Top 5 Accounts Payable Challenges Faced by Businesses

• Reading Time: 7 Minutes
• Published: February 7, 2023
• Last Updated: February 12, 2025

Although accounting for accounts payable is relatively straightforward, businesses can need help to stay on top of things. This is especially true with seasonal businesses or organisations with high vendor and supplier volumes. Inexperienced business owners or managers may not know all the ins and outs of accounts payable, making staying on top of things more difficult. Many businesses face these same difficulties at one point or another. If your business has experienced one (or more) of these common AP challenges, you are not alone. Do not stress—we have solutions to help you get back on track in no time! Keep reading our blog to know about the most common accounts payable challenges faced by businesses and how you can mitigate them to improve your accounts payable management. But first, let us understand more about accounts payable and its management.

What is Meant by Accounts Payable?

Accounts payable is a critical component of a company’s accounting function. Accounts payable determine a company’s creditworthiness and dependability in the market. It has a direct impact on the company’s cash flow and its relationship with its suppliers. Though with technology enhancement over time, businesses are using accounts payable software or accounts payable outsourcing to ensure effective accounts payable management.

Accounts payable management is a system that manages a company’s debts to third-party vendors or suppliers that it incurred on credit and has yet to repay. These debts could include inventory or supply purchases, accumulated expenses, and short-term operational costs. The process of accounts payable management entails purchasing, looking for trade credit lines, and negotiating favourable purchase terms. As business owners, you should closely monitor AP management because it helps to ensure positive cash flow and regulate business finances. However, the challenges of the AP department serve as roadblocks to achieving effective AP management. Let us list some of the common accounts payable challenges.

1. Paying too much in invoice processing- Your AP department is responsible for paying vendors and suppliers for the goods or services that your company has received. By paying these bills, you are “clearing” them. However, some businesses pay their AP department too much in processing costs. This is often because they have high volumes and different vendor and supplier information. Hiring a third-party vendor management services provider or accounts payable outsource companies to manage your AP department might be a good idea if your business faces this challenge. You can also look for software that helps track and manage vendors and supplier information. If you use a third-party vendor, ask about their rates and see if they offer discounts or a special program for businesses with high volumes. On the other hand, if you use software, ensure it is affordable and caters to your specific business needs.

2. Finding the right vendor or supplier information- If your business has a large number of vendors and suppliers, you will likely need to track and manage their information. Managing vendor information can be a challenge for businesses still new to AP. Tracking and managing supplier information can be even more difficult for smaller businesses with fewer resources. If your business faces this challenge, you may need to take a step back and evaluate your vendors and suppliers. Before you start tracking and managing vendors’ information, you must determine if each vendor is worth keeping around. You also want to ensure that each vendor or supplier is authorised to provide goods or services to your organisation. Many businesses fail to do this, which can lead to other challenges in the AP process.

3. Matching invoice numbers with the wrong item(s)- When vendors send you a bill, they often include a description of the item(s) you have purchased and the amount due for that item. Because you know what you have purchased and what you have been billed for, you match those numbers with the corresponding items in your business records. If you are matching invoice numbers with the wrong item(s), it may be a sign that you do not have the correct vendor or supplier information; you may have inadvertently missed a vendor or supplier when you were collecting information. In order to resolve such an issue, you can double-check your vendor or supplier information to ensure everything is correct. On the other hand, you can hire outsourced accounting services to gain access to the skillset of accounting experts. However, if you are unsure of whether to invest in bookkeeping and accounting services or not, you can read our blog on “8 Signs Indicating You Need To Outsource Your Bookkeeping & Accounting Function”.

4. Missing invoices- Tracking down missing invoices is one of the most frustrating and easily resolved issues with the accounts payable (AP) department. Missing invoices are invoices discovered when a vendor calls the AP department for payment status, and the AP department investigates and discovers that the invoice in question was never posted to the AP system. This wastes the AP department’s time and can result in duplicate invoices being paid or, sometimes, not being paid at all. If you are manually processing your invoices, it becomes a bigger struggle. The manual process causes many disagreements among the team members about how the invoice was sent, who received it, whether it was approved, and so on. It can cause late invoice payments or incorrect income statement posting, resulting in inaccurate financial statements. Thus, it is better to use automated tools or hire accounting experts. With access to expertise, you can ensure accuracy and consistency in your accounts payable management system.

5. Receiving invoices that do not match your purchase order- If you purchase a product or receive a service, you will likely receive an invoice. This invoice will detail the price of what you purchased, whom you purchased it from, and when you are expected to pay. When you receive an invoice that does not match your purchase order, it is usually because someone made a mistake. It could be the vendor, your employee who accepted the purchase order, or you. If you receive an invoice that does not match your purchase order, first check to make sure you have the correct vendor or supplier information. This may help you determine where the mistake was made. If you have the correct vendor information and the invoice still does not match your purchase order, talk with the person or team responsible for accepting the purchase order. The entire process is tedious and time-consuming, making it even more stressful. In such cases, you can look for a reliable outsourced service provider that can help streamline your accounts payable process. Not only accounts payable, but business owners can also hire outsourced accounting services to transform their overall accounting function.

Conclusion

Accounts payable is a critical component of your business’s financial health. Accounts payable errors and inefficiencies can have long-term consequences for a business. Missed payments can result in more than just disgruntled vendors; they can also result in a loss of service at a critical juncture or a lack of supply for a business-critical process. This is why a clear perspective on AP and its contributions is critical to your business’s success. If you want your business to be successful, you need to be diligent about your accounts payable management process. Contact your business advisor or accountant if you have any questions or concerns. If you are looking for an outsourced service provider to manage your accounts payable process, you can contact us. We at Whiz Consulting help businesses manage their different accounting functions, including accounts payable, accounts receivable, payroll, and basic accounting and bookkeeping.

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