5 AP Mistakes That Could Cost You Big!

I was recently talking to a controller who was frustrated because his team made a duplicate payment of $100,000. Now this is one of the many problems which we see when you're scaling your AP team. And if you are someone who is responsible for scaling your AP team, this video is for you. Because in here I'm going to reveal five AP mistakes your team must avoid while scaling and stick till the end where I'll share one simple tip that you can implement to reduce the time you spend with vendors regarding payment status updates and so on. If you're joining me for the first time, welcome. My name is Sachin Sharma. I'm the founder of procuredesk where we help growing companies speed up their purchasing and AP controls. So let's jump right in. Number one is duplicate payments. So very common scenario in growing companies where you have multiple invoices coming in, maybe you don't have a central place to track all the invoices and so on. Or you know, vendor just sends the same invoice twice, happens all the time. So you'll end up making duplicate payments. And because you don't have any control on in terms of you're not checking against a purchase order, you send it to the right person for approver, they approved it twice and then you paid the vendor. Right. So a simple way to avoid that is to make sure that you have a purchase order process that is linked to an invoice. So every time an invoice comes in, you see basically for which purchase order it is and whether you have paid this or not. Right. Number two is you are missing early payment discount. So if the vendor offers an early payment discount and you do have the cash flow with you or to kind of pay those invoices faster, you're basically losing 1 to 2% because you're not paying them sooner than the challenge is approval takes so long that you can't just pay them early. Forget about early payment, you can't even pay them on time. So a way to kind of fix that is to automate the approval process and automate any matching with purchase order and invoices and only send exceptions for approval so you're not chasing people for getting something approved and so on. Number three is manual data entry. So your team is manually entering invoices. On an average, a Invoice costs around 20 doll for you to handle manually. But forget about the cost. Right. Think about the errors. In one of our study, we found that the invoices that were entered manually, they were around 4% error rate invoice, quantity entered wrong, price entered wrong, and so on. So that could lead to overpayments, that could lead to underpayments, and then you're chasing or working with your vendors to kind of resolve those issues. Right? So simple fix for that is centralized invoice capture process use technology like OCR and AI to automatically create the invoices so your team is not spending time on manually creating them. Number four is decentralized purchasing. So when everybody can buy everything, that leads to chaos, right? It's as simple as that. So a simple way to fix that is having a purchase order process up front so that no matter who is buying from where they're buying, you have an idea on what is being purchased so that when the invoice comes in, your team can match an invoice with a purchase order and know exactly what is this for, no matter from where it is purchased. Right. The other benefit of this strategy is even if you're dealing with decentralized purchasing, you can have a central process for setting up vendors. So it kind of forces that cadence of people are coming to you and you know, getting something approved before they actually go issue a purchase order. Number five is poor fraud controls. Your team is basically making payments without falling best practices. So what I mean by that best practice for vendor setup, changing their payment information, checking for phishing emails, right? And now nowadays you, when you think about frauds, it's very common for people, you know, phishing email scams, where the email come from, CEO, and this invoice needs to be paid now because it's urgent, right? And if you have a junior resource who doesn't know what they're doing, they could just land up processing that and you have a fraud on your hand to deal with. Or you know, you get a very sophisticated email with the like they ask for changing the bank account and you're not doing basic things like micro deposits or calling the vendor on the register phone number to confirm that they actually submitted the request and so on. These are some of the things you should look for to avoid fraud. Right? And you can only do that if you do the first four, because now your team has, I would say, free bandwidth to focus on these important issues which can lead to fraud and so on. So those are the five areas. Now talking about the bonus tip, what we commonly see with vendors is once they submit the invoice, they're always chasing, right? Your apt, where is my payment, when will I get paid? Is my invoice process and so on. And that is taking hours every week for your team to respond to. I mean we have always seen flooded inboxes inboxes where you just can't respond to vendors on time. So rather than focusing on how do I speed up my email approval process or email process, you should just implement a vendor portal and allow the vendor to sell service. So check for invoice status, submit new invoices Submit an invoice against a purchase order. So you're not only reducing the time your team spends on chasing those inquiries, but you're also enhancing the process in a way that the vendor is doing the work rather than your team is doing the work. So implement this strategy to ensure that you are scaling your AP process without adding headcount. So just to Summarize here the five AP mistakes you should avoid 1. Duplicate payments number two don't miss the early payment discounts if you have the cash flow number three. Avoid manual data entry Number four. Decentralized purchasing so having a purchase order process in place and avoid over fraud controls. If you like this video, hit the subscribe button so you get notified when we release videos like this. Thank you for joining me today and I'll see you in the next video.