Addressing Accounts Receivable & Accounts Payable Risk Through Automation Software
DIFFERENCE BETWEEN ACCOUNTS RECEIVABLE (AR) AND ACCOUNTS PAYABLE (AP)
Risks associated with accounts receivable and accounts payable are unavoidable, but their severity can be moderated through automation software. Without the implementation of software-based solution to reconcile these accounts, the potential for inefficiencies, errors, disputes, and even fraud increases. For an executive looking for an automation software solution, it is important to weigh the cost-benefit of the acquisition and ensure that it is suitable to their organization.
The most common risk associated with accounts receivable (AR) and accounts payable (AP) is dealing with incorrect balances. Without systematic software-based system to store and reconcile information, discrepancies between the two accounts can exist without being noticed in timely manner. This can cause serious problems if vendor or customer notifies their own balance discrepancies or audit results. As networks grow and become increasingly specialized, it becomes much more likely that errors are made and become known to others.
The potential losses associated with AP and AR can be considerable. Financial losses from incorrect metrics like inaccurate pricing, late fees, or duplicate payments can be severe depending on the stakes. Disputes that are concluded unfavorably can result in reduced customer relationships, weakened reputation, and major losses. Finally, fraudulent activity can occur if internal controls are not properly implemented.
Automation software provides several key benefits for organizations managing accounts receivable and payable. Chief among these is the improved speed, accuracy, and consistency of the entire process. By automating the process of entering data, organizations achieve improved accuracy that are key components of strong audit trail. Reconciliations are more efficient, reducing the need for manual efforts typically required to ensure accuracy. Software-based accounts reconciliation further helps organizations to stay on top of any discrepancies that may exist, reducing the chance that errors will cause major losses in the long run.
Software-based AP/AR solutions are widely available, ranging from low cost single user solutions to full-scale enterprise solutions. The most important factor in finding the right solution is understanding the existing processes and requirements within an organzation. Having an accurate assessment of the current process will help ensure that the wrong solution is not purcahsed. Clearly communicating the wants and needs to the software provider will also help to ensure that the chosen product can be tailored to fulfill the organizations needs.
Due to the various risk associated with accounts receivable and accounts payable, automation software is becoming one of the best ways to mitigate these. Through the implementation of software that is tailored to the current process of an organization, an executive can efficiently and accurately reduce profit loss from manual inaccuracies and errors, and protect their stakeholders from losses due to fraudulent activity.
