Apr 12, 2017 Ralph P
Let's not hide behind “feel good" optimistic aphorisms so let's just call it like it is: accounts payable has problems—serious problems.
Accounts payable challenges
From tedious and manually-driven workflows to the looming threat of fraud, common challenges in accounts payable make the job anything but stress-free. Simply navigating an organization's hallways getting payment approvals can feel like navigating a dark labyrinth. And with fraudsters, always devising new and clever ways to defraud, thwarting them can feel like a game of whack-a-mole.
But as Henry Kaiser, American industrialist and founder of the healthcare group bearing his name said, “Problems are only opportunities in work clothes."
Here are five accounts payable challenges in need of a wardrobe change:
- Transposing Error
- Approval Process
- Retrieval and Organization
1. Transposing error
From a misplaced decimal, to an accidental slip of the key, transposing numbers from an invoice to an accounting application or spreadsheet is like tip-toeing through a minefield.
Oftentimes, a diligent accountant will catch any mistake before check-cutting time.
But if those errors slip through the cracks, well then, “Houston, we've got a problem." Correcting those can be costly, time consuming, and may even put a damper on supplier relations.
2. Approval process
You'd think authorizing checks would be easy, considering there's a PO in front of you proving without a shadow of a doubt that a purchase is approved.
But getting a check signed can be anything but.
You're left “sneakering" around the office, walking hallway to hallway trying to get signatures from managers, junior executives, and C-suites. And if you're in a larger organization with locations dispersed around town, check signing may require a full tank of gas and a quick stop at a coffee shop.
Yes, the nasty f-word in accounting—fraud. Not only is identifying fraud important but so is finding ways to avoid it entirely.
An easy entry-point for fraud is through the master vendor file (MVF). Proactive MVF maintenance is an easy way of stemming fraud. This involves removing inactive vendors and suppliers that haven't been used (issued a payment) in three, six, or 12 months. You're left with a lean MVF by slowly churning out unused suppliers.
The problem, unfortunately, is that diligent MVF maintenance is often a low-priority task for most AP departments. This is truly a case where an ounce of prevention is worth a pound of cure.
4. Retrieval and organization
Audits may elicit shivers from the lay person but to an accountant, it's par for the course. In aiding auditors, accountants need to keep financial records for up to seven years.
The challenge for the non-digitized accounts payable department becomes storing and retrieving those records.
Housing several banker boxes of records requires dedicated space, and retrieving those files can present a logistical nightmare. And, in the case of poorly organized organization, finding the one specific invoice can be like finding a needle in a haystack.
The thank you note sent on the heels of a check. Remittance advice accompanies the check mailed to a supplier—or, in the case of an electronic payment, is sent electronically in the form of an email.
Unfortunately, this may be require an accountant to branch off from his or her workflow and compose an email manually if remittance isn't automatically generated and sent alongside electronic payment.
The time savings of electronic payment is lost when remittances aren't automatically sent.
Taken separately, each of these challenges are simply an inconvenience—nothing a diligent accounts payable department can't work past. As a whole, however, these challenges quickly cascade into problems that can cripple any accounts payable department.
Are you ready to make over your AP department with automation?