Accounts payable (AP) is a fundamental accounting practice. That’s Business 101 and — in general — not overly complicated. And yet, as a company grows, issues can crop up and cause major problems, costing the business unnecessary time, energy and money.
The key for improving AP and avoiding these problems is using quality financial accounting software. These tools, especially if accessed in the cloud, can provide growing small- to medium-sized businesses (SMBs) with time-saving processes.
With that in mind, here are several AP issues that can become quite painful if left unattended, as well as ways that technology is able to solve those problems.
Problem #1: You have inadequate security. Having weak internal controls encourages theft. Often, companies feel they’re too small to worry about theft. Others feel they can trust everyone so there isn’t a significant need to worry about additional security procedures.
The solution: Work with a cloud provider. A recent article on Computerworld.com shows that despite National Security Agency data leaks by Edward Snowden, companies aren’t running away from the cloud. While some research in August predicted the leaks could cause American cloud providers to lose business to overseas competitors, “six months later, the impact appears to be less severe than expected,” the article reports. In fact, as a whole, the cloud continues to be much more secure for SMBs than most data closets. For example, an article on the Dark Reading website outlines ways SMBs can improve their security, specifically by using the cloud. With a cloud-based service, companies are able to obtain email, web security and access-management services, and perform automated backups, to name just a few features.
Problem #2: You’re missing discounts from vendors due to poor cash flow planning.
The solution: Use electronic payments and automated AP. These services also enable SMBs to release blocked invoices held up by data errors, which reduce the opportunity to realize discounts. A study discussed in a blog post on the Business Finance website showed that AP departments are “slowly but steadily moving away from paper and to a greater percentage of electronic transactions.” Electronic payments enable SMBs to achieve “better control over their spending and [ensure] purchases are made with preferred suppliers,” the post explains. About a third of companies that use electronic invoices can process a payment for less than $2 each, the study showed.
Problem #3: You’re still using Excel spreadsheets for accounting and tracking invoices, and it’s becoming increasingly difficult as the company grows.
The solution: Financial accounting software helps companies better manage and anticipate cash flow and help enforce internal controls. Advanced accounting systems provide financial insights in real time that spreadsheets will never be capable of delivering.
Problem #4: Too many manual tasks are costing your company time and money. A recent survey of AP professionals showed that most companies have some level of automation; however, only 16.9 percent of these have a fully automated solution.
The solution: Invest in a fully automated payments system to cut down on mistakes, identify billing errors and reduce overpayments. A white paper from Logicbroker outlines several ways that these automated programs work to eliminate manual tasks. Invoices, catalog prices, product inventory, purchase orders, shipment notices and everything in the warehouse can be automated. “Errors are most commonly caused because of inaccuracies made while performing manual tasks,” the white paper reports.
If done right, AP isn’t that complicated for small companies. As the business grows, however, it’s important to invest in powerful financial accounting software to prevent major issues, which could cost your company time and money.