As much as fintech has evolved, finance departments are still chasing paper to manage accounts payable systems. Why? For some, it’s a force of habit, along with the concern of letting go of the proven accounts payable system.
For others, it’s lack of budget and fear of no ROI. So, they’re continuing to rely on paper to manage accounts payable operations without realizing all the risks. With paper, there’s a higher risk of fraud, lost files, and late payments. To save your company time and money otherwise spent on managing paper, here are the top four signs that accounts payable processes are failing your finance department and business.
The Reality of the Finance Department’s Fatigue
Your finance department may be a well-oiled machine, but your employees are not robots. Paper-based accounts payable processes are riddled with scattered piles of paper and repetitive tasks, including continually correcting the same errors, and entering the same lines of information from the piles of paper into the accounting or ERP system. In fact, according to the PayStream 2018 Payables Insight Report, manual data entry is one of the top challenges for accounts payable systems—by 48% of surveyed respondents. Relying on employees to manually enter data from paper often leads to entry errors that aren’t usually caught until later in the accounts payable process. It’s even more common when one person handles more than one part of the accounts payable system. For the staff, it may feel like a never-ending cycle.
Let’s not forget the overwhelming feeling that comes from handling piles of paper. With paper-based accounts payable systems, your AP staff spends the majority of the workday gathering printed invoices and records from other departments, approvers, and systems to pay a single vendor. Doing the same unchallenging tasks over and over often leads to burnout. Handling paper-based accounts payable systems leaves very little time to analyze the current process to improve it. Before you know it, your best employees will be looking for accounting roles that challenge them with more strategic and analytical tasks instead of being bogged down with paper processes that don’t provide strategic growth opportunities.
With an accounts payable automation solution, your finance department eliminates paper processes by electronically streamlining the payment process from start to finish. There’s less time spent on manual entry, and more time to focus on analyzing reports and strategies that make a difference in your business’ financial future.
How to Shred the Biggest Payment Problem
Keeping track of paper often results in lost files. Between invoice entry, approvals, and storage, it’s easy to misplace proprietary documents. Lost invoices are one of biggest challenges that finance departments face during the AP process. Lost paper invoices often result in late payments and poor management of cash flow for the finance department.
Lost and scattered invoices make it nearly impossible to manage the general ledger and auditing function effectively. Ultimately, the disorganization is a disservice to finance staff who spend the day handling processes that could be automatically streamlined.
The big problem is that it’s hard to tell where the printed invoice is in the AP process. Does the approver have it? Has it been entered into the system? With paper-based processes, finance departments lack a centralized system that provides real-time statuses and visibility for finance leadership and contributors.
If your finance department relies on paper copies, there’s an even bigger risk. Keeping track of the original and any other records could result in duplicate payments or the wrong information being stored. For example, if you make a copy of the original invoice, and the approver disputes the invoice amount during the approval phase, you’re now responsible for the original invoice and its copy, as well as the new invoice and its copy. Losing either invoice ultimately leads to a long list of problems from security risks and duplicate payments. In the long run, manual processes trickle down to wasted time and money, late payments, and dreadful auditing.
To avoid lost files and duplicates, finance departments should implement a cloud-based accounts payable automation solution. Creating one place to store all payment information improves visibility and organization of all payments, regardless of payment volume. With AvidInvoice, your suppliers can send invoices via mail, scan, or email. Either way, the invoice is received, data is extracted and imported into the solution portal for easy, paperless access anytime. So, even if your suppliers are sticking to paper, you don’t have to. All your invoices will remain in the cloud-based SaaS for easy auditing and recall.
Adding Up Ancient Accounts Payable System
Manual errors drive up costs and hinder the long-term growth of your finance department. Some of the most common AP errors include duplicate or unapproved payments, duplicate invoices, and data entry errors. For the finance department, correcting these common paper-based mistakes can account for late payments, missed discounts, and lack of productivity. Wasting time fixing these errors also leads to poor vendor relationships, poorly managed cash flow, and poor reporting.
Errors that go unnoticed can wreak havoc in your finance department. If your finance department wants to avoid these mistakes, it’s time to part ways with manual processes, including Excel spreadsheets and filing cabinets. Accounts payable automation solutions eliminate these paper-based problems. How?
- Invoice data is extracted directly from the original invoice sent by the supplier. Your AP staff does not have to manually enter information from the invoice—eliminating entry processing time and typos.
- Each invoice is automatically double-checked to avoid duplicates and fraud. With AvidXchange, a ‘Positive Pay’ is generated for every payment made with a paper check for your protection.
- Invoices are automatically routed to the right approver to avoid skipping a step. By streamlining approvals, there’s less worry about unapproved payments. An invoice is only paid if it is approved.
Control and Visibility Aren’t a Top Priority for AP
It’s nearly impossible to analyze your company’s finances with piles of paper. Chances are that all of the high-dollar problems and risks are stuffed away in filing cabinets. After the invoices are paid, they only see the light of day during auditing or year-end closing.
Without visibility into the accounts payable system, the finance department runs the risks of many long-term problems such as duplicate invoices, which often lead to duplicate payments, and potential fraud. In the long term, finance departments won’t have the details needed to make data-driven decisions for investments, budget, and opportunities to scale.
Even with paper, the finance department must implement strict internal controls. The Association for Financial Professionals (AFP) identified the top controls to implement for any accounts payable system, especially one that’s paper-based. A few controls to immediately enforce include organizing payables by payment date and reviewing every invoice for duplicate entries or fraud. Also, keep a tight lock on blank paper purchase orders, checks, and receiving reports.
If the CFO, Controller, and AP Manager lack visibility and control of the accounts payable system, they’re facing a few immediate internal problems that profoundly impact the company’s bottom line. For example, if your AP manager is counting on a paper-based AP process to evaluate productivity and processes, it’s nearly impossible to quantitatively justify additional resources or opportunities to scale for growth.
Tips to Shred Paper-Based Accounts Payable Processes
- Evaluate the current paper payment process. Connect with AP specialists to determine the problems with the current accounts payable systems to create long-lasting solutions. For example, if handling paper checks is problematic, evaluate your suppliers’ payment methods and create a plan to accept less time consuming electronic payment methods that save time and money.
- Automate as much of the AP process as possible. Digitized workflows eliminate the amount of lost paper used during the process. Your finance department’s current rules and processes can be automated to reduce manual errors or compliance risks. There’s also the bonus of reducing burnout that the finance staff face from chasing paper across the business to pay suppliers.
- Convince suppliers to shred paper. Show suppliers the benefits of electronic payments and invoices. When submitting electronic invoices and accepting e-payments, there’s a higher chance they’ll be paid on time because less time will be spent manually entering information and correcting errors. All information will be easier to handle.
- Get to know your IT department. If your finance leadership isn’t sold on the idea of digitizing accounts payable systems and prefers paper, speak with your IT department. They’ll have the general resources and answers when it comes to accounts payable automation systems—including security, implementation, and current system capabilities. You’ll have the extra buy-in from cross-functional teams to show the big problems with paper.