8 Most Common Mistakes In Accounts Payable

accounts payable

Accounts payable comes with its own set of problems. If not dealt with on-time, it can severely impact your organization’s financial health. Without a proper structure & systems in place, businesses might end up paying for unnecessary expenses. An accounts payable automation software can help you identify the loopholes and also, set up a proper system in place such that you receive real-time updates and address any concerns that arise.

In this blog, we are discussing the most common problems faced in accounts payable and how it is overcome. If you want to know more about accounts payable and its process, read all about it here.

Accounts Payable Problems & Solutions

The finance teams deal with multiple accounts payable issues, each having its consequences. Few of the most common problems are listed below.

1 – Manual Data Entry – This is one of the most common errors that come across in accounts payable. Manually entering data from invoices into the computer is time-consuming and is prone to human errors. Even a simple data miscalculation can result in vast differences and creates accounting mismatch leading to financial turbulences in the organization. A majority of the finance teams use excel sheets which can be with incorrect values, dates or percentages alongside wrongly inputted formulas and inaccurate final calculations. 

Eliminate the data entry issues by implementing a robust automation software that can automatically gather data from invoices and enters it into the system. It makes the AP process more efficient, accurate and eliminates the need for manual data entry.

2 – Paper-based Records Storage – Manual filing and paper storage takes up to a massive amount of storage space. You’ll have to manage a stack of files to retrieve any data. Also, paper-based records can easily get destroyed, faded out, or tampered, making it difficult for the finance teams to use it during the accounting process.

A digital platform can store all your records in one single place. The software automatically back-up all the essential files and retrieve them with a single tap of a button. You can reduce the costs involved in re-printing, purchasing paper filers, and other stationeries. 

3 – Slow Processing – Processing documents manually would consume much time. Processing purchase orders, invoices can be a huge task, especially without a proper structure in place. Finance personnel who are unaware of such processes can come up with their own and make things cumbersome. Delay in processing invoices can result in paying up hefty fines and losing out of vendor discounts costing the organization a lot.

Reduce the turnaround time and increase efficiency by using a centralized accounts payable software. The finance team can process any number of documents with just a click and track the status in real-time. Avoid delay in payments and gain preferential customer benefits from the vendor.

4 – Delayed Approval – Any documents that get processed has to go through a systematic approval flow within the organization. The senior managers or the head of the department goes through the documents thoroughly and then give their consent to go ahead with the processing. There may be a single or multiple approvers to process invoices or purchase orders depending upon the order size, organizational hierarchy, etc. Higher stages of approval, processing speed will be slower too!

By implementing a robust finance automation workflow software, you can customize the approval flow as per your organizational policies. Approval matrix can be configured depending upon the order size, invoice value, and other parameters. Trigger email or SMS notifications for any pending approvals and track the status in real-time.

5 – Payment Errors – One of the most critical aspects involved in the accounts payable process. An error here can lead the organization into a financial turmoil. Finance teams need to look for ways to reduce mistakes consistently. Involving too many people in the accounts payable process can also lead up to human errors as they bring in their method of working.

Accounts payable automation software has an in-built payment automation component that can schedule, automate and track all the payouts. With the help of integrated API banking, you can make the payouts through the software and notify vendors via emails & SMS. The system captures the digital footprint of the payment processed, and finance teams can pull out the record at any instant. This helps in curbing all the payment errors. 

6 – Fraud Management – One of the most commonly occurred concerns is fraud management happening in the billing department. Fraudulent payment happens in various ways like creating duplicated invoices, tampered documents, multiple payments, etc. If the risk is not mitigated, organizations tend to end up paying a lot more than required.

A finance governance suite helps you mitigate risks and identify fraudulent payments. By enforcing stringent employee compliance policies, you can ensure that all the employees of the organization adhere to it. The powerful governance engine can issue warnings for any policy violations and notify the approval authorities immediately. Multiple violations can end up blocking the user.

7 – Financial Reports – Most of the finance managers are heavily dependent on excel sheets and powerpoints to analyze the financial health of the organization. These reports are quite heavy and are less accurate. It would be difficult for the finance team to gather all the data at once and analyze the same. If there are any miscalculation and accounting errors, the finance team will end up giving wrong projections. 

An accounts payable automation tool has an in-built feature which allows you to download reports at any instant. You will also get an interactive dashboard showing all the business expenses and use it to compare your Q-o-Q financial health. The data is entirely accurate, helping finance team to analyze and project-specific information to the management.

8 – Manual Follow-ups Process – Finance teams need to run from pillar-to-post in order to get things done which is quite annoying. Just to get an approval for purchase requests, processing purchase orders, invoices, and payment they have to wait for days sometimes weeks to get it approved. They may even lose the email thread in case of multiple email follow-ups. 

A finance automation tool can ease the life of finance teams. They can automate the approval workflow and receive timely approval. The system sends out reminders for any pending invoices or payments to be processed. You can address any discrepancy by posting your comments and immediately notify them. These help in effective communication and collaboration and hence increases productivity.

Why is it essential to optimize accounts payable?

Streamlining and optimizing the accounts payable has a more significant benefit for the organization. It reduces unwanted business spending by enforcing stricter employee policy compliance. By allocating budgets, you can eliminate all the unwanted purchases and focus more on maximizing the profitability of the company. Automating payments gives you complete control and visibility on who’s paying for what so much so that you can avoid fraudulent and duplicated payments and save money
With the help of automation, you can eliminate the error-prone manual entries and allow your finance teams to be more efficient and productive.

Which is the best accounts payable automation software?

Finance automation software like Finly can enhance your accounts payable process. It is a machine learning powered finance management and automation suite, helping businesses to streamline and automate their accounts payable.

Track the status of all the processed purchase orders, invoices, pending payments, in real-time. Notify your vendors about the status  through email / SMS.

You can customize an approval workflow as per the organizational terms that send out essential information about each transaction to the next approval authority.

With the help of powerful API banking, schedule and automate payment and track them in real-time.

The intelligent platform is capable of matching invoices against purchase orders and GRNs and hence, eliminating the chance of data mismatch and miscalculation.

accounts payable

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