Few business owners dream of the day when they can manage their accounts payable. AP is one of the most tedious processes in business, but it is also among the most important. If you do not have good practices in place for managing accounts payable, you could be making any number of serious mistakes that will ultimately result in business failure.
The last thing you want is to close up shop because of AP errors. Here are a few common mistakes beginner business owners make in managing accounts payable and what you should do to keep your AP in order for all time.
Assigning All AP Responsibilities to One Employee
Accounts payable is far too important and certainly too time-consuming to assign to a single employee — even a hardworking and dedicated employee like yourself. You are working to grow your business, and that means more and more payments that must be evaluated and completed on time and in full. While you absolutely should take advantage of advanced AP tech like AP automation software, you also need a team of qualified AP professionals to manage your invoices and payments.
Paying the Same Invoices Multiple Times
Almost every business experiences the accident of paying the same invoice twice. An accounts payable team on autopilot might not recognize an invoice they have already paid, especially if a vendor is sending duplicate invoices. However, a company that is continuously double- or triple-paying the same invoices is losing time, reputation and money. You can eliminate the issue of paying invoices multiple times by getting into the habit of closing a purchase order as soon as it is paid. Then, if someone attempts to pay an invoice again, they will immediately encounter a challenge that makes them think twice.
Batch-processing Your Invoices
Companies often process many invoices at a time, sometimes to include many invoices from the same vendor. It might be tempting to lump all of these invoices together into one big batch payment to save time and paperwork — but doing so is likely to cause you headaches in the future. Batch-processing could save you time and effort now only to demand even more time and effort during an audit in the future. You need to create clear records of payment for each and every invoice, so if you or your vendors perform an audit, you can provide evidence of invoice payment.
Neglecting AP Customer Service
Your accounts payable team has almost as many customers to manage as your customer service team. AP should be capable of fielding questions and concerns from vendors, employees, auditors and any others who may need more information about receivables, expense reports and payment records. You may need to consider integrating tools and processes to help your accounts payable professionals manage their customer service roles while also completing their core AP tasks.
Using Paper in Your AP Process
At some point in history, paper was an incredible innovation that allowed for outstanding organization of records — but that point has long passed. Today, if you are making a paper copy of any AP information, you are inviting chaos into what should be a straightforward and simple system. Paper copies are difficult to update with evolving information, like a rising interest rate or a credit that lowers the amount to be paid. Paper copies can become lost or damaged, and they can be copied further to create confusion regarding completion of payment. You should strive to digitize your entire accounts payable process and prevent paper from popping up at any point.
Allowing Overdue Payments
Almost all mistakes in accounts payable end with the same conclusion: an overdue payment. Unfortunately, overdue payments are expensive in more ways than one. Many vendors apply late fees that will deplete your business’s already tight budget, and almost all vendors will lose respect for companies that do not pay promptly and in full. Because you want to maintain positive relationships with all your vendors and avoid financial waste, you should keep on-time payments as a top priority for your AP team.
Accounts payable might not be the most thrilling business operation, but it is among the most important. By thinking critical about AP processes and avoiding key mistakes, you can keep this essential business department running smoothly as your company grows.