By Sharon Nouh (pictured), Founder & CEO, ProSpend
Accounts payable isn’t flashy, however inefficient AP is silently bleeding cash from your corporation on daily basis. Many finance groups settle for sluggish approvals as regular, however handbook processes quietly drain time, cash and efficiency.
In Prospend’s new report, Cease the AP Leak, Duplicate Funds, Sluggish Approvals and What High CFOs Do Subsequent, we spoke to a number of Australian-based finance leaders throughout industries to uncover simply how pricey handbook AP might be; their insights have been correct and even just a little alarming. On this first excerpt article, we share a few of their insights to disclose how outdated workflows create dangers that stretch far past processing delays, suppose fraud, misplaced belief, and missed alternatives.
In response to the Australian Taxation Workplace, a paper bill can value thrice extra to course of than an digital one ($27–$30 vs <$10).. But, shockingly, many finance groups proceed to depend on clunky electronic mail approvals, spreadsheet monitoring and handbook information entry.
Guide or paper-based AP processes expose organisations to actual and rising dangers. The hidden prices embrace sluggish, labour-intensive processing the place invoices take weeks to approve, frequent errors and duplicates from handbook information entry, restricted visibility into payables and money movement, missed early fee reductions, and compliance and fraud dangers from messy audit trails. Each further day an bill sits unapproved is a day money movement and credibility takes successful.
These prices aren’t simply financial, additionally they squander potential. As Lou Krstevski, CFO of Sydney-based monetary providers agency BAC Consulting & Advisory, factors out.
“The price of outdated handbook AP techniques and processes go far past employees time. Additionally they stop an organisation from reallocating expertise to extra value-added duties. Different prices embrace the harm to company goodwill {and professional} picture when there may be fixed leakage by duplicates, errors, unchecked financial institution information,” Krstevski mentioned.
In different phrases, handbook AP doesn’t simply waste time, it steals alternatives out of your workforce and tarnishes your organization’s repute with each error.
Such points harm relationships with suppliers, monetary lenders, auditors, the tax workplace and regulators. This lack of belief is compounded by rising cybersecurity and bill fraud dangers. In response to the Australian Cyber Safety Centre’s newest Annual Cyber Menace Report, BEC scams value Australian organisations almost $84 million within the 2023-24 monetary 12 months.
In high-stakes industries similar to building, AP delays can actually cease work. Maximilian Zielinski, CFO of Issue Corp, shares simply how dangerous handbook AP might be.
“Errors or delays can maintain up tasks, create disputes, or pressure provider belief. In an business the place money movement is the whole lot, these inefficiencies carry actual monetary weight,” Zielinski mentioned.
When a mission stalls on account of a fee difficulty, it’s not simply an inconvenience, it’s misplaced income and damaged belief that may take months to rebuild.
Cascading right into a flood of inaccurate information
Guide bill processing is just not solely sluggish ‘within the second’, it triggers a cascade of downstream errors that may value much more to repair. Retief Lampen, Chief Monetary Officer at iion, explains that tiny typos or inconsistencies (like an additional area or a wrongly keyed vendor ID) can snowball into lacking entries and duplicate funds.
Morgan Wilson, Founder and Director of Brisbane-based agency Creditte, calls the detective work of fixing mismatches a ruinous use of sources.
“Groups spend hours matching invoices to POs and receipts, usually in spreadsheets. Each handoff is an opportunity for an error to creep in, and fixing errors takes twice so long as stopping them,” Wilson mentioned.
Many of those points stem from inaccurate bill information. Staggeringly, of the 1.2 billion invoices exchanged in Australia every year, 1 in 5 is distributed to the flawed individual and almost 1 in 3 comprises incorrect info, in line with the Australian Small Enterprise and Household Enterprise Ombudsman.
Emma Fisher of Sydney-based Evolve Consultancy underscores that dangerous bill information undermines the whole lot.
“If bill information isn’t correct, the financials constructed on high of it might’t be trusted,” Fisher mentioned.
Briefly, dangerous information = dangerous choices. If invoices aren’t checked correctly, budgets and forecasts turn out to be fantastical.
Elevated strain on suppliers
Provider endurance is carrying skinny. In simply the final couple of years, ‘acceptable’ fee phrases have shrunk dramatically. Two years in the past, suppliers tolerated month-to-month fee batches. Right this moment they need real-time updates on fee standing and on the spot affirmation.
These expectations create specific strain in industries like building, the place fee delays rapidly cascade down the provision chain. Suppliers and subcontractors want quicker fee cycles and clearer communication about after they’ll obtain funds. If these requirements will not be met, anticipate suppliers to escalate by aggressively chasing funds, withholding deliveries and even terminating contracts.
For organisations nonetheless counting on handbook AP processes, assembly these calls for turns into more and more tough. However the upside of streamlining approvals is substantial.
As Lou Krstevski observes, dashing up approvals doesn’t simply hold suppliers completely satisfied, it really strengthens your bargaining energy.
“The power to precisely cut back approval instances and fee offers you the leverage to renegotiate higher provider phrases,” Krstevski mentioned.
“Correct reporting of approvals and payables will improve confidence in cashflow forecasting, and the workforce can concentrate on extra value-add duties or be moved to particular tasks that add worth.”
If you pay quicker and error-free, you achieve leverage to demand early-payment reductions or higher phrases. Actual-time, correct AP information means no extra guessing in cashflow forecasting, management can belief the numbers and make choices quicker.
The query isn’t whether or not your handbook AP course of will fail, it’s when. The actual value goes nicely past processing inefficiencies. It damages relationships, exposes organisations to fraud, undermines monetary reporting and prevents finance groups from contributing strategically.
By sticking with the established order, you’re not simply tolerating a sluggish course of, you’re risking your money, your credibility, and your organization’s future. Each day you wait is one other day of misplaced cash and misplaced alternative. It’s time to behave.
This text is only a preview of the findings in our new report, Cease the AP Leak. Obtain the complete report back to see what high CFOs are doing subsequent to repair AP and how one can observe their lead.”
