How To Overcome Your Most Common Problems In Paper-Based Accounts Payable Processes
More businesses make the move to electronic invoices and automatic accounts payable every day. There’s a good reason for this. Paper processing is so cumbersome that more than 30% of accounts payable managers can’t even answer how much it costs their company to process an invoice. And even if you do know the cost per invoice, in many cases it’s much higher than it needs to be.
But high or unknown costs aren’t the only problems with paper-based systems. Error-riddled manual data entry, lengthy processing, and inefficient documentation plague many an AP department. These problems, and others like them, are serious. So serious that if left unchecked they could actually sink your company. The good news is that you’re not helpless when confronting them.
Accounts payable automation removes or improves all the common problems associated with manual AP processing. And it offers a simple, cost-effective solution that will work for most (if not all) companies wondering how to fix their accounts payable. Keep reading to learn just how a quality accounts payable automation system can help your company save money and develop a more efficient process.
Get More Reliable Data Entry
Manually entering invoice data from paper to the computer is time-consuming and prone to human error. It’s not that anyone is putting errors in on purpose. It’s just a fact that people will make a few mistakes when transferring data manually. And even a simple mistake like typing in the wrong number or putting a decimal point in the wrong place can lead to costly errors.
Automatic AP systems take care of data entry for you. Electronic invoices are easy – they simply enter the system automatically for data gathering. And once you have the system set up, paper invoices are pretty easy, too. After they’re scanned using electronic data capture technology, the system files paper invoices the same way as electronic ones. This saves time and avoids errors.
Go Beyond Image Capture
With the best accounts payable software, their system for data entry goes beyond simply capturing the invoice data. It’s one thing to scan pictures of the documents, but it’s another entirely to end up with a searchable index for every aspect of the document.
Optical character recognition (ORC) software uses pattern recognition to look at a printed image and generate a digital equivalent. That’s a big improvement over simple image capture. It generates digital files that you can edit and search more easily. Plus, the documents take up less digital storage space since text files are smaller than image files.
You can take ORC one step further with data indexing. This feature adds even more value to a system that’s already much better than a paper-based system. If you opt for an AP software system that supports data indexing (like NextProcess), you’ll have searchable records for all of the fields on the document and you’ll also have the metadata with respect to the document submission. That includes when and where the invoice what received, who submitted it to the system, where it was submitted, and more.
Fix Messy Processing
On paper-based accounts payable systems, it’s much harder to streamline processing. Employees within a single accounts payable department might interpret guidelines differently or opt for their own “shortcuts.” And in larger corporations, different offices may handle their accounting systems differently.
Cloud-based automation ensures everyone in the accounts payable department has access to the same system and it enforces company policy across the board. AP automation also lets everyone responsible for invoice processing check on every invoice’s status. Now, no one will waste time by accidentally working on the same tasks. And there’s no risk of someone overlooking an invoice because they think a different employee took care of it.
Speed-Up Your Process
It takes time to process an invoice manually and then get it approved. Accounting departments can easily fall behind, misplace an invoice, or fail to get it approved by the payment deadline. This costs your company both time and money. Not only are employees spending lots of time trying to process invoices (which costs money in labor), but you’ll also have to deal with late payment fees.
An automated system routes most invoices for approval quickly. With automation, you can actually take approval time down from an average of 28 days to under 3 days. And the system also prioritizes invoices with the earliest deadlines, so no more late fees. In addition, the system will also send approval reminders if someone forgets to approve an invoice within a set amount of time. You can make this process fit your company by setting up custom tolerances for different invoice categories.
Improve Invoice Matching Accuracy
If you’re going to avoid making erroneous payments, then you’ll have to check each invoice for accuracy. In a paper-based system, accounts payable employees do this manually. And that’s on top of all the time it takes to double-check manual data entry to make sure the information was copied correctly.
For 2-way matching, you need to match standard invoices to purchase orders and double-check that all the information lines up. For the 3-way matching that’s better at preventing fraud, you also check the invoice and purchase order with a record of goods received.
All this matching is hard in a paper-based system. But with accounts payable automation, the software can match purchase orders and invoices without outside help. You can even automate the purchase order system as well to make things even easier. To make sure the AP and PO systems work well together, make sure you purchase them from the same automation supplier.
Handle INR and RNI Effectively
Another topic related to invoice matching is how your accounts payable department handles INR (invoice not received) and RNI (received not invoiced). These situations happen when billing and shipping get out of sync. In the past, invoices would arrive around the same time as shipments. But with today’s email/digital invoices, most invoices arrive days or weeks before the goods. And sometimes, goods arrive before an invoice and they enter inventory before the purchase can be recorded by accounts payable.
Waiting to approve payment of invoices for products that haven’t been received yet is a major time-drain for AP staff. And keeping track of which goods are waiting for an invoice as well as which invoices relate to goods that haven’t arrived yet is hard on a paper-based system. Automation will help streamline this process so you don’t lose track of information.
Monitor Accounts Payable In Real-Time
If you avoid losing invoices in a paper-based system then you’re doing well. Going a step beyond that and knowing where the invoices are at any given time is well-nigh impossible. The closest you can come is a system so well organized that it only takes a few minutes to track-down what stage of processing an invoice is going through.
