Common Accounts Payable Mistakes And How Automation Software Can Avoid Them
February 5, 2024
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It doesn’t matter how experienced your accounts payable team is; mistakes can still happen. What really matters is that your business takes steps to minimize the risk of those mistakes and their potential to disrupt your finances.
Something that can help to reduce the likelihood of many errors is incorporating AP automation software into your processes. The support offered by the software can take a significant load off your team’s shoulders, freeing them up to focus on other crucial work.
To make the case for switching, consider these three common mistakes that crop up in AP and how automation software can prevent them.
1. Data Entry Errors
Everyone’s made a typo before. It’s remarkably easy to mistype a letter, forget a zero, or put the decimal place in the wrong spot. Especially when you’re trying to get through whatever you’re doing at a relatively fast pace.
However, when it comes to your accounts payable, any typo or other inputting error could cause you a lot more trouble than a simple misspelling. Any error could prevent the invoice in question from being paid on time, causing inconvenience for both your business and the ones you owe money to.
But if you don’t have to rely on manual data entry, you can largely cut out the risk of typos. When using AP automation software, a lot of repetitive tasks like these are given over to the software instead. As staff only need to give oversight, this eliminates the odds of any potential mix-up.
2. Batch Entering Invoices
It’s very tempting to do work in batches, entering all the invoices you have in one go rather than spacing them out throughout the day. After all, it’s surely more efficient to get it all done in a single sitting.
This can be a bit of a trap, as batching could cost your team more time down the line than they save at the moment. Keeping on top of a large number of paper invoices raises the risk of potential errors, with the possibility of any moment of distraction potentially resulting in the same invoice being entered more than once.
With an entirely digital approach to invoice management, you can eliminate the need for piles of paper. Utilizing AP automation helps make sure that no duplicate entries can slip in, with everything kept organized and clear within the software.
3. Late Payments
Making sure that all of the company’s financial obligations are met on time is a crucial role of the AP team. After all, it’s a bad reflection on your business if it fails to pay all its bills when it should and could affect your future trade relationships.
A payment can end up late for a variety of reasons, whether there’s a filing error, a money-flow problem, or even staff change-over. Where possible, it’s best to make sure that your team doesn’t leave it until right before the payment deadline to get your accounts in order.
While some issues can’t be avoided entirely, with AP automation software, you can take a lot of the risk of lateness out of the process. Keeping track of all your unpaid invoices is much easier through a digital platform, where you can check on their status with nothing more than a couple of clicks.
Why Is Payment Automation Beneficial In The Long Run?
Payment automation reduces most of the manual activities involved in the final step in the accounts payable process to make the entire cycle complete. This develops a better link between the procure-to-pay system and the payment solution and also increases the automation levels, thus extending nine major benefits of AP automation:
Faster Cycle Time
For accounts payable teams, time is the actual definition of money. Therefore, the more efficient and automated their process is, the more return the organization is going to witness on the investments, and hence, the suppliers will get paid much faster. This also depicts cost savings from more rapid invoice processing & capturing much earlier payment discounts.
Low Cost Transactions
Electronic payments are way cheaper than paper checks. The average cost incurred for processing and paying any invoice is $20, which represents a nice opportunity for businesses of multiple sizes to automate their accounts payable process and shift to electronic payments.
Fraud Prevention
Checks are always and forever the one payment method that is under constant target for the ones planning to attempt or commit fraud. As per the 2020 State of Accounts Payable Report, approximately 57% of the total respondents claim that they have received false invoices in some way or another. As expected, 81% of companies have been the targets of payment fraud in 2019. The way false checks and invoices are continuously growing only justifies how important it is for businesses these days to automate their AP.
Reduced Errors Or Duplicate Payments
Mistakes in the accounts payable process waste a lot of valuable time, damage relationships with suppliers, and may result in payment duplicates. The best of the companies leveraging automation may reduce the rate of overpayments and duplicates.
Increased Visibility
By shifting to automated or electronic payments, you may capture way more financial data, which can support advanced analytics and process improvements. Payments have become the ultimate area of strategic focus to help finance executives get a better understanding of, predict and forecast their cash flow. This kind of visibility also allows a number of strategic tools that can optimize cash position, such as supply chain financing or dynamic discounting.
Additional Discounts
As per the PayStream Advisors’ Accounts Payable and Working Capital Report, 31% of the total claimed that manual routing of the invoices for payment or approval was a barrier on the road to an early payment discount. Payment automation may compress the whole processing cycle and allow organizations to get more of the discounts that are available to them, thus optimizing their working capital.
Fewer Supplier Inquiries
Accounts payable spends quite a lot of time responding to suppliers’ inquiries about payment status and invoices. Automating the whole process of payment allows the companies to offer suppliers real-time visibility into where their transactions stand, through a portal, hence reducing the time they spend on their supplier inquiries.
Increased Supplier Satisfaction
Automating the payment process allows for the cycle to get short, hence resulting in more suppliers being satisfied with the process. There is a lack of delay, which goes a long way to improve the relationship of the organization with its supplier base.
There You Have It
When it comes to making sure that your AP team is running as effectively as possible, it’s important to incorporate AP automation software into your workflows. With the risk of errors reduced, your business can push forward confidently toward further growth.
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