Using her access to their accounts payable process, an employee stole nearly $1M from a family-owned rig enterprise in Texas. If it wasn’t distressing enough, fraud is only one of the accounts payable challenges we face nowadays. To face them, financial teams have to adapt and update their processes. This article will help you identify the top challenges and what solutions to implement.
Trustpair helps you secure your AP processes thanks to automation and constant data monitoring – protecting you from mistakes or fraud during your entire AP process. Request a demo to learn more!
Who’s never spent hours looking for a missing invoice or piece of information? Data gets misplaced all the time, either in paper form or digital. Scanning Google Drives, paper folders, and email inboxes for the information we desperately need is a reality for many of us.
And yet, this process of tracking an invoice manually can become a problem. Proper and adequate data management has to be a priority for companies. It’s one of the accounts payable challenges — one that extends to the whole organization.
Invoices that go missing can create a bottleneck in your processes, causing payment delays. It will also create compliance issues when your accounting department is audited.
The solution? Using automation to centralize all the relevant information into one location that you’ll use as your one source of truth. In AP, that looks like:
- A master file with all your vendor data up-to-date,
- Accounting software with your purchase orders, invoices, and delivery slips to do your three-way matching.
Reducing the manual component from your processing system for an automated process will help reduce problems. Departments will also save time on manual entry, freeing it up for higher-value tasks.
Whether it’s because your employee got distracted while processing purchase orders, or the wrong number got entered in your payment software, mistakes are bound to happen even in the best organization.
Invoice processing errors are recurring accounts payable challenges, with manual data entry being a contributing factor (but it also happens when using some automation).
That’s especially true if you don’t have added approval verification in place, such as the four-eye principle, which ensures at least two people approve the same key operation. For example, you could have someone from your bookkeeping team approve invoices, and someone else from the department to approve payments.
Accounts payable mistakes look like:
- Matching discrepancies between invoice and purchase order, or invoice and payment (account reconciliation),
- Duplicate payments or overpayments of an invoice,
- Sending money to the wrong bank account.
Those negatively impact your vendor relationships and damage your cash flow. While human errors are natural, your aim should be to reduce them to save time (and money) by using more automation.
For instance, using anti-fraud software like Trustpair means all your vendor credentials are checked before any invoice payment is sent to your supplier.
That means that no errors can slip by, and you’re 100% sure of who you sent the money to — that’s good for you and your vendor management! It also provides your company with the best accounts payable fraud protection.
Delays in payment
All the above accounts payable challenges create inefficiencies in your business.
The absence of streamlined accounts payable processes is bad for:
- Your teams’ productivity, as employees have to spend more energy than necessary on tasks, from sales to accounts payable teams.
- Your overall organization, suffers from sub-optimal cash flow management.
- Your suppliers, who experience payment delays.
Late payments mean getting hit by delay fees, or at the very least, not being able to enjoy early payment discounts some of your suppliers might have.
In the long run, it can damage your relationship with key vendors and even completely put your company’s activity to a halt if they refuse to deliver their goods or services.
How can you reduce payment delays? By increasing automation. Not for the sake of it, but by leveraging software automation and AI into a streamlined account payable workflow. Here’s what we recommend at Trustpair:
- Use technology that works together, so your information is always up-to-date and centralized.
- Simplify your processes so they meet your teams’ needs while adhering to your safety protocols.
- Provide regular training to your employees about how to navigate those processes and explain why they’re necessary.
- Share the relevant information with your vendors so they know when they can expect payment, maybe even offering an online interface.
Lack of visibility
Employees and managers from accounts payable departments deal with many people inside and outside of their organization. They also use many different software services to do their job, from invoice processing to financial forecasting.
This diversity leads to a lack of visibility, which negatively impacts their decision-making and their cash flow.
- On a micro level, it’s not knowing which invoice has been paid already, or who checked the vendor credentials of Mr John’s company since he asked to change them.
- On a macro level, it’s not knowing where your money has gone, or how much cash flow you have at your disposal.
That’s one of the accounts payable challenges that has the biggest impact on your business at large. Without this visibility, treasurers have to deal with an added complexity in an already uncertain world.
It’s hard enough for financial teams to know how the market will act in the next months, but without clearly knowing where you stand, it’s like navigating a storm in the dark.
Your teams need accurate information to have the best chance at thriving despite the general climate. Creating (or updating) a dashboard with your accounts payable KPIs is the solution.
Financial dashboards help better manage your cash flow, and make decisions based on real-time and accurate data. Many solutions exist for this, choose one that integrates with your current tech stack if you want to get the complete picture!
Increased risk of fraud
Fraud in 2024
56% of US companies were targeted by at least one fraud attempt in 2022. According to the ACFE (Association of Certified Fraud Examiners) report of the same year, typical fraud cases caused a median loss of $117,000 to companies.
In other words: fraud is the most damaging of the accounts payable challenges. With the current economic climate and the advancement of technology, it’s become easier to defraud organizations.
Fraud in accounts payables often comes from employees not following the correct processes. They do so because:
- They choose to circumvent your usual payable processes, for instance, if needing to close a deal ASAP.
- They yield to outside pressure, real or perceived. For example in CEO fraud, victims receive a request from someone impersonating a high-level executive to convince them to send a wire transfer or sensitive information to a third party.
It can also be that your employees know the processes a bit too well. In internal fraud, they leverage their knowledge and access for their personal gain — just like the Texan woman mentioned in our introduction.
Last but not least, cyber security or social engineering experts use any means available to access your company’s funds. Businesses are at risk from many types of fraud, some more dangerous than others.
Learn more about fraud in our latest fraud report!
Using anti-fraud software
Fortunately, there is a solution to both the fraud and the mistakes that come from accounts payable. It’s using an anti-fraud solution!
Fraud protection and detection software like Trustpair completely eradicate the risk of:
- Payment processing error (sending money to the wrong bank account by mistake)
- Third-party fraud (being tricked into sending money to someone impersonating a supplier)
We provide ongoing checks of your vendor credentials, in real-time. Right before you press send to a payment transfer is when you need the most protection.
Trustpair does continual and automatic audits of your suppliers’ bank account information to ensure that:
- The business bank account numbers are correct,
- The name on the account is correct,
- Both elements match.
If there is a mistake in the bank account details or if our algorithm picks up any suspicious activity, the transaction won’t be sent.
It’s beneficial for companies with international vendors, as their account information is usually hard to get.
Using Trustpair also means all your vendor data management happens in one central location.
We operate as a SaaS, offering a secure online space for different collaborators to work together. Because we integrate with major software like SAP, all the information you access is always up-to-date. It limits the mistakes in processing.
Integrating an anti-fraud solution also sends a strong message to your employees that serious about fraud protection. With Trustpair, no one can impersonate one of your vendors. You always know who you’re sending money to, and you do it efficiently! Not doing security checks using manual processes (which are time-consuming and error-prone) frees up your team’s time, so it can focus on higher-value tasks.
- Account payables teams face challenges old and new in 2024. Increasing productivity, visibility, and data management while remaining protected are priorities.
- Companies have to adapt and leverage accounts payable automation to keep on thriving in the current climate. Trustpair helps protect your business against fraud.