Automated AP software makes it incredibly simple to find out what’s going on with any invoice. It tracks invoice processing and updates in real-time while also making it easy to search for specific invoices.
If you’re wondering where an invoice is in the approvals process, it just takes a few key-strokes to look it up. And with cloud-based solutions, you can access this information from anywhere as long as you have the right passwords. That enables remote approvals and invoice monitoring when accounts payable managers are out of the office.
Handle Exceptions More Easily
Exceptions invoices are a huge headache for accounts payable. If you’re using a paper-based system, you’re already spending a huge amount of time on each invoice so exceptions just mean even more work.
When you automate the AP process, employees will have the time they need to handle exceptions. Accounts payable software is designed to catch exceptions, such as non-standard invoices and documents with discrepancies. Once they’re caught, it routs them for manual approval.
At first, you might find that a new automatic system is flagging quite a few invoices as exceptions. But the best accounts payable software will let you adjust your custom standardization and refine your business rules. With NextProcess, you can get to the point where you’re auto-processing up to 90% of your invoices.
Manage Different Types of Payments
No matter how efficient they are, your invoice management practices aren’t going to do much good if you don’t finish the process and pay your vendors. That’s pretty obvious, but for some reason we don’t think about it as a part of the accounts payable process we can improve. Printing out, signing, and sending paper checks is just how you’ve always done it.
Modern payment solutions can improve this process, though. If you want to stick with paper checks or if that’s required by some of your vendors, then check-printing software makes this type of payment simple. And if you’re switching to electronic payments, a payment system can streamline rapid, secure file transfers. Alternately, you might consider outsourcing your payment solutions.
Sorting Out Storage Difficulties
Maintaining paper records takes up huge amounts of space and searching for one of those documents requires time, even under the most efficient filing system. Even if you scan paper documents and store them digitally they’re useless unless they’re in a searchable format like the data indexed files we talked about earlier.
Good quality AP automation software permanently stores your invoice information in a digital format that’s easy to access. This centralized document repository makes it easy to search and download every invoice that’s ever been through the system. Plus, it doesn’t take up any extra space in your offices.
Improve Your Anti-Fraud Controls
Most accounts payable departments have fraud controls in place. You have to, since asset misappropriation fraud (such as billing and check tampering schemes) accounts for 83% of all reported fraud.
But controls designed to prevent fraud are hard to enforce in a paper-based system. And on their own, anti-fraud controls aren’t enough. They’ll help discourage fraud but won’t catch fraud that slips through your initial detection methods. In fact, tips are by far the most common way companies catch fraud. The next most common detection methods are internal audits and management review.
Automation helps you strengthen your internal controls. It also helps you catch fraud that slips through the system. The system makes it easier for employees to notice if fraud happens, which leads to more tips. And because automating makes it easier to conduct audits and for managers to review the system, they’re more likely to catch fraud too.
Become More Audit Friendly
No one enjoys dealing with audits, especially if your process has made it difficult to access accurate records. But audits are going to happen, so you might as well make sure your system is ready for them. Getting ready for audits is made much easier by AP Automation.
Because automation software enforces compliance and makes it easy to search for past invoices, audits are simplified considerably. The system tracks all the important information and places it at the tips of your fingers. And because you improved the whole process, you’ll likely receive a better report at the end of the audit.
Give Employees More Time
There’s a good chance that employees in a manual, paper-based accounts payable department feel overworked. It’s hard to keep up with the workload in a setting like that. And it’s also hard to convince upper management to hire more help.
AP automation means your existing employees will finally be able to get on top of all the work coming into accounts payable. And that means they’ll have the extra time they need to process exceptions invoices quickly, be more vigilant about checking for signs of fraud, and focus on other value-added tasks for the company.
Improve Your Environmental Impact
Making paper means cutting down trees. On top of that, the process used to make paper puts carbon dioxide into the atmosphere. And what actually happens to most of the paper your office uses? A good percentage of it just ends up in the trash, which contributes to landfill waste.
One of the big reasons businesses talk about going paperless is because of the positive environmental impact. Paperless AP processing is “green.” It’s just about impossible to completely get rid of paper in the accounts payable, but you can definitely cut back with accounts payable automation.
Scale With Your Needs
If your company is growing or experiences fluctuations in AP workload, it’s hard to keep up with on a paper-based system. Paper systems will work okay when workload decreases. But they aren’t flexible or fast enough to effectively adjust to an increasing number of invoices.
That’s not something you’ll ever have to worry about with the sort of accounts payable software NextProcess offers. Cloud-based software solutions scale automatically to fit the exact amount of invoices your business needs to process each month. And we’ll only charge for the features you use and the number of invoices you process.
If you’re looking for the best automation software to fix your accounts payable, look no further than NextProcess. Our AP automation reduces processing costs immediately, gives you instant oversight into your invoice processing, and stores all the information in a centralized document repository. Furthermore, our software can be scaled and customized to match your business’s specific needs at any given time. Contact us today to schedule a demo.