Top 4 errors in accounts payable and how to solve them

Businesses often make decisions based on their books. Understanding what revenue is coming in and balancing it against expenditures is a vital part of any business. When one of those processes is slow or inaccurate, it can be detrimental to the business overall; it’s why identifying and correcting issues in your accounting processes is so important. It’s why many businesses seek out better accounting solutions.

As with any accounting task that relies on manual entry, the potential for error exists. Regardless of how careful a person can be, how many sets of eyes review your “books,” any number of factors can result in a missed number or other error costing both time and money as well as impacting your team’s efficiency. If only there were a way to avoid those issues and prevent problems in your accounts payable process.

Key Takeaways

• What is the Accounts Payable Process?
• Top 4 Errors in the Accounts Payable Process
• 5 Tips to Improve Your Accounts Payable Process

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What is the Accounts Payable Process?

The accounts payable process is how your business processes payments to other businesses or individuals from whom you purchase goods or services. Typically, the full process involves a cycle of receiving an invoice, determining which cost center or account should pay for the goods/services, approving payment, invoice matching (which ties the invoice to either a purchase order or receipt), and then making a payment. It should be pretty clear from the number of steps involved in that process that any number of errors or mistakes can occur.

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Top 4 Errors in the Accounts Payable Process

While there are several different errors possible in the accounts payable process, in large part most of them can be attributed to just a few causes and once we’re able to identify those, we can address resolution later on.

1. Lack of organization or set policies

While errors are more likely to come in the actual human handling of invoices and data entry (we’ll get to that), the bigger picture is simply that many businesses just don’t have policies in place to keep these tasks organized, to ensure oversight, and in general keep the process moving efficiently and accurately. This can lead to any of the other problems we’ll discuss, but first and foremost, understanding the proper procedures for handling documentation and the steps required for reconciliation can help save you time and money.

2. Double Payments

Sometimes this is an error in communication. Sometimes this is an error in documentation. Sometimes this is an error in policies and procedures for verification or organization. Regardless, when a vendor sends a second payment request, the invoice may erroneously be paid for twice. As a result, the money spends time in limbo as you try to rectify the error and recover the funds. One can imagine that, especially if both accounting offices are disorganized, the time spent waiting on the money to be returned is time that could have been invested elsewhere. Sometimes duplicate payments can happen if the invoice is accidentally uploaded again by the processor and this error might never be detected without accounting AI.

3. Manual Accounting Process Errors

As noted above, when humans are required to enter or verify data, particularly in volume, or for long periods of time, errors are bound to occur. These errors can happen during the data entry process or even during the invoice and PO matching process. Similarly, this can also include errors on the vendor’s part. In other words, the vendor may enter the wrong amount resulting in overpayment. As with other errors, discovery and rectification take valuable time and effort.

4. Slow Processing Speeds

Businesses rely on understanding the movement of cash. When the move to electronic payments and fund transfers reduced float from checks, businesses started to rely on accurate and quick processing of payments. 

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Being able to rely on balanced and accurate books can be vital to businesses looking to make investments, prepare for market fluctuations, seasonal shifts, and more. That goes for your vendors who want prompt payment too. Manual processes are slow, particularly when they must be verified for accuracy or when processes are inefficient. And, let’s be honest, the speed of the modern business world is not slow.

5 Tips to Improve Your Accounts Payable Process

While there are several parts of the accounts payable process where errors can occur, thankfully there are even more ways to help you eliminate them!

1. Eliminate paper

Going paperless has long been a goal for many organizations, and while digital errors still occur, eliminating paper means your team is less likely to lose, duplicate, or destroy important paperwork. That also means they won’t waste valuable time searching for it. Further, delayed payments due to these issues can potentially damage vendor relationships. Switching to digital speeds up payments, processing, and communications resulting in better vendor relationships. In turn, vendors are more likely to be responsive to your needs since you’re responsive to theirs. It also means your team has more time to spend on other processes and procedures. You’ll need less storage space - plus fewer files means it’s easier to find what you need when you need it. 

2. Review vendor relationships and contacts 

Communicating with your vendors can save you a lot of time and trouble in the accounts payable process. This includes ensuring you’ve got up-to-date contact information should there be a problem, but it also means learning about their payment preferences. Do they prefer electronic or paper check payments? Can you use bulk payments or should each invoice be paid separately? Knowing their preferences and accommodating them can help create a solid relationship that may pay off in other ways.Further, you’ll want to look at their payment dates and set up a calendar to ensure your payments are on schedule and that your approval process won’t create an obstacle to meeting those dates.

3. Monitor your budget, cashflow, and reserves

Monitoring your budget is vital for many aspects of your business including your accounts payable process. More specifically, accurately and consistently tracking your budget ensures that you’ve got the cash flow to cover your expenses. When invoices come in, you want to be able to have them handled quickly and your vendors paid. A streamlined process requires proper budgeting.Being prepared for regular expenses is important, but so is being prepared for an emergency. This will not only provide peace of mind for you, but also means there’s no interruption of your accounts payable process should you need to make unplanned expenditures.

4. Streamline and standardize your workflow

Especially when you have regular accounts and vendor relationships, figuring out ways to streamline their payment process can save you valuable time, foster strong vendor relationships, and save your team work and stress. What exactly does streamlining mean though? In this case, it means looking for ways to speed up all parts of the accounts payable process. That means keeping vendor information such as payment dates (or creating an alert/calendar), payment preferences, and contract dates, in one centralized location.It’s not just vendor information though. All your data, reports, and files should be stored in a central location with access provided to the team members who need it. If someone’s out of the office you’ll want to make sure all the information is accessible and readily available. This will make it far easier to track, report, and review all files and accounts.Finally, digitize the process. As noted above, going paperless speeds up invoicing, payments, and communications. 

5. The one solution to fix them all: Hyper-automate.

While all of these individual solutions are great first steps, there’s one solution that addresses all of these concerns. It streamlines your accounting, improves accuracy and efficiency, stores relevant information, alerts you when needed, monitors accounts and cash flow, and can provide reports as needed.The single solution is autonomous AP. In addition to simplifying the process, it prevents manual entry errors, double payments, and can follow standardized rules to apply to workflows and approvals. You can see in this image below, that the Vic.ai system will notify you if it detects a duplicate invoice.

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Learn how to hyper-automate your finance department with autonomous accounting

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