Risk Of Not Automating Accounts Payable
AUTOMATE PURCHASE ORDER
Adopting and utilising accounts payable automation software has become necessity for companies of all sizes in the current market climate. While it may seem that the time and resources needed to introduce such system produces an obligation of too much upkeep, in the long run it is far more cost effective and efficient than manual processes. In the absence of accounts payable automation software, business will be exposed to several financial risks, which they can ill-afford to take.
The first and foremost risk of manual accounts payable processes, is that of fraud. Financial fraud in the accounts payable and receivable departments has increased exponentially for businesses without automated systems in place. The lack of reporting and audit trails built into manual system leaves the company and its finances vulnerable to fraudulent activity. Additionally, manual reconciliations rely on human interference and input, meaning the process will rarely be error-free. As manual systems are labour intensive with high opportunity costs, they lead to opportunities for employees to capitalise on them.?
Lack of visibility is another high risk that companies risk when they do not have automated accounts payable processes. Though manual processes may be completed with diligence and accuracy, they may still be error prone and/or unaccounted for. Having automated software in place means that reports and audits can be pulled at any time to evaluate the financial health of the company. This prevents errors and allows any discrepancies to be spotted quickly, minimising the damage suffered by the company.
Not only does the lack of automation cause financial instability, it also affects the companies cash flow. With manual invoice processes, the reconciliation of payments and tracking of vendor due dates continually accumulates significant delays. This can in turn lead to late penalties and change in vendor priority, so payments that should be made on time may not be, further impacting cash flow. Automated accounts payable processes, on the other hand, can be efficient in releasing payments and ensuring that funds are not blocked, stabilising cash flow and enabling the efficient allocation of resources.
Achieving compliance with financial regulations is also made significantly more difficult in the absence of automated accounts payable processes. As manual processes lack the built-in audit trails that automated systems possess, the burden is placed on the companies employees to both track and document their transactions accordingly. This can be difficult, time-consuming, and expensive. Automation not only aids in achieving compliance, but it also offers the assurance that compliant procedures have been followed and have been effectively executed.
Finally, manual accounts payable processes can also strain relationships with vendors. This is because of the previously-mentioned delays and other discrepancies that can arise from them. Vendors will not be fully informed or aware of when payments should arrive, or why delays have occurred. Automated processes, on the other hand, will enable the company to provide proof of payments in timely manner, resulting in the vendor being able to track and monitor payments proactively.
For companies? financial stability and security, reducing their risk should be at the top of their agenda. Accounting for the costs associated with setting up accounts payable automation software, the return on investment generated immensely outweighs the risks associated with manual accounts payable processes. They can ensure regulatory compliance, reduce financial fraud, enhance vendor relationships, and stabilise cashflow, all through simplified accounts payable task. Therefore, it is strongly recommended that any company that lacks an automated accounts payable solution begin the process of implementing one in order to remain competitive and secure.
