No accounting system is perfect. Learn about the common problems we’ve identified with AR and AP departments and how to overcome them in this blog!
Want To Improve Your Accounting System?
Despite the automation and simplification of account processes, 27.5% of professionals reported that incorrect data has been entered in their accounting processes. Even if your accounting department hasn’t made any mistakes, your system has room for improvement. If you want to increase the accuracy and efficiency of your AR and AP departments, keep reading!
Common Problems for Accounts Payable Departments
There are several issues that bog down many accounts payable departments. Does your AP department struggle with these issues?
Slow Processing Speeds
Slow processing speeds are especially prevalent in paper-based systems. Between manually writing things down and waiting for them to be delivered by mail, slow processing can kill AP departments.
This can have serious consequences. Making payments late leads to fees, delayed shipments, and poor credit scores. Your business shouldn’t tank because a check got lost in the mail, so you might need to reconsider your paper-based accounting system.
Things Aren’t Matching Up
Small errors in the data matching process can lead to a huge waste of time. Data matching errors occur frequently in accounting systems that are spread across multiple sources. The primary reason for issues is simple mistakes in data entry.
Conflicting billing information can cause matching errors as well. It’s possible that some of your billing information sources are outdated. Regardless of the source of the problem, matching errors cost a lot of time.
While it might make your suppliers happy, you definitely don’t want to be paying for any goods or services twice! Duplicate payments are surprisingly common and usually occur when accounting systems are inconsistently spread across multiple platforms. Simple human error in data entry regarding supplier information, scheduling, or payment amounts could cause duplicate payments.
Solutions for Accounts Payable Departments
Accounts payable departments are busy. Between supplier satisfaction and internal cash flow, implementing new processes can feel impossible. However, implementing these solutions for your AP department is well worth it and will help address the issues we mentioned above.
Many AP department challenges stem from heavy reliance on paper. From the slow processing speeds we mentioned earlier to things simply getting lost in the mix, systems full of paper waste time.
Transitioning into an electronic system makes your processes easier to automate. Automation saves time, cuts out the possibility for human error, and frees up your workers for higher-priority tasks.
Implement a Three-Way Matching System
If your accounts payable department isn’t using a three-way watching system, you’re doing something wrong. While three-way matching systems might seem like a lot of time, they make your department more efficient by reducing the time spent fixing mistakes.
This system can also give you the confidence to roll out automated approvals. Certain accounting and ERP (enterprise resource planning) softwares automatically check if purchase orders, invoices, and receipts all match up. If they do, they’re automatically sent out. If they don’t, the system sets a flag.
Automate Your AP System
Automation has been a common theme in how we believe you can improve your AP department. It saves time and labor while keeping your accounts payable department accurate and running smoothly.
Common Problems for Accounts Receivable Departments
Now that we’ve gone over common AP department problems, let’s review some issues that frequently arise with accounts receivable departments:
Cash flow is the life blood of any business. If a large portion of your customers are making their payments late, then your business is going to struggle with managing its working capital. Consistently late payments can hinder any business and are unfortunately common.
A lot of information goes through an accounts receivable department. Depending on how your data is organized (or disorganized), data management can become an issue. If your accounts receivable department is constantly switching between sources, it doesn’t only waste time—it could lead to errors when transposing data.
Your accounts receivable department may struggle with time management. From wading through countless emails to resending invoices over and over again, there’s no shortage of ways your team can lose time.
Solutions for Accounts Receivable Departments
Keep your cash flow consistent and your accounts receivable department efficient by following these steps:
Revamp Your Communication
You might need to improve communication with your clients. Make sure you’re consistently contacting them and try to be flexible with their communication needs. If they say they need to be reminded before their payments are due, make sure to schedule reminders to them.
Outside of flexibility, check in with customers regularly to see if their needs have changed. If payments are going to come in late, maintaining a good line of communication means you’ll receive honest answers as to why. Transparency is huge for your accounts receivable department.
Investing in an ERP system is an excellent way to manage your business’s data. ERP systems bring all of the data your accounts receivable department needs onto one platform, keeping your data uniform and easy to access.
Partner With a Payment Facilitator
A payment facilitator can help you deal with digital payments by lowering your processing costs. These facilitators are based around volume, so you’ll continue to save as you build your relationship with them.
Rapid Collections Can Solve Your AR Issues
If you’re continuing to struggle with your accounts receivable turnover even after following these steps, partner with a collections company. Rapid Collections has a wealth of experience in the collections industry and is committed to satisfying our customers.