AP invoice automation
Best practice


5 Symptoms of an Unhealthy AP Process

It can be a tough and unglamorous job working in AP, processing supplier invoices and keeping the business running in a back-office role that is typically unnoticed until some event blows up – an invoice was not paid so the power is cut to a location – and everyone from the C-Suite down suddenly has eyes on you.  Great. 

When you're heads down in the trenches, it's difficult to pause and catch breath, to look up and find opportunities for improvement.  That's not healthy for AP and it's not healthy for the business.

So, what are the causes of this AP malaise?

If you can relate to any or all of these, give us a call – we make AP as it should be.

#1. Long invoice processing lead times

If you’re still managing invoices in a manual or semi-manual process, you know what a grind it can be to churn through a never-ending stack of invoices. Tedious and error-prone, often with much duplicated effort, you’re off to a tough start every day. We even hear of companies that assign individual AP staff to a single supplier because of the extra lengths and contortions that need to be performed to process their invoices into the ERP in a specific way. Come on, this is supposed to be AP not a circus act… and, normally, much less entertaining to watch in action. And what happens when that individual is out or leaves? The show must go on.

PO-based invoices should represent a quick win for automation because of 3-way matching, right?  Well, ask your peers in AP how their process is automated. How do they manage the full range of deviations that happen when doing business? For example, emailing the buyer with a link to a PDF copy of the invoice on a shared drive asking how to deal with a special charge that’s not on the PO.  The buyer then goes into the ERP and takes a look, opening the invoice on the shared drive… and then moving that PDF to a different folder once the issue has been dealt with… and then emailing AP back with an update…  so that they can now process the invoice… oh my.  That’s just the tip of the iceberg when it comes to handling anything outside of traditional 3-way match.

Dealing with indirect spend, or invoices without a corresponding purchase order, presents similar frustrating issues for the AP staff. Manually determining who the budget holder is and tracking them down for approval further delays the invoice for payment and takes valuable time away from the AP team. This often means relying on sifting through emails and calls to make sure things are getting approved, opening the door to late payments and lost invoices.

The net result is friction across the organization, frustration in the AP team and supplier dissatisfaction when they’re paid late and their AR teams have to chase you down.

#2. Inconsistencies and a lack of control in AP

It may seem obvious that the AP malaise caused by this is a sign of an unhealthy AP process, but it’s one that many companies accept as characteristic of their day-to-day dealings in accounts payable. Without a single system providing a consistent, systemized framework for streamlined workflow and guidelines for employees to follow, an AP team cannot possibly be equipped for success. Special “business rules” for handling specific invoices, and the disparate forms they come in (paper, email, fax etc.), not only makes the likelihood of errors increase, but also makes onboarding new employees less effective without a firm set of guidelines that the entire team follows. 

Just say “No!” to Post-It note cheat-sheets and bulky manuals for Standard Operating Procedures.

The lack of control in AP also opens the door for potential fraud and security risks. Without the oversight provided by a streamlined, single system of governance, it’s possible to miss tell-tale signs of security breach or fraudulent behavior within the AP process. Automation enforces strict adherence to guidelines, putting all transactions and invoices under the scope of the business’ review and keeping your accounts payable under control.

#3. Lengthy and painful month end closing process

AKA the bane of your life! (… and don’t think your family doesn’t feel it, too).

Why is this totally expected procedure such a nightmare for many companies? Month end and period end closing is a requirement that most often is used in the same sentence as “headache.” But for an AP team still struggling with manual or paper-based processes, it transcends to a much bigger, time-consuming task than it needs to be. Data integrity and the speed with which you are combing through various data summaries are all impacted by the manual AP process. And in a process on which the overall company’s bottom line is affected, getting accurate financial reports in the hands of business leaders is of utmost importance.

While reconciling the books at the end of each month will probably never top the list of “Favorite Employee Activities,” automation can make the process so much easier for the AP team. Replacing the manual steps of spreadsheets and data collection with automation not only cuts days from the month end closing process but links all data back to a verifiable source with original invoices and activity audits and reporting only a few clicks away.

#4. Creating a “lose-lose” with your suppliers

You think your poor AP process is a pain for you?  Well, your suppliers think so, too, and may well choose to do business with customers that are easier to deal with and actually pay on time – every time!

An inefficient invoice process puts your company at risk of losing money. Inaccurate records increase the possibility of making duplicate payments or overpaying suppliers. Unless the AP team catches this mistake and prevents a payment made in error, begins the process of re-collecting the overage, that money is hard to recover.

A slow invoice process can be another hidden cost for the company and for suppliers. The longer it takes the AP team to move the invoice from receipt to payment, the higher the cost of labor to manage your invoice volume. This is especially of concern if your company has plans for growth in the future. And if your suppliers have to invest time and energy in chasing payments, there’s a strong chance your prices will increase or your credit rating be impacted.

If the delay in your invoice lead time is long enough to incur late payment fees, this problem should be escalated as a must-fix for the business. Late payment fees are entirely avoidable by taking advantage of automation. In fact, best in class businesses using automation often save money beyond avoiding late fees, by taking advantage of their touchless process to earn early payment discounts. It is possible to turn AP into a profit center for the business, you only need to look to automation to see how. 

#5. Lack of visibility into the business’ financial picture

Reporting on the current state of your company’s finances is crucial to making informed business decisions and, for public companies, a legal requirement. Often, business executives look to AP for reports on outstanding invoices and cash flow. For many AP departments, these requests for reports are a source of anxiety for the accounts payable team, who are tasked with physically tracking down invoices for these reports in filing cabinets and approvers’ desks.

This also becomes a dangerous problem to have if your company ever faces an audit. Keeping in mind how difficult it may or may not be to pull reports for a single financial period, imagine pulling a similar report for the past 5 years! With automation, there is no paper trail to follow. All of the records you process are conveniently stored and organized in digitized format, making it easy to search by keyword and find the invoice you need in a matter of seconds.

See how controlling AP can help you control your business. Watch our recorded webinar: “How to transform your AP from back office to business intelligence hub”

Rich Revill

Rich Revill

Director, Solutions Consulting