Top 5 Accounts Payable Challenges Faced by Businesses

PS APPS: Accounts Payables processing by automated system

16-09-2024

Hungary

Accounting

digitalization, digital transformation, touchless accounting, bookeeping automation, AP processing, accounts payable processing

Just as athletes face rigorous challenges, both teams encounter hurdles such as handling vast volumes of invoices, ensuring data accuracy, and maintaining compliance. The manual data entry, error-prone processes, and slow approval cycles are akin to running a marathon with constant obstacles. However, the solution isn’t simply to shift the problem elsewhere but to address it in the right place. Just as athletes rely on cutting-edge technology and training to excel, both internal and outsourced finance teams can overcome these challenges by embracing integrated and automated solutions. Streamlining your AP processes not only enhances speed and accuracy but also ensures your team can achieve gold-medal efficiency in financial management, freeing up valuable resources for strategic initiatives.

1 – Manual invoice processing

As a leading accounting and bookkeeping service provider, we have significant experience in understanding that manual invoice processing takes up 50-60% of accounting professionals’ time. We strive to reduce this nearly to zero, and with our latest PS APPS solution, we can achieve significant time and resource savings.

Let’s look at an example from a previous study that also supports this: a survey by the Aberdeen Group shows that the average cost to process an invoice manually being $15, compared to $2.36 for electronic processing. These processes are also slow, taking an average of 14.6 days per invoice, which delays payments and strains vendor relationships. Over half of companies report lengthy approval times, leading to late fees, delayed shipments, and potential harm to business credit ratings (Pezza, S., & Dwyer, C. J. (2010). Invoicing and Workflow: Transforming Process Automation into Operational Cost Control. In Aberdeen Group (p. 2)).

By reducing manual invoice processing, businesses can improve efficiency, reduce costs, and enhance relationships with vendors. PS APPS is a fully digital solution with a powerful OCR engine that eliminates manual invoice data capturing for most invoices. To learn more, check out our article on PS APPS.

2 – Lack of visibility and control

Manual accounts payable processes lack efficiency and cost-effectiveness, impeding visibility into invoice status and outstanding liabilities, which complicates forecasting and cash flow management. Errors such as data entry mistakes and misrouted documents are common, and tracking these errors in a manual system is time-consuming, often leading to late payments and damaged supplier relationships. One day, you may wake up realizing you don’t exactly know how, when, or why money is leaving your organization.

You can always tell what stage an invoice is at after just a few clicks in PS APPS, or review the processing performance though in-built reports. It provides full transparency for key users, giving you a level of control and comfort otherwise unobtainable by manual processes.

3 – Duplicate invoices

Studies show that up to 3% of payments in high-performing industries are duplicated, significantly impacting cash flow.Common causes include errors in manual data entry and using multiple financial systems. Without proper visibility and checks, duplicate payments can lead to lost revenue and strained vendor relationships.

4 – Data entry error

Human error in data entry is a prevalent issue in accounts payable, with studies indicating that 88% of manual AP documents contain inaccuracies. These errors, such as incorrect values or dates, lead to underpayments, overpayments, and delays, creating inefficiencies and backlogs in departments. A digital process such as PS APPS , where data capture is at best aided by humans rather than performed, provides a significant reduction to mistakes.

5 – Potential fraud and theft

AP teams face significant fraud risks, both internal and external, with B2B payment fraud increasing by 10%, creating inefficiencies and backlogs in departments. during the COVID-19 pandemic. Common fraud tactics include email scams, impersonation frauds, and unauthorized purchases. According to the Association of Certified Fraud Examiners, companies lose 5% of their revenue annually to fraud , highlighting the need for enhanced security measures and AP automation to detect and prevent fraudulent activities.

Most of these challenges can be solved by using integrated payables software that embraces automation at its core. With the comprehensive capabilities of
PS Accounts Payable Processing Solutions (PS APPS),
you can turn all accounts payable challenges into perfection.

Tackle these challenges effortlessly with an all-in-one accounts payables solution from Process Solutions!