Accounts Payable is much more than receiving and processing the invoices of your payment obligations. First thing, managing Accounts Payable for a rapidly growing business is not simple, second, it holds key to working capital management which is crucial for a growing business. And third, an ineffective and neglected Accounts Payable can de-rail a business by eroding the supplier relationships, endangering the supply chain and tarnishing the reputation of the business – which ultimately jeopardizes the entire business.
While businesses do set up an Accounts Payable that works for them, over time either they stuck in aged methods that can be ineffective, fail to catch up with increased demand and lead to inefficient, sluggish and expensive Accounts Payable process.
Here we list out common Accounts Payable mistakes our AP Specialists at Back Office Accountants identify in businesses of all sizes. If you are a small and medium business that is looking to improve and ramp up your Accounts Payable Process then you must keep a close eye and rectify if you are committing the same. Read on:
Poor data entry: Yes, it is 2021 but some businesses still opt for manual data entry that is riddled with mistakes and can potentially cost them a lot of time and money just to rectify the errors. The majority of businesses still use excel sheets that are routinely filled with incorrect data- values, percentages, formulae which can potentially cause financial mishaps.
If you are a small and medium business still relying on excel sheets for your AP you can avoid these data entry issues by setting up an AP automation software that can automatically pull the invoice data and put it into your system for error-free data entry and invoice processing.
Slow processing & manual follow-up: Slow invoice processing the after effect of manual data capture and data entry, which increase the time and cost spent on processing an invoice significantly. Manual follow-up is another area most businesses falter on, this can include e-mails, calls, rectifying the conditions, submissions, rinse and repeat until the end – That said, both slow processing and manual follow-up problems can be solved using automated tools.
Automated AP system streamlines and accelerates the entire AP process from data capture to payment processing resulting in a significant increase in the number of invoices processed per employees which ultimately reduces the time spent & cost incurred on invoice processing. As for manual follow-ups, Automated AP tools follows-up by sending automated invoice reminders to suppliers. Vendor portals are set up for suppliers who await the status of their payments – the invoice processing is tracked and is seamlessly communicated to vendors.
Squeezing the supply chain: To improve the working capital businesses often extend the payment terms deadline. While this could boost the working capital in the short-term, it could invisibly squeeze suppliers which more often than not impact the delivery timeliness and quality of the supplies. Having worked with many small and medium business we are aware of this situation which is why we recommend you analyse the risks and costs of this decision before you implement one.
Not relying on data for better AP performance: Most businesses still take a conventional approach and do not rely much on data which is a common AP mistake. Key AP data like amount spent on each supplier, number of outstanding invoices etc., which pave way for key performance indices like cost per invoice, invoice processing time, invoice exception rate, discounts captured, total erroneous payments per cost processing are crucial to improve Accounts Payable Process.
Leveraging this data is key to strategize, and execute the right AP process based on your working capital requirements, which most businesses miss. The foundation for a data-driven AP process is to capture accurate data in the format the AP system needs – structured, high quality, and uniform. E-invoices can help you capture this data accurately, or you can also use advanced scanning services that feature OCR with machine learning to capture, categorize and use data as needed for further analytics.
If you are a small and medium business with a conventional AP system you can try to fix all your mistakes but this data-driven approach for high-performance AP system need not only AP expertise but also the technological stack, resources and experience in working with your specific niche of business.
To level up your Accounts Payable process and reap rewards, you can set up your own AP system, install advanced tools and software, train your AP resources and hire experts for your own AP department or you can simply outsource Accounts Payable Services to our Accounts Payable experts at Back Office Accountants. Equipped with advanced Accounts Payable tools and software we can chart out the right AP strategy and execute it to pave way for a high-performance Accounts Payable System for your business. For Outsourced Accounts Payable Services you can contact our Accounts Payable experts here: https://www.backofficeaccountants.com/