Managing the AP department can be a daunting and overwhelming task because of the numerous challenges it faces. These problems have a significant impact on the company’s operations and bottom line. A good number of the obstacles in AP emanate from the manual processing of invoices. Fortunately, you can resolve the issues with AP automation. Here are three common AP problems and how automation solves them.
Problem #1: Data Entry Errors
Data entry errors are among the biggest AP problems for departments that have not embraced automation. The errors mainly emanate from AP professionals. As AP professionals enter data manually from invoices into the computer, errors become inevitable.
A simple mistake such as missing or adding one digit can be costly for a business. For example, if you were to pay a supplier $250, then you key in the number into the computer as $2500, the company loses a significant amount of money. The matter accelerates when multiple data entry mistakes are made.
AP automation solves data entry errors entirely. It processes invoices electronically and reduces human interaction with invoices. AP professionals no longer need to spend hundreds of hours and labor entering figures into the computer. This way, data entry errors become a thing of the past, and data accuracy improves substantially. Automation leaves no room for costly mistakes.
Problem #2: Lost Money
AP departments lose money in many ways when using manual invoice processing methods. First, processing vast numbers of invoices manually is costly. Organizations spend approximately $3-13to process a single invoice. A medium-sized hospital spends around $250,000 per year on manual invoice processing.
Second, traditional paper invoicing is labor-intensive, and organizations incur significant labor costs. Third, data entry errors cause overpayments and duplicate payments resulting in further financial loss. Fourth, processing paper invoices is time-consuming. It increases the likelihood of missed payment deadlines that come with penalties. Late payments also ruin your relationship with suppliers.
AP automation results in cost savings and reduces the money an organization loses. It cuts the cost of processing invoices substantially, saving your business much money. For example, with iPayables electronic invoicing, the cost of invoicing reduces to around $1-3 per invoice. For big organizations processing many invoices each month, the cost savings are enormous.
Automation prevents costly data entry errors. It also eliminates cases of missed payment deadlines because suppliers are paid promptly. Businesses enjoy early payment discounts. Additionally, automation increases the productivity of AP professionals because it replaces the tiresome and labor-intensive manual invoice processing. AP professionals divert their time and effort to valuable tasks that have a positive effect on the company’s bottom line.
Problem #3: Fraud
Fraud is a pressing issue affecting the AP. The AP department is a prime target for fraudsters because huge amounts of money leave the company through the department. Therefore, fraud not only results in a financial loss but also ruins an organization’s reputation.
Although organizations understand the severity of fraud, they don’t do enough to prevent it. Notably, implementing anti-fraud controls in a manual AP system is relatively hard. At times, AP professionals connive with suppliers to defraud the company vast sums of money through overpayments and duplicate payments. They take advantage of the flawed manual invoice processing systems that lack controls, transparency, and fraud detection mechanisms.
Enterprises can use technologies such as AP automaton to prevent fraud. AP automation software has custom controls that enforce company policies on payments and notify you of any suspicious activity. For example, iPayables AP automation software has fraud detection features that allow organizations greater control in fraud prevention.
AP departments face various problems that compromise their ability to work effectively and efficiently. These problems affect a company’s bottom line because it loses substantial amounts of money in paper-based invoice processing. Fortunately, automation can tackle these problems and help AP departments cut costs, increase efficiency, prevent errors, and improve productivity. What are you waiting for? Embrace AP automation and say goodbye to these costly AP problems.