5 Biggest Mistakes in Accounts Payable and How to Fix Them

 

I have spoken to countless Accounts Payable and Finance professionals in my time, hearing horror stories about how they process invoices and make payments.

In this article I have picked my top 5 favourite answers to the question “So how do you currently process your supplier invoices?” and what my response would be.

Printing out Emails

1.      We receive invoices via email, print them out, and then type the information into our ERP

Do you really need me to tell you where they are going wrong here?

I can understand the need to type information from a paper invoice, if you were unaware of the valuable technology that is Optical Character Recognition (OCR), or better yet Intelligent Capture Recognition (ICR).

My problem with this system, and believe it or not – this has come up many times, is that the supplier is on board with paperless invoicing, and then you are making the decision to print it out yourself costing your company more money than receiving invoices by post.

For most companies, when looking to change AP processes, the challenge is convincing the suppliers to do something different. This is not the case here.

With any Windows PC from the last decade, it is possible to snap pages to the left and right of the screen, showing you two programs at once. Allowing you to type from the image, into your ERP, until you get around to installing an intelligent data capture solution which will happily locate and copy information for you.

Now there is no need for a paper copy, which could get lost, duplicated, or destroyed. If you’re excuse after all that is that you rely on a barcode system to store and archive your files, then please gently slap the wrist of your CIO and introduce them to any file storage software on the market today.

signing off a document

2.      We print out copies of invoices to manually pass around the office for approval

When I hear the word “copies” when it comes to processing invoices, my toes curl.

Does this not ring alarm bells? Creating copies of invoices brings many more problems than it solves.

Sure, you can easily send the invoice around the business for approval, but what happens when that invoices comes back to AP and someone else processes it a second time?

What happens when you assume you have copies of an invoice, so you shred one only to find out that was the original and there are no copies?

Or how about when you send a copy, it doesn’t arrive on time, so you send another copy, only for them both to arrive eventually and get processed twice.

This could all easily be avoided by scanning and emailing instead of copying and posting, or better yet, deploying an RPA solution to automatically send invoices out for approval all while storing meta data about who has opened the file and when.

Cutting down trees for paper

3.      We receive paper copies of invoices and sort and store them manually

Okay. I understand that paper LITERALLY grows on trees, but does that mean that you can justify cutting down 30 trees a year just for the invoices your company receives? (see this blog post to work out how many trees your company uses a year)

Not only does this method waste trees, it also wastes time and space.

It is a waste of your time if you are opening letters, looking for relevant information, typing that into your system, and filing that page in a giant storage cabinet.

I know this was once the most effective way to run AP, but times have changed.

We are living in the age of Alexa, Siri, Cortana, etc. Why haven’t your processes changed when our daily lives have had such a huge impact from technology?

Fix this by reaching out to your suppliers. They will be happy to save their own money by switching to paperless invoicing, and this will massively improve efficiency in your department – so long as you install an electronic archiving solution, so you don’t have to then print all the invoices out…

This, of course, could be automated in conjunction with all the above solutions, ICR & RPA. Any solution should come with archiving, unless your ERP already has that capability – ask IT!

People in office

4.      We have 20 staff processing 35,000 invoices a year

The average AP clerk salary (in the UK) is just shy of £20,000 a year.

Your company is paying £400,000 per year to process 35,000 invoices.

That is a cost of nearly £11.50 per invoice, before you count the costs of electricity, heating, lighting, space, etc.

That is hideous. There is a better way people!

The average AP clerk can process about 10,000 invoices a year manually, so for starters, your staff are pretty inefficient.

If you employed an automated solution, the majority of those 20 people could be moved to other, more beneficial, parts of the business, generating money instead of paying it out.

Automating invoice processing has seen some companies thrive and be able to process in excess of 100,000 invoices with 1.5 AP staff.

5.      We have automation. It is a template-based solution implemented in 2008

Do you use the same phone you used 10 years ago?

Are you watching the same TV you had 10 years ago?

Driving the same car you had 10 years ago?

Chances are you said no to at least two out of the three questions there, if your personal tech is changing why wouldn’t your business tech?

Templates are so 2000 and late.

Modern technology can pick up any document from any location or source, determine what type of document it is and process it accordingly.

In AP, this is all about invoices. Why should you have to tell your software where to look for a PO number, quantities, and prices?

ICR, as mentioned above, can do all of these things. It can differentiate an invoice from a driver’s license, process a photo uploaded from your smart phone, and even notify you when it thinks an invoice looks dodgy.

There’s not much more to be said on this, but get back into the market, look at what’s available, and improve your processes!

Conclusion?

You all knew I was going to say automation was the solution for everything, and to a greater extent, it is.

But the hardest thing to change is your company’s culture. Moving from paper files to computer files and removing menial tasks from the humans you hire to help your company grow.

Automation and robotics have always been a tough subject in the warehouse, but as it makes its way into the office we need to accept it and let it help us.

One of my previous blog posts was about the hard time I had trying to go paperless in a previous job, it can be found here, and goes through some hurdles I had to face and how I overcame them.

Post by Rory Coleman-Smith

Rory has been working with ITESOFT since early 2017. He has placed himself as a thought leader, educating finance departments on the latest advancements in technology in Financial Process Automation.

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