8 common accounts payable pitfalls and how to avoid them
by Anna Koussertari
It's tough enough running a business without having to worry about making mistakes with your accounts payable. Even the best-managed businesses can fall into common traps that can cause problems down the road. By being aware of these traps and taking steps to avoid them, you can save yourself a lot of headaches. The following is a list of the most common accounts payable mistakes you should watch out for and try your best to avoid.
The most common issue with accounts payable is that many people forget or miss an invoice. This can happen for various reasons, such as not having a system to track invoices or simply being forgetful. If you find yourself in this situation, it's important to take action immediately to avoid any further problems.
The first step is creating a system to track invoices, whether using a software program or simply keeping a physical file. Once you have a system in place, review it regularly to ensure that all invoices are accounted for.
If you miss an invoice, reach out to the vendor as soon as possible to let them know and make arrangements for payment.
Double payments occur when a company accidentally pays the same invoice twice. This can happen for various reasons, such as duplicate invoices being entered into the system or a mistake when manually processing payments. Double payments can also occur when a company pays an invoice early and accidentally pays it again when it is due, so it is important to catch it early and correct the error.
To avoid duplicate invoice payments, keep accurate records of what has been paid and what is still owed. Always check to see if the invoice has already been paid when making a payment. If you have any questions, contact the person who issued the invoice to confirm the payment status.
Data entry mistakes
When a company has a system that requires manual data entry, it is susceptible to errors. Data entry errors can lead to inaccurate financial reporting and can be costly to correct.
These can be easily avoided by taking care when entering data into the system and by checking the data entered for accuracy before completing the transaction.
Businesses should also consider implementing an automated accounts payable system. Automated accounts payable systems can help improve accuracy and efficiency and save businesses time and money in the long run.
Lack of internal controls to prevent fraud
Fraud in accounts payable is an intentional act of deception by a person or entity in order to gain a financial advantage. This can take many forms, such as falsifying invoices, using forged documents, or manipulating accounting records. This type of fraud can be difficult to detect, as it often involves complex financial transactions.
There are a few common ways businesses can prevent fraud, such as implementing proper segregation of duties, instituting strong anti-fraud policies, and conducting background checks on employees. However, the best way to prevent fraud is to have a strong system of internal controls in place.
Additionally, suppose you suspect that fraud has occurred in your accounts payable. In that case, it is important to contact an experienced accountant or fraud investigator to help you determine what has happened and how to prevent it from happening again.
If a company experiences rapid growth, its accounts payable may struggle to keep up with the increased demand. Additionally, if a company changes its accounting software or process, this can also cause problems. Scaling issues can also occur when a company moves to a new location.
Businesses can do a few things to solve accounts payable scaling issues. One is to automate as much of the accounts payable process as possible. Another solution is to outsource accounts payable services to a third-party provider. This can be a cost-effective way to scale up accounts payable operations without hiring additional staff or investing in new software.
Lack of communication with vendors
Lack of communication with vendors can lead to payment delays, misunderstandings about terms, and other problems. To avoid these issues, establish clear communication channels with your vendor from the start. Keep lines of communication open by regularly checking in with your and updating them on your company's payables processing needs. By doing so, you can avoid misunderstandings and ensure that your payables are processed smoothly.
An exception invoice is a type of invoice that is created when there is a discrepancy between the expected invoice and the actual invoice. This can happen when there is a change in the price of the product, a change in the quantity of the product, or a change in the terms of the sale. Exception invoices can also be created when there is a problem with the billing or shipping address.
To avoid errors when handling exception invoices in accounts payable, carefully review each invoice for accuracy. If an error is discovered, reach out to the vendor to correct the mistake.
Batch-entering your invoices
Batch-entering invoices can be a common challenge in payables. Businesses receive many invoices at once, making it difficult to enter them all into the system individually.
However, batch-entering invoices in the accounts payable system can be problematic because it can create duplicate entries and make it difficult to track payments. This can lead to overpayments and other costly mistakes.
There's a simple solution. Just enter each invoice one at a time, and you'll avoid making any mistakes. This may take a bit longer, but it's worth it to make sure your invoices are entered correctly into the system.
Mistakes in accounts payable can mean the difference between an effective, fast-paced business and a sluggish, debt-plagued company. These issues may seem simple enough to ignore, but they can wind up costing your business money. If you've found that your accounts payable process has been lacking, it's time to implement some methods to help make it more efficient.
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