Errors are inevitable in any process. Although sometimes they might be annoying and time-consuming to rectify, it’s not impossible to fix them. And we know you are having difficulty managing your accounts payable errors, but it is crucial to maintain a healthy financial system.
We aim to empower you with practical tips to help you avoid costly mistakes and enhance your financial management capabilities.
Implementing these tips can significantly minimize errors and foster a smoother and more accurate accounts payable workflow. Moreover, you can save valuable time, reduce the risk of errors, and ultimately improve your organization’s financial health.
But before jumping into that, let’s understand what accounts payables are.
What are Accounts Payable?
Accounts payable(AP) are generally an organization’s outstanding debts which consist of money owed to other companies, vendors, or creditors who have provided services or goods and have not yet been paid.
However, accounts payable can accumulate rapidly during high sales periods when many invoices arrive in short order. The debts must be paid within a specific period, usually 30 to 90 days. Meanwhile, if the supplier finds that money is not getting paid for some reason, they start charging late fees and interest payments, which in turn cost more than paying off the original bill in most cases.
Now, let’s have a look at the different types of accounts payable errors that occur.
Types Of Accounts Payable Errors
Several problems may occur with accounts payable; some of the Accounts Payable Errors are:
1. Duplicate Payments
A study by Infor says that approximately 0.1% of invoices are paid twice.
Duplicate payments can occur if invoices are received through different communication channels, say email or post. In this case, the organization pays both invoices, leading to financial losses. Sometimes, you may get the money back, but cash flow gets disrupted in most cases. However, it is a stupid mistake but could be avoided using an invoicing tool like Invoicera that avoids duplicate payments.
2. Incorrect Amount
The cheques that clear an account need to be legible and match exactly with what has been sent over, so it’s critical to double-check your accounting department before making any allegations.
3. Payments Not Recorded
If made payments are not recorded within 45 days, they can be considered unrecorded. This can seriously affect your business’s cash flow and financial stability. You may also lose money on interest penalties you would typically accrue during that time.
For example, if you receive a 1099-INT for $500 but don’t record it until a year later, you will owe taxes on $500 in interest in addition to any late fees or penalties that could apply.
4. Data Entry Errors
With large numbers of transactions, even a few simple errors will begin to affect your financial areas. Because financial documents must be reviewed for accuracy, nothing must go unchecked as you input data into an accounting system.
You can significantly reduce the chances of an error by knowing what kinds of mistakes are expected and how you can avoid them before they have a chance to happen. You can also use accounts payable software to help you deal with these errors feasibly.
5. Excessive Overpayments
Overpaying your suppliers is an accounting mistake that looks innocent on paper but can lead to intractable problems. Overpaid money is complicated or requires a lot of work to get back. This error also creates a hassle for accounts payable departments.
Instead of blindly paying invoices as they come in, it’s essential to understand how overpayments affect your balance sheet and cash flow. This way, you’ll be less likely to do it again. After all, a small mistake today can become a major problem tomorrow.
This was a piece of brief information about account payables and their different types.
Let’s move on to the 8 tips that will reduce errors in your Accounts Payable and help you save time and money!
1) Get Rid Of Manual Data Entry
First and foremost, you want to get rid of manual data entry. This is one of your most significant errors, mainly if you don’t employ double-entry bookkeeping. Automate your accounts payable process so that it’s efficient and error-free.
Spend money on software or accounting outsourcing services, whatever it takes to get out of manual data entry. Just because you have an old system doesn’t mean you have to keep using it. Technology has changed quite a bit, with some tools becoming more powerful than others.
It may take some research and trial-and-error before finding what works for your business. For this reason, we have a great choice Invoicera for you that will reduce the use of manpower and automate the invoicing process.
2) Improve Communication
When it comes to Accounts Payable, effective communication with your vendors can ensure you have everything you need when it’s time to pay their invoices.
Since errors are more common than most companies would like to admit, improving your communications with vendors can help reduce mistakes and save you money.
3) No More Excel
Suppose you find yourself spending hours entering and correcting data. In that case, it’s time to say goodbye to Excel and make room for a professional accounts payable system. Automating your AP processes with workflow automation software like Invoicera can save you time, reduce errors, reduce labor costs, and increase compliance.
4) Control The Process
Control how you pay your bills. While it’s tempting to pay all your bills online, if you have a lot of them, spending hours on an accounts payable system can be frustrating. Instead, try making payments by cheque or by hand when possible. This will help keep control of each invoice and reduce errors from confusion over which payment goes with which bill.
Ensure that every single receipt for your business is accounted for so that no unidentified costs or revenues appear out of nowhere.
