Accounts Payable (AP) is among the most critical and least understood departments in any modern enterprise. They are the linchpin required to ensure that payments go out on time and that business expenses are met. However, AP professionals often complain that several challenges are facing the department that senior management ignores. Whether or not they’re acknowledged, these challenges remain a critical stumbling block that limits the department’s efficiency. This article will highlight the most common problems that AP professionals face in their job and how AP automation can solve those issues.
AP Department Challenges Persist
Efficiency is at the heart of an AP department since they need to ensure suppliers get paid on time, keeping the business in good standing. Sadly, most companies still use manual AP processing, which leads to issues with efficiency. Among the most common problems that AP departments encounter are:
1. Manual Routing of Data
Manual processing of invoices carries with it a high added cost to a business. CFO mentions that the least efficient processors could pay up to $10.00 per processed invoice compared to $2.07 for the most efficient processors. The difference in cost can be chalked up to using mostly manual routing for these invoices. The human error appears when invoices are misrouted and end up in the wrong department.
2. Manual Data Entry
Data entry and verification is a critical bottleneck in the efficiency of accounting processes. Entrepreneur mentions that the IDC discovered firms lose, on average, 20-30% of revenue due to data entry inefficiencies.
According to PayStream Advisors research, 79% of companies face AP errors caused by human error, either in what regards routing of data or data entry and processing.
3. Paper-Based Invoicing
Aside from the apparent impact on the environment, paper-based invoicing can significantly impact processing time and cost to a business. Today’s world has become more focused on electronic payments and invoicing. Even so, Tradeshift mentions that as many as 49.7% of invoices submitted to AP departments are still in a paper-based format. And according to Corp! Magazine, more than 80% of businesses still use paper invoices.
4. Lost or Missing Invoices
When an invoice is submitted to a business, it’s expected to get to its intended destination. Unfortunately, as anyone who has ever worked in an AP department knows, this isn’t always the case. PayStream Advisors noted that, in 2018, as much as 34% of businesses stated that lost or missing invoices were a significant hurdle in their invoice processing efficiency.
5. Inability to See Outstanding Liabilities
One of the best ways of calculating a business’s efficiency is its Days Payable Outstanding (DPO). The DPO is a calculation of how long it takes the company to pay off a creditor. The APQC finds that the median processing time for businesses is around forty (40) days, with the most efficient companies delivering within thirty (30) days.
According to PayStream Advisors research, 22% of businesses are facing this challenge.
Is AP Automation A Potential Solution?
These problems persist in AP departments because they haven’t considered how useful automation can be in solving these problems. Automation systems bring with them several benefits, including:
- Removal of data entry and manual processing errors: Invoices can be submitted and processed in electronic format, making life easier for workers and removing the problems with data entry. There’s no need for manual intervention if the system is appropriately set up. Businesses still can print out paper documents for signature if they prefer having a physical paper-trail within the organization.
- Real-time updating of payments and invoices: AP departments that collect their invoices through the system can get data about their payments process at their fingertips. There’s little chance for invoices to be lost or misplaced if they’re sent in digital format. There will always be an electronic backup copy available stored on the system.
- Updated statistics and details: Businesses can see at a glance what outstanding liabilities they have and what suppliers remain unpaid. With an efficient setup, a company can even reduce its DPO to the industry’s most efficient level.
How APXPRESS Can Help
Arista Consulting suggests the use of APXPRESS. With embedded security features, alongside automation to remove paperwork burdens, APXPRESS remains one of the best solutions available to modern AP departments.
Automatic invoice receiving removes the human element altogether and saves the document in a digital format that the company can access later on. The built-in activity and analytics dashboard provides a single location where businesses can see what outstanding invoices they still have to deal with.
If you’re interested in experiencing what APXPRESS can offer your business, let us know, and we’ll set up a meeting to demonstrate what APXPRESS can do for you.