In 2022, Accounts Payable is nothing short of tightrope walking where a perfect balance has to be maintained between healthy cash flow, vendor relationships and total costs incurred. Unfortunately at least one of these three aspects takes a shot making the walk difficult for enterprises.
The need for healthy cash flow may impact time vendor payments. And payment deadlines due to unfavourable contract terms may not result in alignment with cash requirements. If both goals are met the cost of the total AP process shoots up impacting the bottom line.
Common Accounts Payable problems can turn into insurmountable challenges:
The fundamental reason for these inconveniences is the inability to solve common AP problems that go on to become insurmountable challenges over time. Particularly enterprises following manual AP are the ones that wage an uphill battle when it comes to solving these Accounts Payable problems. While the semi-automated AP process may dodge these inconveniences, their ability to scale is impacted when these problems are not solved.
Small, medium or large – the best thing any organisation or enterprise can do is to make themselves aware of these problems and nip them in their bud to ensure a smooth AP process that can be easily scaled at will.
5 Surprising Challenges Accounts Payable Pose in 2022:
Being one of the leading remote accounting firms specializing in Accounts Payable Services we have worked with businesses of both sizes. So if you are a business that is consistently facing troubles in balancing the three key aspects – health cash flow, vendor relationships, and cost of AP process then there is a high chance that you are experiencing common AP problems possibly unaware to you.
So with the input of our Accounts Payable experts at Back Office Accountants, we have listed a few common AP problems that one must pay close attention to in 2022. Read on to know:
1. Missing invoices:A common but also the most common problem experienced by AP teams, missing invoices is the sign of a lax AP process that invites a load of problems at all fronts.
It is the easiest way to forget the payment processing that leads to strained relations and late payment penalties. Missing invoices also burden the in-house resources with complicated bookkeeping practices and also inconsistent paper trails at the time of audits. Remember if you are consistently missing invoices, then 80% of your AP problems can be solved by adequately tackling this issue.
2. Payment before delivery:Because of the rush an AP team always end up in, this is may seem like no big deal but in most cases, it is a precursor for financial discrepancies in the long run.
In most cases, AP is independent and there is little to no communication between departments. It can trigger inconvenient circumstances due to quality control issues, ultimately leading to strained vendor relationships.
3. Double payments:Manual data entry errors, data inconsistencies, and coding errors can cause double payments. In a few cases, a supplier may even send double invoices which eventually get paid leading to a loss of money unaware to the team. Due to low involvement volume, the chance of this happening is less in small businesses where a single person is responsible for payments. However this is not a scalable solution, payment discrepancies will occur when the volume surges.
That said, double payments are also a sign of an ambiguous AP process with little to no control which eventually can cause financial discrepancies. Whether you small, medium or large business always find the source of payment discrepancies to take adequate measures.
4. Multiple invoice formats:Simple as they may seem, it always seems, multiple invoice with different formats from multiple channels can cause a lot of problems for unprepared AP teams that are short of time. Not only does processing them takes time, but they also increase the chance of erratic invoice processing and late payments which ultimately affect the cash flow.
When the AP team do not have enough tech stack at hand and is short of an organized invoice process, multiple invoice formats and channels can create chaos in an AP department. This common problem is usually addressed by outsourcing invoice processing to remote accounting firms like us at Back Office Accountants. In our case study section here you can find how our Accounts Payable experts have successfully solved this problem for businesses, in our case study section here.
5. Reconciliation problems: Missing invoices, duplicate payments, multiple invoice formats, unauthorized payments – every problem creates a lot of processing issues which increases the burden on the AP resources.
Departments still resorting to manual processes will have their task cut out for them with reams of invoices staring at them. Now imagine the case of lost invoices, double payments or missed payments which throws a spanner in the process. At Back Office Accountants we are aware of the instances where businesses had effectively shut down their departments to make reconciliations at the month-end.
Any business that doesn’t solve the problems listed above will eventually run into reconciliation problems at the month-end which further derails their audit preparedness. So if you are a business that is facing any one of the problems we advise you to look into the root cause of problems and take necessary steps to nip them in the bud before they rot the AP process. If you are already aware of the problems but lack sufficient resources or expertise to sort the issues, you can consider outsourcing your Accounts Payable to Back Office Accountants: https://www.backofficeaccountants.com/