5) Perform Reconciliations Regularly
When many people use your accounts payable system, it’s important to regularly reconcile your list of vendors with a recent bank statement.
Reconciliation ensures that all transactions are recorded accurately, and there are no duplicate entries or errors. This can go a long way toward keeping errors low and reducing concerns about security breaches. It also helps you catch mistakes before they grow into nerve- problems.
With proper reconciliation procedures in place at all times, there should be fewer transactions to double-check and fewer mistakes to slip through.
6) Use Control Accounts Wisely
Control accounts track revenue and expenses that are associated with a specific project. Using control accounts wisely will help you manage projects from start to finish and reduce errors associated with closing out multiple general ledger accounts simultaneously. To minimize the mistakes in Accounts Payable, use control accounts like items on an invoice.
A good rule of thumb is to have one control account for each GL account you’re paying. This will help you to account for your costs and revenues more accurately as they flow through your business. It also makes balancing a lot easier at month-end since all of your expenses should be accounted for in their respective accounts, no matter how many invoices or purchase orders you’ve got outstanding.
7) Automate Billing And Payments
Automating tasks is one of many ways you can reduce errors in Accounts Payable. By automating your billing, you ensure that payments are only made for invoices approved and sent through a process that includes internal and external parties. Invoicera automates the invoices and gets approvals through an electronic invoice approval process.
Automating your payment processing saves time and money by ensuring that payments are correctly processed. And also, there’s no need to worry about misfiled documents or incorrect data entry with automation.
Create rules that dictate how each invoice should be paid so it happens automatically. This allows you to reduce manual work and focus more on growing your business.
8) Select The Right Tools
Before you even set up an accounts payable system, choosing the right software for your company is important. Some solutions are perfect for small businesses, and others better serve larger organizations. Research different products and compare their features before choosing one.
Suppose you decide on one that can be used across multiple devices, for example, on a mobile device and your desktop computer. In that case, you’ll have more flexibility when processing invoices, entering transactions, and making payments.
9) Have an approval system
Through this, stakeholders can electronically review and authorize the invoices which eventually enhances transparency and accountability. Moreover, it enables hassle-free coordination between people involved in the approval process.
Best Online Billing Software: Invoicera
With Invoicera’s best online invoice software, companies can manage accounts payable and invoices and track payments within their browser. Whether you’re just getting started or are already handling thousands of invoices every month, our accounting software provides a full suite of tools designed to make your life easier.
We aim to create an online invoicing experience that seamlessly fits your workflow without sacrificing quality at a price that allows even small businesses access to powerful features they previously only dreamed about.
Invoicera helps your business and account payable to be more efficient by making it easier for customers to pay you with advanced features like one-click payments, email reminders, partial payment tracking, and much more. Recurring invoices can also be generated and modified using Invoicera recurring billing software to make your working process more efficient.
Additionally, our best invoicing software allows you to make changes before they go out while ensuring that all edits are tracked within a built-in audit trail. With Invoicera, you can save time and money on each invoice and free up more of both for other aspects of your business.
So what are you waiting for?
Manage your vendors with Invoicera’s best online billing software. Whether you have a few invoices every month or thousands, we have an option that fits your business needs.
No matter how much your business size is, all businesses need a compelling accounts payable process. Whether you are a two-person company or a multinational corporation, your vendors deserve timely payment and accurate invoices.
However, most businesses don’t have the time or resources to manage paper checks and physical invoices. This leads them to make costly mistakes like paying late fees or sending inaccurate payments that cost time and money down the road. Fortunately, these issues can be avoided with the right tool or software.
Instead of managing outdated processes unsuited for today’s digital world, many businesses opt for online invoice management solutions that help them save time and reduce errors while streamlining operations.
We hope these 9 tips help you implement a more efficient accounts payable process. Please let us know in the comment section if you have additional tips or questions about online invoicing software.
Q: What are the benefits of reducing errors in accounts payable?
Reduction of errors is beneficial in every process, and the same goes for the accounts payable process. Thus, if there are fewer errors, it helps in maintaining accurate financial records, prevents duplicate payments, and improves client relationships while ensuring an efficient cash flow.
Q: Is it important to establish clear accounts payable policies and procedures?
Having well-defined policies and procedures ensures consistency in invoice processing, improves accountability, reduces confusion, and provides a framework for error prevention and resolution in accounts payable operations.
Q: What role does Invoicera play in reducing errors in accounts payable?
Leveraging automation tools and invoice management software, such as Invoicera, streamlines data entry, reduces manual errors, enables better invoice tracking, and improves overall accuracy and efficiency in accounts payable processes.