Let’s face it. It’s the job no one wants and no one wants to think about: paying suppliers. The accounts payable effort is an unsexy sunk cost to the company. Every step of the accounts payable supplier payment operation, from invoice processing to approvals and payments to issue resolution to reconciliation is an operational vortex for the company.

manual-switchboard-accounts-payableAccounts payable is a liability in more ways than one.

And that’s a real shame because accounts payable people are some of the most meticulous, service-oriented, and punctilious. They have to be in order to contend with the minutiae of supplier payments. But a great chunk of their effort is still about contending with error-prone, manual processes not unlike switchboard operators faced back in the halcyon days of telco.

Wouldn’t AP practitioners’ observational, rule-based skills be better utilized in delivering insight rather than making payments? In fact, they would. When asked if AP operations were more automated, what would AP rather do, majorities responded that they’d focus on the more analytical aspects of AP.

priorities for cfo

For companies where there are a few suppliers and invoices to deal with, manual processes may be fine. But when you start considering hundreds or thousands of invoices and transactions, the gargantuan effort to inbound, validate, approve, and process payments is an operational roadblock. Unpaid suppliers lead to unfulfilled goods and services and can stop your business. Then you have to mix in tax issues, fraud and risk checks, and the various payments that can’t be completed because of a host of reasons (which now someone now has to investigate and resolve).

Supplier payments: the job no one wants to do, but what every company must do perfectly.

flooding-houseImagine being put into a room where a constant flow of water is coming at you and as accounts payable, you have to route that water to the right place and all you’re given is a set of tubes. And oh, you’ve got to get it done on time otherwise your vendors are going to charge you extra and your internal customers will be frustrated or business will stop. Sometimes the destination of the tubes is wrong. Sometimes, the amount to pay isn’t exactly what’s on the invoice. Sometimes it’s not clear who owns a particular invoice. The madness that follows is what AP confronts on a daily basis.

Then, after you’ve siphoned the water to the right people, you now have to reconcile how much everyone was given and from which supply tank. All the while, the government needs you to track and report who needs to be tax for their water. Occasionally, someone is paid the wrong amount which then must be rectified. In fact, according to a recent survey we conducted, nearly 32% of respondents reported a payment error rate of over 3%.

error rate on supplier payments

While 3% doesn’t seem like a lot, a company that makes 400 payments a month encounters 12 errors and can cost a company over $20,000 a year. » Try our calculator to do your own analysis.

Let’s just hire more people

Certainly one solution is to bring on more resources to contend with the volume. That’s not always the best choice. If you’re a lean or small organization and want to stay that way, do you really want to use up valuable headcount on a non-value-generating position? Or would you rather hire someone who’s more focused on strategy, managing cash flow, forecasting, and analysis? And can you find someone you can train and trust to handle the payments? Someone who now has access to your company’s funds?

Instead, maybe accounts payable people need to declare that there are mundane tasks that they should never have to do again, and that their lives would be more fulfilled by applying their talents in other areas.

So here’s a proposal:

The Accounts Payable Manifesto


1.

Accounts Payable team members are assets, not liabilities.

2.

Our time and skills are valuable and we want to focus them on strategic cash management, fraud prevention, forecasting, and financial insight that will benefit how the business works.

3.

We want to automate as much as we can to ensure quality and accuracy in what we do and reduce our audit risk.

4.

Approvals should be simplified and secured, not soul-crushingly boring.

5.

Suppliers and partners need to take ownership for cleansing and maintaining their own contact, tax, and banking/payment details.

6.

As a reward, suppliers and partners shall be paid on time and in whatever method or currency makes the most sense for them. As a business, we also benefit from a strengthened relationship, potential credit opportunities, and an enhanced reputation.

7.

Invoices should be easily imported into accounting and payment systems.

8.

Payment data from banks must be simple to reconcile and relate to accounting records.

9.

Every process can be improved and having more time to focus on them will make operations better.

Agree with this? Be sure to share it. If you care to add more, shoot us a comment below.