5 signs you’ve outgrown your current AP tools

July 17, 2019 5:01 PM

Accounts payable is the most time-consuming and paper-intensive function in finance, according to the latest study from the Institute of Finance and Management. When given a list of dozens of AP challenges, the six biggest issues identified by finance leaders directly related to efficiency.

That’s not shocking. Oftentimes, AP processes stunt growth and hold companies back from reaching their full potential. Manual accounting methods and techniques lead to mistakes, inefficiencies, added costs and a lack of visibility — things that growing businesses can no longer afford to ignore.

The first step is recognizing that your current methods aren’t working. The second is implementing the right tools to optimize your clients for success.

Conceptual business illustration with the words accounts payable

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1. You're growing abroad

Accounts payable is always an afterthought, especially when businesses start to expand globally. But the unexpected difficulties of managing accounts payable can range from tax compliance to mitigating foreign exchange volatility exposure.

Companies must designate the currency in which they will pay their vendors, while those with multiple subsidiaries must open bank accounts in each jurisdiction to facilitate each payment and manage internal cash flows. Foreign exchange management opens up companies to the risk of errors, while a lack of familiarity with local regulations exposes it to the consequences of non-compliance.

2. You’re adding more headcount

High-growth businesses can feel the pain of AP the hardest. There is a massive amount of data handled by an accounting team, including purchase orders, reports, contracts and invoices. Both the effectiveness and efficiency of AP impacts a business's cash position, credit score and, most importantly, relationships with suppliers and vendors.

When the invoice volume begins to outstrip capacity, you might think the only course of action is to add headcount to keep up with demand. But, in the digital age, that might not be the best solution available to your team. According to Ardent Partners’ State of ePayables Research Survey, streamlined AP teams process invoices at a rate that's five times more efficient than other organizations — that’s a difference between $2.52 and $14.38 per invoice. With technology, AI and robotic process automation, the digital landscape is quickly evolving, and might offer significant benefits.

3. You’re struggling to close the books

The numbers aren’t matching, you’re drowning in spreadsheets, and you’re ready to throw the general ledger out the window.

The reconciliation process is inherently tedious — you need to manually measure, doublecheck, and verify all paid and unpaid invoices at the end of each reporting period. Chances are you’ll find an error or two (or 20). Management wants to know the state of their finances, but it’s a struggle to get bank and payment data back into the accounting system for an honest view of where the business is at.

Visibility is strained, and there is a high risk of data miscalculations, lost files and security breaches. Simply put, you just can’t close the books.

4. You’re managing everything manually

When a business is growing quickly, it often makes the most fiscal sense to devote resources and time to building the company, growing revenue, and investing in marketing and sales.

But because of this, the automation of AP has been notoriously pushed to the side. Accountants have consistently noted that AP is the most time-consuming function in finance today. This error-prone process creates a ripple effect that is significant and magnified in a world where commerce is increasingly global and digital.

Spending your valuable time on manual, back-office tasks is unnecessary. It’s work that no one wants to do, and no one should have to do. In today’s landscape, accountants are financial advisors to their clients — they should be focused on scaling the business while relying on automation to do the grunt work.

5. You’re not making payments on time

It might seem simple enough — not everyone closes the books in a timely way, not everyone complies with all regulations, and sometimes vendors and suppliers just have to wait.

But that can be disastrous. With operations stalled, valuable time is not only wasted, but key relationships with vendors and suppliers can be strained. Paying accurately and on time is paramount to the success of any business.

Late payments can create a huge bottleneck in your operations and can open the organization to a myriad of problems, including duplicate payments, negative impact on your client’s cash flow, increased cost and workload, inaccurate financial reports and a damaged reputation.

The bottom line

These five problems are the first signs of a broken AP process. While there are numerous metrics to rate the effectiveness of AP automation, the real difference emerges when organizations aren’t just experiencing less friction with AP, but when it’s no longer an operational pain point at all. In this day and age, streamlining AP needs to be a part of every modern accountant’s toolbox.