Exploring The Risks Of Forgoing Automated Accounts Payable Software

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For finance department of any size, ensuring their accounts payable (AP) are managed correctly is paramount. Maintaining tight control over cash flow and not missing payments can mean the difference between success and failure for business. By forgoing the use of automated AP software, finance executives risk dragging their department and company into dire straits.

The accounts payable process is both critical and labor-intensive, making it ideal for automation. The nature of automation software is to take tasks normally done by hand and transform them into efficient, repeatable processes. Without commitment to investing in accounts payable automation software, finance department is more prone to errors, fraudulent payments, and late payments.

Human capital is the most expensive element of the accounts payable process. AP automation software takes the burden off people and allows them to apply their skills in other, more strategic areas. Automating manual tasks such as managing invoices, double-checking to prevent overpayments, and reconciling accounts can improve accuracy and reduce discrepancies which may have unintended consequences.

A significant disadvantage of avoiding automated accounts payable software is the potential for late payment penalties or missed opportunities for early payment discounts. Payments can become disorganized, leading to extended payment approval cycles and ill-timed payments that can lead to missed or late payments. Without an automated system to send reminders for payment due dates, it is highly likely that some bills will slip through the cracks. Not only could this result in significant penalties, but it can also have serious long-term implications with AP vendors.

There’s also an opportunity cost associated with lack of automated AP software. Unnecessarily tying up staff in AP management can detract from more strategic projects. Without automated AP software, CFOs are limited to reactive rather than proactive role in overall financial management.

Perhaps the greatest risk of not using accounts payable automation software is in the form of leakages. This can include losses caused by misplacing invoices and processing duplicate payments, among other things. Organizations that rely on manual processes may miss the opportunity to make more optimal payment choices, such as taking advantage of supplier agreements and discount terms. Organizations without automated AP software can lose great deal of money due to inefficient manual workflows.

Automated accounts payable software is critical tool for any finance function. Without it, risk increases in number of areas including inefficient manual processes, missed payment deadlines, penalties, and kep leakage. Finance executives must carefully weigh the decision to invest in AP automation software and the associated cost. The only way to make that judgment is to look at the potential risks associated with forgoing automated AP software.