6 Signs You Have Outgrown Your Accounts Payable Processes

Accounts Payable is a highly error-prone accounting process. While manual AP processes or limited scope AP solutions are sufficient for some companies, it is important to know when it is time to transition to a more streamlined and automated solution for your company.

Here are some indications that suggest your current accounts payable process has outgrown its capabilities:

Increasing volume of invoices: 

Processing delays due to an increasing volume of invoices is the most obvious sign that your old AP processes are no longer sufficient. On average, a skilled accounts payable specialist can process about 5 invoices per hour. If your accounts payable team regularly works overtime and your month-end close is consistently delayed or invoice processing is prone to errors, it could indicate that your AP is unable to keep up with your company's growth.

While hiring additional accounts payable accountants might seem like a solution to handle invoice growth, it can cost your company an additional $40 - 50k per year for every additional headcount. And more humans only increase the risk of manual errors. But this can be easily be overcome by implementing automation.

Inefficient approval workflows and lack of control:

Do you find it difficult to keep track of invoice statuses? Are they frequently stuck in the approval process? The entire invoice process can take several weeks, with invoices remaining held up in the approval process for extended periods. Where additional processes like 3-way matching and payment approvals are added, the delays increase even further and can result in missed discount opportunities or late payments, and damage your vendor relationships.

AP accountants spend a significant amount of time following up with business approvers, but these business heads themselves lack the necessary context to take an appropriate action on the invoice. And when this process takes place on long email threads, it becomes extremely challenging for an accountant to keep track of the current status of invoices.

Introducing automation to your processes can reduce the time wasted in approvals and simplify invoice tracking and viewing.

Errors with manual data entry: 

If frequent errors occur while creating bills in your accounting system or during cost center allocation or you find yourself making duplicate payments often, it may be time to upgrade your processes.

According to Goldman Sachs, 60% of B2B payments require manual intervention to resolve manual entry and matching errors, which adds an additional 15-20 minutes to the resolution process. This accounts for up to 60% of your AP specialist's time and leads to a decrease in the number of invoices processed.

Compliance issues: 

With a large number of invoices already in play, it can become challenging to keep track of other vendor documents such as tax forms and contracts. As your business scales and additional vendors are added, vendor onboarding while ensuring strict compliance can become tricky and time-consuming.

Proper compliance and vendor checks help your company avoid falling victim to fraud. By implementing a cloud-based automation system, you can ensure that you are paying the correct vendor and avoid financial losses due to fraudulent payments and invoices.

International expansion: 

According to Goldman Sachs, nearly one-fifth of B2B payments are cross-border. As your international payments and global reach increase, you may face the burden of high foreign exchange fees and increased processing time for payments. Overseas payments generally take 3-5 days to process. Consequently, you may incur late payment fees even after processing the invoice well in advance. Additionally, keeping track of payments as they pass through correspondent banks can be challenging.

Implementing an accounts payable solution that supports international payments and multiple international subsidiaries can alleviate concerns associated with foreign payments.

Delayed payments: 

Frequent late payments or delays in paying vendors are another clear sign that your accounting processes need an overhaul. Late payments not only result in additional costs due to late payment penalties and missed discounts but also negatively impact supplier relationships, leading to supplier churn and potentially lower quality or higher costs for goods or services.

Strong vendor relationships are crucial for a scaling business. Ensure that your vendors have visibility into when their invoices are being paid. Ensure that your accounting systems are equipped with smart payment tracking and support to maintain effective communication with your vendors.

Before selecting your next accounts payable solution, ensure that the software you choose supports your business needs. A suitable payable solution, such as ClearTech, seamlessly integrates with your ERP and scales alongside your business. It offers features like multi-entity support, international payments, vendor compliance checks, smart approval policies, and end-to-end automation to meet your specific requirements.