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Why are accounts payable so stressful

Tickmarks Team
February 22, 2023

Making sure that accounts payable (AP) are well-managed and up-to-date is a critical part of ensuring any business runs smoothly. With the current global market for accounting software estimated to grow at a CAGR of 8.02% from 2018 to 2026, increasing from $11 billion to $20.4 billion, the importance of AP is clear.

AP is an essential component of any business’s financial operations, and it's no surprise that managing these accounts can be time-consuming and stressful. With multiple vendors to keep track of, bills to pay, and invoices to process, AP management can seem like a daunting task. In this blog post, we'll explore some of the common and top problems faced in AP departments and provide potential solutions.

The Most Common Problems and How Businesses Have Addressed Them

There are a few common problems businesses face when managing their accounts payable. They can be divided into two main categories:

  • Time management and efficiency problems

These issues arise due to the manual nature of many AP processes, such as data entry and invoice processing.

  • Error prevention

Errors can arise due to human error, manual mistakes, or inadequate software solutions.

Slow or Inefficient Processes

Manual processes can be time-consuming and error-prone. This can lead to delays in payment, which can have consequences such as late fees or vendor disputes. If companies are still relying on paper records and spreadsheets, they might be missing out on the benefits of automated systems that can help streamline operations. As a result, slower processes can lead to higher costs and less efficiency in the long run.

A leading FMCG player had an inefficient process for managing accounts payable, leading to delays and errors. They implemented a cloud-based system to automate the process and cut down on manual data entry. This allowed them to save time and money, reducing their overall costs by 20%.

Poor Cash Flow Management

Cash flow is the lifeblood of any business, and managing AP processes can help ensure that cash flows smoothly. Poor cash flow management can lead to a shortage of funds and hinder the ability to pay vendors on time. This can negatively affect future vendor relationships, cause customer service issues, and result in late payment fees. Additionally, if a business is making duplicate payments, it could be unnecessarily overspending.

Blue Star India experienced cash flow issues, as their rapid growth led to an inability to keep up with accounts payable. They implemented a new system that could handle the volume of payments and keep up with customer demands. This allowed them to better manage their cash flow, ensuring that vendors were paid on time and customers received their orders promptly. This improved invoice processing time by 33% and increased payment requests by 98%.

Difficulty Tracking Invoices and Payments

Manually tracking invoices and payments can be a difficult task, especially if there are multiple vendors or customers. Without the proper tracking software in place, it's easy to lose track of who owes what and when payments were made. This can cause delays in payment processing and leave businesses vulnerable to fraud or theft.

Capita Group plc is a leading FTSE top 50 firm and the UK's biggest business process outsourcing (BPO) and professional services provider. Every year, this premier company yields an impressive £2.7 billion in revenue. Their existing P2P software was unable to provide the granular data and complete visibility needed to effectively track invoices, leading to longer payment cycles and a lack of control over payments. They implemented a new system that provided full visibility into all invoices and allowed them to easily track payments and improve their cash flow management. As a result, Capita saw a 25% growth in payment cycles, saving them both time and money. These are some of the most common problems businesses experience when managing accounts payable.

Maintaining Manual Records

Maintaining manual records can be a tedious process and lead to errors. This can not only be time-consuming but also expose businesses to potential inaccuracies or discrepancies in data that could cause major issues in the future. Manual documentation can also be vulnerable to tampering and fraud.

Cypress Creek faced difficulties with manual record-keeping. They implemented an automated system that enabled them to track invoices, payments, and vendors more efficiently. This allowed them to reduce errors, save time, and minimize their risk exposure. As a result of this process improvement, Cypress Creek's accuracy rate increased by 98%.

Early Payments Without Delivery

Being prompt with payments to suppliers can indeed reap rewards for businesses. However, if Accounts Payable teams rush the process of verifying and paying invoices without checking whether goods were shipped up to standard or even received in the first place, then companies face serious consequences. Furthermore, settling bills before their due date reduces organizational liquidity levels - hindering cash flow significantly.

A global Telco provider implemented an automated accounts payable system, which included a three-way matching process. This enabled them to compare invoices against goods received and shipment notes before processing payments. The new system allowed for greater control of early payments, resulting in improved working capital management, better relationships with suppliers, and reduced costs associated with late payment fees.

Streamline your Accounts Payable With Tickmark’s P2P Solutions

Accounts payable is a long and complicated process, involving invoice data capture, coding invoices with the correct account, matching them to purchase orders, approving them, and finally making payments. To streamline this process and make it more efficient, businesses can turn to Tickmark’s Procure-to-Pay (P2P) services.

With over a decade of industry experience spanning multiple verticals and an in-house IT team that automates and integrates the app with your accounting system, we offer touchless invoice processing as well as complete visibility into the accounts payable process with our centralized dashboard. Our team of 60+ dedicated professionals also ensures that vendors get paid on time and all queries are addressed quickly. Get in touch with us today to make your accounts payable process more streamlined and efficient.

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