Any accountant can attest to the tediousness of certain accounts payable (AP) processes. And yet, some companies today still perform AP processes like invoice and document encoding manually. While they may think that their old AP systems are working just fine, they may not realize that they are losing money and supplier trust because of these.
What are the most common AP problems that can hurt your business?
1. Manual data entry
Data entry is one of the most time-consuming and error-prone AP processes. In fact, studies show that erroneous data entry occurs in almost 88% of manually processed AP documents. These errors range from incorrect values or percentages to wrong formulas and total calculations. And if you rely on paper-based processes, the probability of error increases because of inaccurate invoice matching and inefficient processing.
Manual data entry issues can be avoided by switching to digital AP solutions like PaperSave. With PaperSave, you can receive physical and digital invoices and capture data via optical character recognition, eliminating errors that may arise from manual data entry.
2. Poor data management
AP departments handle a lot of documents, which have to be stored in filing cabinets. According to a Robert Half International study, maintaining a regular four-drawer cabinet costs $2,000 per year, making them a big business investment.
As the cabinet is filled, documents become more difficult to access and manage. And by failing to find the right file, critical processes like invoicing and customer service get delayed, leading to staff issues and lost revenue.
Digitizing your documents and storing them in the cloud is an ideal way of fixing data management issues. This enables only authorized users to access your files on any internet-enabled device, eliminating risks of document loss or damage.
You can also tag your documents with unique keywords like vendor names, dates, and invoice amounts to make them searchable.
3. Complicated purchase order approval processes
Simplified purchase order (PO) approval processes are critical to ensure accurate invoicing and payment. However, the probability of human error increases if too many departments are involved. Errors resulting in an inaccurate PO can cause the supplier over- or under-delivering, or overcharging you on the invoice.
With AP automation solutions, you can streamline your AP processes by creating groups authorized to approve POs and invoices. PaperSave also allows you to create complete workflows that cover document approval. What’s more, approvals can be done securely through any internet-connected device.
4. Payment errors
Payment errors often occur when too many people are involved in approving invoices. If you pay your suppliers late, you may incur penalties and miss out on early payment discounts. On the other hand, duplicate payments may impact your cash flow and negatively affect your finance department’s credibility.
Minimize payment issues by using an AP solution that allows you to set up individual control account codes for each supplier you work with. Control account codes automatically classify invoices to the appropriate account, flag duplicate invoice numbers, and input detailed information into an account ledger for future reference. What’s more, these codes can apply vendor-specific discounts and check off orders after they’ve been paid in full.
5. Ineffective fraud prevention
The AP department is a prime target for cybercriminals because of its access to money and private information. According to Abnormal Security, business email compromise attacks focused payment or invoice fraud rose around 200% from April to May 2020. And although businesses are aware of fraud, some don't do enough to mitigate the attacks.
AP automation solutions can help prevent fraud by preventing employees from manually creating vendors, entering and approving invoices, and printing checks. These programs can also notify you of any suspicious invoice activity.
You can also adopt email security protocols such as Sender Policy Framework, Sender ID, DomainKeys Identified Mail, and Domain-based Message Authentication, Reporting and Conformance to prevent domain spoofing.
No one knows AP automation solutions better than PaperSave. We empower modern businesses by offering a secure, efficient, and flexible means to process POs, invoices, and other documents. To learn more about how we can help your business reach new heights, schedule a free personalized demo today.