As a small business owner, you purchase a lot of goods from vendors or suppliers. Most businesses get goods for credit and pay the amount on a fixed day every month. Accounts payables directly affect your cash flow. You may apparently have abundant cash flow, but you will need to pay a sizable sum of money as a part of your payables. Keeping tabs on your payables gives you clarity on your cash flow and maintains a good rapport with your vendors.
Unfortunately, small businesses struggle to handle multiple challenges in the accounts payables. There are a lot of times when we miss out on the purchase orders. And most times, we tend to accidentally ignore the late invoice notice, looking at the original invoice at hand. These issues may seem simple in the beginning but will inflict a great mess when repeated unintentionally.
Locating where the problem arises and fixing it is daunting. That’s when technology and automation come as your savior. With the help of accounts payables automation, you can easily manage the full cycle of the accounts payable process without any glitch.
This article throws light on what accounts payable automation is, what are the apparent challenges in accounts payables and how to overcome them.
Why are accounts payable significant?
For instance, let’s say that you are a small business owner. You buy goods from a vendor for credit. You receive an overcharged invoice on delivery of the goods at a point in time. So, to get things straight, you will look for the issued purchase order. Unfortunately, small businesses do not take up purchase orders seriously and fail to issue purchase orders.
Purchase orders are not usually issued in small business circumstances, as it is time-consuming. In such occurrences, you will be confused about whether to pay the extra amount or not. And this disorganized way of payables may affect your rapport with your vendor and eventually affect your business.
But, with automated accounts payable systems, every inch of your payment, right from purchase orders are taken care of until the payment is settled successfully. You will have all the activities tracked down and will know where things go wrong if any.
Common Accounts Payables Challenges
These are some issues that are likely to be faced that affect your small business accounts payables.
Manual data entry
Accounts payables, when handled manually involve painful manually keying. A person has to sit and enter each digit of each transaction manually into the system. Then the payments have to get approved and then the payment is released. In this process, however vigilantly done, manual data entry is highly prone to errors. As a result, you will have to scroll through the whole record to find and fix the error. This is a laborious and inefficient process.
Lost Invoices & Purchase Orders
When you have hundreds of invoices coming in, there are chances to miss out on an invoice or its due date, when payables are handled manually. You can call up and ask your supplier to resend the invoice, but for this, you should be aware that a particular invoice is missing. But, you will come to know that the invoice is missing only when the Supplier reminds you of the immediate payment request. Such missed invoices may greatly hurt your relationship with your vendor.
Mistaken duplicate payments
Vendors usually re-send an invoice when the invoice is not paid on time. But each business has a fixed paying date each month. That said, there are a lot of chances that you pay for both invoices. This usually happens when the same business has different branches. The supplier will send invoices to all the branches, and the payment is either delayed or paid twice. Such duplicate payment has a direct impact on your business cash flow. And when such duplicate payments are made, it is hard to chase the vendor and get refunds.
Slow Turnaround
Manually processing payables is not only laborious and critical but also painfully time-consuming. Things may get out of hand when your internal team is not so efficient. If each invoice has to get approval from multiple desks, the process can be so long. It takes more time when you have paper-based invoices or e-mails. This may prevent you from getting early payment discounts and in the worst cases, you may even have to pay late payment penalties.
Costly and inefficient manual records
When filing a purchase transaction, there are two documents involved – the purchase order and vendor invoice. And more documentation is involved in some special cases. When your business gets expanded, you will have to manage truckloads of transactions and prepare a number of documents. That comes along with the storage cost to maintain records. Also, it is very difficult to rummage through a pile of records to track and locate a particular document. A study by CFO tells us that small businesses spend about 62% of the company’s labour cost on manual invoice processing.
Let’s say you need a particular invoice from last month. You have to sieve through the hoard of records to locate a single invoice. Archiving, tracking, retrieving and updating these manual records is very time-consuming and painful. Also, storing paper-based records for a long time is risky as they are too vulnerable to be stored. Most importantly, some invoices may get lost at the time of audit or tax filing.
Accounts Payables Automation – Best Practices for Small Businesses
If you are struggling with one of the above mentioned payable challenges, it is already high time you should think of other alternatives, efficient ways to manage your payables.
All the challenges mentioned above can be resolved when you switch to automatic payable processes. With automated payables, you can enhance the speed and accuracy of the process. Automation removes the work out of your payables workflow. Every invoice, every approval and denial is tracked down and so there is no chance of getting stuck anywhere. This means no more disappearing invoices, late payment penalties and never double payments.
Also, when you choose to accept and pay invoices digitally, you will have every inch of your monetary activity recorded. You can even connect your payment system to your accounting software and let the data flow into your accounting system, as you make and receive payments. Most accounting software has OCR (Optical Character Recognition) features or add-ons so that you can scan your paper receipts and get digital records.
Accounts payable tools usually come with reminders that will help you avoid late payments. And there is no chance of missing invoices and duplicate payments. If you have recurring payments, you can also set up automatic recurring payments, in which the system automatically pays your monthly invoices by itself.
Even if the payments get stuck somewhere, you can easily locate in which stage the payment is and can fix the issue in a snap. Moreover, you need not be there to approve the records. You can pre-set your approval conditions so that payments can be done even when you are away. You can also offer limited access to your team members, just enough for their part of the approval. Also, you will get financial reports to make decisions with better clarity.
Key Takeaway
If you are facing a lot of challenges in your payables process, it is time to switch to automation. When you automate your payables, the entire process goes friction-free and on the mark. You can improve your efficiency, reduce errors and pay on time with automated payables.
Similarly, if you are facing errors in manually entering transactions into QuickBooks, you can take up automated bookkeeping tools like PayTraQer to sync all your sales and transactions into QuickBooks in real-time. When PayTraQer records the transactions, it also records the customer, item, shipping, tax, refund and every other detail attached with the transitions. With such automated bookkeeping tools, you can save time, labour and always have perfectly balanced books. You can try exploring the application with a 30-day free trial.
