The amount owed by the company for the credit purchase of any good or service is called accounts payable. Accounts payable are vital to any business and a mistake in the accounts payable process can result in huge losses for the business.
It plays a key role in shaping cash flow, requiring constant control and management. Maintaining accounts payable can solidify business relationships with vendors that can greatly help your business and for this reason it becomes vital to properly maintain the company’s accounts payable process. However, doing it is not always straightforward because you may encounter various challenges when doing it.
Here are the most common accounts payable challenges and how to solve them:
Common challenges of accounts payable
You may encounter various problems while maintaining your accounts payable account, and these are the most common:
Maintenance of supplier invoices
Losing track of your invoices and their due dates is common when your business deals with numerous vendors. In case you have lost a receipt or invoice, you can simply ask the provider to provide you with another one. However, the workaround will only be useful if you have noticed that some invoices are missing. Losing critical invoices can not only deter your working relationships, but also hamper your reliability.
Manual data entry
A general accounts payable transaction is as follows:
- Enter vendor invoice and transaction details
- Get approval
- Finishing the payment
However, the inclusion of manual data entry can lead to transaction errors, leading to miscalculations, inaccurate payments, and ultimately incorrect company finances.
Vendor management issues
No business can thrive optimally with poor supplier relationships, which makes suppliers vital. In case your company manually manages the transaction details, keeping up with the vendors to resolve any miscalculation of the transaction is cumbersome.
Missing purchase receipts
Keeping your purchase receipts is essential, as it helps prevent unapproved purchases or identical orders. It also helps track orders; however, companies do not adopt this practice due to its complexity and time consumption.
Not all the providers you deal with will be ethical, so there is also the possibility that they will send you a duplicate invoice. This can also be an error in judgment, but it can cost you a lot. If your business operates in multiple locations, it will be more difficult to keep track of payments.
Inefficient and time consuming
Inefficient business structure and manual data processing can seriously hamper your productivity. A company with a medium scale of operations needs to have 2-3 people to manage the accounts payable process. If the entire process is carried out manually, it can consume a significant amount of time.
Solutions for Accounts Payable Problems
Here’s how you can solve common accounts payable problems:
Automate the accounts payable process
While the process has traditionally been managed manually, replacing it with accounting software can improve your productivity in several ways. Accounting software completely eliminates the possibility of manual entry errors. Always prefer digital invoices as you can import them directly into accounting software. Most software offers payment reminders, which eliminates the risk of late payments.
Track purchase orders
Accounting software efficiently tracks purchase orders and compares them to vendor invoices. If possible, establish the obligation to generate a purchase order for each purchase transaction. It can help you review supplier invoices and orders.
Always check the reliability and
your payment approval process. A supplier portal helps you connect with suppliers in a better way. Details such as transaction notes, purchase entries, and vendor details can be saved to the portal, thus efficiently managing vendor relationships.
Maintain digital inputs and design an efficient workflow
A smoothly functioning framework speeds up your transactions and also increases efficiency. In addition to a smooth workflow, you must also maintain digital transaction inputs for maximum accuracy. Prepare a workflow that suits your procedures and improves your productivity.
The accounts payable process has a great importance in the formation of the cash flow of a company, so it is vital to analyze it thoroughly. In case your company has allocated human resources to carry out the process, then it may reduce its efficiency. Investing in fast-running accounting software can not only increase your productivity, but also smooth out relationships with your suppliers.
LAST is a thirteen-year-old real estate services company that works with more than 50 commercial and residential real estate developers, funds, and property management companies throughout the United States. Our extensive experience in real estate accounting, financial analysis, lease administration and asset management has helped clients reduce associated costs by 40-50%. We currently provide these services to a portfolio of 75,000 units among clients.
We invite you to experience financial and accounting outsourcing through us. Contact us to develop a custom accounts payable process manual tailored to your business needs and requirements.
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