Even though it’s 2021, some of the challenges still facing accounts payable departments are problems that have been plaguing them for decades. In a 2019 AFP Electronic Payments Survey by JPMorgan, they found that companies still make 42 percent of business customer payments by check. Ardent Partners also estimates that about half of all invoices are still sent to the receiver manually, often resulting in missing payments, delays, and errors. In addition to these challenges, NetSuite highlighted eight AP challenges. Here’s what they found:
- Slow Processing: This is especially a problem when companies are manually processing invoices on paper and leads to longer approval times as documents are passed from desk to desk, printed, copied, shoved into an envelope, and then mailed. It often results in late-payment fees and reduces credibility.
- Matching Errors: AP automation systems, like MetaViewer, often engage in automatic three-way matching to make sure that there are no duplicates within the system and that the invoice matches the purchase order and other documentation. When automation software is not deployed, it is more likely that there will be errors caused by manual data entry.
- Exception Invoices and Manual Follow-Up: Exceptions are one of the biggest challenges facing AP departments. If they are not followed in a streamlined, consistent way, they lead to errors and inconsistencies. In addition to this, they are also extremely time-consuming. According to Aberdeen Group, about 20 percent of invoices regularly have incorrect or incomplete information. And to top that off, Ardent Partners found that the average AP department spends almost one-quarter of its time handling supplier inquiries.
- Unauthorized Purchases: If your processes are manual, you may never know if purchases have been approved and authorized. Looking into approved and unapproved purchases is incredibly time-consuming for AP departments, so if processes are manual many of these purchases are likely swept under the rug with no system in place to catch them.
- Fraud and Theft: According to NetSuite, “a typical organization loses 5% of its revenue to fraud every year, with a median loss of $125,000.” This is according to findings from the Association of Certified Fraud Examiners (ACFE).
- Paying Invoices Before a Service or Product is Delivered: Sometimes we’re so busy with day-to-day tasks that we pay an invoice before the service has been completed or before the product has been delivered. This lack of visibility can be a large cost burden on organizations, as it restricts cash flow and reduces liquidity, according to NetSuite.
- Disappearing Invoices: Raise your hands if you have tried to solve the mystery of the disappearing invoice. When your office is handling piles of physical paperwork, invoices can easily (and literally) get lost in the shuffle, resulting in limited visibility, late or missing payments and fees associated with them. It also leaves your leadership team in the dark about the company’s actual financials.
- Double Payment: The opposite problem from the disappearing invoice is the duplicate payment. Coding issues, missing and rediscovered invoices and, again, limited visibility can cause team members to make double payments on goods or services, especially if there are multiple systems in place that are not integrated properly.
In their report “The State of ePayables 2021: Operating in the New Normal,” Ardent Partners highlighted the importance of acting strategically within the AP department to combat these challenges. Here are their strategies for success:
- Create a plan for automation and innovation that includes the standardization of your invoice and payment processing procedures. This should include plans for expansion to other areas of the enterprise, as well as timing and benchmarks.
- Collaborate with key stakeholders within your organization to develop a plan that fits your organization’s needs and will work strategically with other areas of the business.
- Take your entire workforce into consideration, including contractors, contingent workers and employees who may be remote. Figure out how they will contribute to your AP automation strategy, as well.
- “Integrate payments and payment-related approaches into how AP plans to evolve.” These areas are important to take into consideration as they will help your AP team achieve its goals and continue to adjust moving forward.
State-of-the-art, savvy technology is the key to eliminating old-school challenges and developing a plan for a successful future for your AP team.