When it comes to Accounts Payable, the longer it takes to process an invoice higher the invoice processing costs runs burning a hole in the pocket of the firm. But that is not all, lax Accounts Payable can lead to overpayments, duplicate and missed payments, penalties and also result in strained vendor relationships in the longer run.
An inefficient and unorganized Accounts Payable can push an enterprise into all kinds of problems like an invisible dead weight. These AP problems seldom go under the radar until the enterprise cop a massive hit in one way or the other. Fortunately, you don’t have to wait until you suffer sizeable AP problems.
Know The Accounts Payable Risks & Fix Them:
As an expert remote accounting firm, Back Office Accountants have identified almost all kinds of Accounts Payable problems faced by businesses and fixed them for good. And in this blog here we are going to list out common Accounts Payable risks faced by businesses and also give out quick ways to mitigate and nip them in the bud. So Read on:
Common Accounts Payable Risks Faced by Businesses and Ways to Mitigate Them:
1. Payment delays: Delays in payments is the most common Accounts Payable problem that every business encounters at some point in time. Payment delays due to invoice processing lags increase the processing costs and even may attract penalties from the vendors.
And in the majority of cases, these delays either happen due to an unorganized AP process or a jumbled workflow. Missing invoices, multiple invoice submissions, delays in correcting manual errors and too many manual touchpoints in the process commonly cause delays.
Businesses can correct them by identifying the exact causes and filling the gaps in the existing AP process. Leveraging OCR for data entry, adopting e-invoicing methods to curb missing invoices, accelerating the approval process by minimizing touch points can help in reducing the risk of payment delays.
2. Inconsistent processing & payment errors: Even when the AP process is organized if the business has a manual AP in place it is bound to encounter inconsistent processing and payment errors. While all the problems that cause delayed payments may also result in payment errors, the added risk of manual processing will add a touch of inconsistency be it with overpayments or duplicate payments.
A business can simply reduce the incidence of payment delays, errors or inconsistent processing by automating Accounts payable or by outsourcing Account payable to remote accounting firms like Back Office Accountants.
3. Internal & external financial fraud: Every year businesses worldwide are expected to cop around $7 billion in losses due to fraud caused by the vulnerable AP process. Manual AP due to lack of visibility, transparency or audit is the most vulnerable to fraud both internal and external.
The common modus operandi of internal fraud involves false billing with duplicates invoices, unauthorized payments, financial reporting tampering and more. The collusion of staff members with external vendors for fake or duplicate payments, kickbacks, phishing scams are some of the common ways businesses suffer external financial fraud.
The most basic way to keep this fraud in check is to enhance the overall visibility, especially around the payment process. Analysing the history of payments for a particular vendor, amount, frequency of payment, and the threshold can help identify the fraudulence of payments. Naturally automating AP will give more visibility at every stage, provides more access to financial data for improved digital audit trails.
4. Conflict of interest in AP management: Separation of duties especially among procurement, verification and payment processing bring much-needed transparency and accountability in an AP process. However, most SMBs due to lack of manpower or expertise forego this and increase the chance of financial discrepancies that can be simply avoided instead. If you are an enterprise that is facing unavoidable risks due to conflict of interest you can consider filling the necessary gaps by adhering to a much more responsible and accountable AP process. Enterprises can take the help of remote accounting firms like Back Office Accountants to get much needed AP expertise and manpower to avoid conflict of interest and improve their AP management for better accountability.
How Back Office Accountants can help?
As one of the most trusted remote accounting firms in the business, Back Office Accountants has an excellent track record in providing dedicated Accounts Payable Services for all types of businesses. We closely work with our clients to identify current AP problems and provide solutions within the given time frame for an optimized AP process.
With a team of dedicated Accounts Payable experts we can both fill the gaps in the current AP process or provide dedicated Accounts Payable Services from the ground up, based on the requirements. With dedicated expertise in a wide variety of domains, we are also one of the very few remote accounting firms that provided dedicated Accounts Payable Services to Restaurants, and Real Estate Accounts Payable Services. If you are looking for additional help to improve your AP process or need an outsourcing partner for your Accounts Payable, you can contact Back Office Accountants here: https://www.backofficeaccountants.com/