Challenges for AP
Accounts Payable specialists at most organisations know the pain of manual invoice processing all too well, as almost 80% of all vendor invoice activity is still paper-based*.(Source: Aberdeen Group)
Accounts Payable departments relying on manual processes are finding that adding staff does not solve the inherent problem. Manual processes are not only expensive, inefficient and error-prone; they also expose organisations to serious risks that can affect their credit rating and regulatory compliance standing.
Handling vendor invoices is a necessary evil. But unrecorded liabilities and misappropriated cost allocation — duplicate, inaccurate or unauthorised payments and late payments, lost discounts, disgruntled suppliers and control weaknesses — are all symptoms of a larger problem with the Accounts Payable process: poor performance.
For example, if you have late payments, is the problem in the approval process? Are invoices stuffed into desk drawers and forgotten? Is the problem in the data capture process?
Five symptoms of poor AP Performance
- Dissatisfied vendors or staff
- High invoice-processing error rates
- Missed vendor discounts and late charges
- Lengthy reconciliation and payment cycles
- Inadequate or non-existent reporting
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Complexity of AP
Receipt: Collating invoices that come from different suppliers or cost centres in many different layouts and delivery formats — mail, fax, email, EDI, etc. High costs associated with manual document routing, shipping, mailing, storage, etc.
Data Capture: Errors associated with manual data entry in accounting systems. Labour- intensive processes required to input data further compounded if linked to different costs centres and possibly involving currency conversion.
Approval: Extended lead times due to manual routing, processing, and sign-off procedures involving individuals in different departments and possibly different countries.
Payment: Inability to maximise financial benefits associated with payment schedules, such as discounts for early payments or avoiding fees for late payments.
Reporting: Inability to easily audit invoice processing and payments to match up document flow with the accounting system.
Filing: Risk of document loss or damage, as documents are received at multiple input points and may be routed or classified incorrectly. High archive costs for compliance and account audits.