The ripple effects of accounts payable (AP) mistakes can be long-lasting. Repeated errors can chip away at the trust you have built with your vendors, leading to delivery delays, tough negotiations, and even the loss of critical partnerships.
So, what can you do to reduce these errors, streamline your AP processes, and keep your bottom line intact? Here are some common issues and a few steps to get you started.
1) Inaccurate data entry
One of the biggest culprits in AP departments is manual data entry. When dealing with large volumes of invoices and payment details, it is easy to make mistakes, whether entering the wrong amount, picking the wrong vendor, or messing up the invoice date. These slip-ups can disrupt cash flow, cause late payments, and harm vendor relationships.
The fix: Consider automating your data entry with an AP automation software. Many options are available on the market, including tools like Clearway. These solutions employ advanced technologies such as OCR (Optical Character Recognition) and AI/machine learning to learn from each entry. OCR accurately captures invoice data, while AI/machine learning enables the software to learn from each entry, improving accuracy and consistency over time.
2) Missing invoices
Have you ever had an invoice go missing? It happens more often than you think due to poor manual document management. Missing invoices can lead to late payments, missed opportunities for early payment discounts, and strained vendor relationships.
The fix: Streamline your process by setting up a digital central document management system to log, manage, and track invoices from arrival to payment. If you do not have an ERP, you could consider cloud-based platforms such as Microsoft 365 or Dropbox. Or you may opt for on-premises solutions if you have specific security or control requirements. This will reduce the risk of lost documents and make retrieval easy when needed.
3) Batch entering invoices
While batch-entering invoices may seem efficient, it often leads to costly issues such as duplicate entries, inaccurate data, and tracking challenges.
The fix: You could develop standardised templates for common invoice formats to reduce data entry time for your team. Another option is to provide your vendors with online portals to submit invoices electronically to minimise manual handling of paper invoices. Alternatively you could consider using automated AP management tools that process the entire invoice lifecycle – including capture, validation, approval and payment.
4) Double payments
Double payments are another headache, usually popping up in disorganised AP departments with little visibility into payment history. Paying the same invoice twice without proper checks is too easy, impacting your cash flow and creating extra work to recover those overpayments.
The fix: Implement a solid AP management system that tracks all invoices and payments. This system should allow you to set payment authorisation controls and limits, as well as perform two-way and three-way document matching, to ensure invoices, purchase orders, and shipping/delivery notices align before payment. Ideally this workflow can be automated so it significantly reduces the risk of double paying vendors and improves the overall efficiency of your AP process.
5) Miscommunication with vendors
Finally, poor communication with vendors can cause various issues, from payment disputes to delayed shipments and strained relationships.
The fix: Make communication a priority. Use project
management tools such as Asana or Trello to centralise your communication for
tracking progress. Be proactive as well and regularly check in with your
vendors, confirm payment terms, and address any issues as soon as they arise.
This approach will help to maintain strong relationships and keeps operations
running smoothly.
Benefits of addressing AP failures
Taking the time to fix these common AP issues can do wonders for your business. Not only will it improve your financial health, but it will also strengthen your relationships with vendors. By adopting solutions like Clearway for automation, you will enjoy:
- Improved cash flow – accurate and timely payments keep your cash flow healthy, making it easier to manage your finances.
- Fewer errors – automation and better organisation cut down on costly mistakes, saving you time and resources.
- Stronger vendor relationships – consistent communication and timely payments build trust and foster long-term partnerships.
- Increased efficiency – simplified AP processes lead to faster payment cycles, allowing you to take advantage of early payment discounts and avoid late fees.
By saying goodbye to manual processes and adopting a digital approach to manage your business documents, you can benefit from digital tools that streamline workflows and offer real-time visibility into financial data, leading to improved decision-making and stronger vendor relationships.
In a competitive market where every dollar and minute counts, streamlining your AP processes to minimise human error and double handling is not just nice to have – it is essential for keeping your business healthy and thriving.