The Accounts Payable function faces a continual balancing act of maintaining a healthy cash flow while keeping a good relationship with suppliers and vendors. Ensuring that payments are accurate and timely is an important aspect of this, and below are five common AP errors that not only can disrupt this balance, but also cause your business to overpay for goods/services rendered and waste resources on correcting mistakes.
1. Data Entry Errors
Human error is clearly one of the more widespread issues in accounts payable, with data entry inaccuracies leading to a number of problems, including overpayment, underpayment, or delayed payment. Sometimes, these errors go unnoticed and even when discovered, there are the added complications and costs of mitigating those mistakes. An automated AP system that can scan and input invoices can drastically reduce these errors.
2. Disappearing Invoices
Occasionally, an invoice can be misplaced or even accidentally discarded or destroyed, resulting in missed deadlines for payments. This is especially true in fast-paced workplaces with manual processes. By the time this is discovered, late fees can be applied, bookkeeping becomes more complicated, and vendor relations can be strained.
3. Duplicate Payments
Whether caused by double-entry or by duplicate processing, double payment can occur when a second invoice arrives before payment has been made. Duplicate payments on the same invoice are an obvious issue, negatively affecting the bottom line if not discovered. Even when caught, cash flow has been negatively affected and productivity is affected while recovering the overpayment.
4. Early Payment of Invoices
Keeping on top of payments is obviously a good thing, but there are some negative impacts when invoices are paid before goods or services are received and verified. For example, paying before delivery can complicate matters if a shipment does not arrive or items are missing or damaged. Early payment results in lost leverage in reaching resolution of the problem, as well as accruing labor time and costs to resolve it.
5. Invoice Math Errors
Your suppliers’ and vendors’ invoicing teams can also make mistakes on the invoices you receive, so matching POs and invoices to confirm that amounts are correct is also an important step to avoid overpaying for good and services and maintain optimal cash flow.
Your output is only as good as your input, so take steps to ensure that the data is correct and the right processes are in place to catch these common errors affecting accounts payable. Making your AP department function effectively is better for your bottom line, cash flow, and your reputation. LCW CPAs has the proven expertise to help with issues from bookkeeping services to accounting system consulting. Contact us to discuss your accounting services needs.