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5 Types of Accounts Payable Errors (+How to Minimize Them)

September 26, 2019

Suppose you are receiving invoices from various suppliers and see that your purchase order software does not have any record of the purchases made.

This means that you are not sure whether to pay them or not. When you're working in the accounts payable department, it is obvious that you'll understand the pain.

In that case, you have to reach out employees working in other departments and have to chase them to get the correct information. Making calls and sending emails may not always be helpful. Instead, you will have to go personally to their desk and ask questions.

Your task gets difficult when you have to figure out what are the items purchased and by whom, if those orders were authorized, do you need to pay invoices, and more. Accounts payable problems mainly take place because of the unorganized processes.

Types of accounts payable errors

We have gone through and listed out the following accounts payable errors to help you better understand and identify them.

1. Errors in manually entering data

Entering data inaccurately is one of the biggest issues of accounts payable. It is difficult to track employees who haven’t exchanged a PO number or the amount payable while entering data manually in the software. When your organization has to essentially rely on entering data manually for invoice payment or in order to create purchase orders, errors are bound to crop up.

2. Paying invoices before receiving receipts

Did you ever pay an invoice before receiving the receipt of a product? During busy days, accounts payable staff may, at times, approve payment of invoices even before receiving them. They do not confirm whether the product or the service has been delivered properly or not.

3. Double payments

At times, suppliers send second invoice if their first invoice does not get processed. So, now you have two invoices for the same product maybe one on your desk and the other one misplaced inside your files. So, it is obvious that you have to pay for both invoices.

4. Slow invoice processing

Manually processing invoices is a cumbersome task and takes a lot of time. With an automated accounts payable system, average invoice processing per employee increase more than 5 times. So, if an accounts payable department can process 1000 invoices manually every month, then automating AP process can increase the number more than 5000 per AP employee. 

TIP: Learn all about invoice processing to brush up your knowledge and grow your expertise. 

Read more: What Is Invoice Processing?  →

5. Delays in payment

Missing a due date and not paying on time is the most common problem that AP departments face. While you are working with the suppliers, they expect their payments on time. They may feel annoyed when you keep on telling them that unfortunately you have lost the invoice, or missed the due date.

Continuous late payments lead to receiving late fees which make hole in your budget. When your supplier is not happy, they may cut ties with your organization if there is no solution to late payments.

4 tips for minimizing accounts payable errors

The following four tips can help with minimizing the above accounts payable errors. See which work best for you!

1. Leverage online accounts payable software

Excel spreadsheets cannot provide you a complete picture of procurement process. It includes entering data manually which is a natural cause for errors.

Accounts payable (AP) management software systems can streamline your accounts payable processes by completely eliminating human errors taking place while entering and calculating purchase orders manually. 

TIP: See the best AP automation software available for your company's accounts payable needs on G2. 

See the Highest-Rated AP Automation Software, Free →

Your data is secured on your laptops and you can easily access them from your smartphones. It becomes easier for you to suspect any kind of wrong entries with an online AP system that turns troubleshooting a breeze. 

2. Provide complete visibility

You must be able to view the entire accounts payable process starting from who ordered which product, who signed after deliveries, who matched the items, and who made the payment for invoices. You can simply do it without making repetitive phone calls or sending emails multiple times.

This way you will have everything at your fingertips that you need to resolve a problem along with knowing your point of contact if there is any question to ask. Receiving granular insights makes your work easier without worrying about audits.

3. Identify trouble errors

If you are tracking accounts payable for some days, then you will find few trends recurring in payment scheduling. You can predict monthly and annual trends and generate cash flow management accurately such as at which time of the month you are spending cash often or which categories in accounts payable fluctuate the most.

Identifying the trouble areas enables you to plan them in a better way so you have a good amount of cash with you in order to meet your requirements.

4. Three way matching

This is the act of investigating shipping orders, purchase orders (PO), and invoices in order to check the amount and quantity are same and whether the procurement transaction is legal. Any kind of deviation is alarming and could signal possibilities of fraudulent activities or errors while ordering and following up.

One of the biggest drawbacks of this AP process is that it is extremely time consuming and a tedious task. Accounts payable tracking software helps eliminate the time taken by an employee to search for the right documents.

The bottom line

So, if you are successful in resolving the above accounts payable problems, there is no need to worry about delayed or missed payments. At the same time, you can also maintain a good relationship with your vendors and your business will make most rebates on large volumes of purchases made. 

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