systems can be forced to resort to more expensive, same-day payments to meet payment deadlines.
Some spend can be pushed through as expenses to get around the cumbersome invoice process, which prevents the finance team from forecasting anticipated spend for each cost code.
3. Incomplete automation
Many companies mistakenly believe that simply receiving invoices by email and capturing the data on a computer means they have an automated AP process.
While digital AP processes are the first step towards a more efficient process, this is just a tiny piece of the automation puzzle.
Automated AP processes cut out paper steps, and reduce errors and delays. This reduces costs and helps to ensure compliance with internal policies.
Companies that can effectively automate their AP processes can generally reduce costs through lessening their administrative burden, reducing the chance of erroneous payments, and negotiating better arrangements with suppliers based on more consistent, timely payments.
Matt Goss is the Australian and New Zealand managing director for Concur, an international travel management business.