Accounts payable efficiency is crucial to maintaining a business’s financial planning, ensuring accurate cash flow forecasting, and building a rapport and strong reputation with its vendors. Below, we explore how automation solutions like data extraction software, powered by OCR & AI, can address inefficiencies in the accounts payable process to maximise efficiencies and benefits for companies.
Unresolved AP Problems Can Accumulate
Daily, accounts payable teams face numerous challenges that inhibit their workflow. An invoice with no matching purchase order in the system, for example, or a late invoice notice when no one saw the original invoice arrive. Ongoing issues like these can quickly build up and affect a business’s efficiency and damage relationships between a company and its suppliers.
Addressing these issues and incorporating new technologies to avoid them recurring in the future will make it exponentially easier to develop a streamlined AP process with as little friction as possible.
6 of the Most Common AP Problems
Some accounts payable problems arise from human error or poorly defined processes while others result from technical inefficiencies. Although the causes may differ, the central commonality is that they all impair a department’s ability to operate efficiently.
Below, we explore some of the most common accounts payable problems organisations face, particularly larger companies or those that process high volumes of documents.
Sluggish processing time & delayed payments
Before paper invoices can be approved for payment, they must pass through many hands and across many desks for review and approval. The more steps this approval process involves, the greater the risk of errors or lost documents slowing down processing.
Slow processing can lead to late invoices and dissatisfied vendors asking about their payment status. This can also lead to late payment fees and shipping delays and affect credit ratings. Physical invoices lost or misplaced during transit to approvers will also increase costs.
Through invoice matching, AP teams match invoice data with company data (purchase orders, delivery receipts, etc.,) ensuring congruency across documents. Matching a single invoice with multiple documents containing line items can result in mistakes. Matching errors can occur when discrepancies occur between purchase orders, invoices, and reports.
From duplicate or missed payments to incorrect payment amounts and more, matching errors can be stressful and often require manual investigation from staff, who must set aside other priority tasks to perform a multi-step investigation. Manually investigating these errors can create delays and stall other processes within the department as well.
Exception Invoices and Manual Follow-Ups
It would be a dream come true if suppliers transmitted accurate invoices 100% of the time. Unfortunately, every business is susceptible to mistakes and human errors. Incomplete or inaccurate data causes exceptions generated in the recipients’ systems and processing; the necessitating follow-up steps to sort the issue can take days.
Even professionals do not always follow correct purchase procedures and sometimes side-step standard purchasing processes to avoid the hassle of an accounts payable department with strict regulations that slow down processing. Unauthorised purchases could also be due to an urgent need making employees buy from a different supplier. Processing unexpected invoices can be more time consuming and take up more effort, stalling other priority invoices.
Payments Sent Before Delivery
While there are benefits to paying invoices ahead of the due date, payments to a supplier made before goods or services are received can create further problems. If the shipment of goods has arrived, but it is damaged, or items are missing from the order, paying before delivery can make a resolution more difficult and puts more pressure on companies.
Siloing accounts payable from other departments can hinder transparency across the company and between teams, and such problems are more likely to occur.
Regulatory compliance issues
Another common issue for accounts payable is dealing with the ever-changing taxation and legal regulations. Maintaining compliance can be difficult, especially when mixing in manual processes such as paper-based invoices. Auditing can be challenging, especially as physical documents are more susceptible to getting lost or damaged, and incorrect reviews or approvals can lead to harsh consequences or fines.
How can automation help?
Through intelligent document processing (IDP), companies can streamline their AP workflow and maximise efficiency, speeding up processing time while increasing accuracy and optimising payment cycles.
Businesses can also improve cash flow while avoiding late fees. Additionally, an efficient AP system increases the possibility of early payment discounts and significant savings. Workers on the AP team can also free up their time to focus on more high-value tasks and initiatives.
Another way that automation benefits AP efficiency is when combined with three-way matching. Three-way matching helps businesses optimise their processes by reducing matching errors. This process ensures that each invoice is matched against the purchase order and confirmation that businesses receive their goods or services (for example, through delivery dockets).
Automation solutions like Xtracta’s OCR invoice scanning software combine with this matching process to streamline it and make it significantly faster and more accurate. Backed by machine learning and artificial intelligence, Xtracta is extremely versatile and can be incorporated into virtually any business software to optimise operations and AP workflows.
With automated software such as Xtracta, invoices can be aligned and automatically approved with matching documents, flagging exceptions once the purchase orders, receipts, and invoices are input into the system. This will enable AP teams to schedule approved invoices for payment quickly and spot discrepancies early.
Automation also significantly reduces or eliminates compliance issues such as incorrect data entered in the system, manual errors, untracked documents, and lost documents. By automatically logging access, changes, approvals, and sharing invoices, companies can avoid the detriment of siloed departments and improve compliance while also knuckling down on financial data security with customised access restrictions.
Get in touch to optimise your AP efficiency and improve system integration with Xtracta
Xtracta’s receipt, contract, and invoice OCR software integrate seamlessly with your business’s existing software. By integrating your software with Xtracta’s public cloud (or your own private cloud), management can be centralised through a single platform that meets most needs, eliminating silos and ensuring that every team member can work from the same information pool without worrying about stale data.
If you’re interested in discovering how Xtracta’s OCR and data capture technology can benefit your company, get in touch with the team today.