The accounts payable department may be the least favourite part of your business. After all, the last thing you really want to think about are the companies, service providers or lenders you owe money to.
However, devising a strategy to keeping it streamlined and functional means fewer hassles. This is vital for your company’s data integrity. Haphazard processes and poorly set infrastructure leaves you vulnerable to making errors and losing track of major expenses.
These errors can set off a damaging chain of events such as miscommunication between your suppliers, a loss of profits and trust and even legal repercussions. The best way to avoid it all is to ensure that your accounts payable process keeps everything organized and structured.
A SWOT Analysis of Your AP Department
To ensure that your accounts payable department is structured for precision, you first have to identify how it’s performing. You can do this with the classic SWOT analysis. Sit down with your team and discuss what a day in the life of an employee working with accounts payable feels like.
Also, reflect on recent events and consider observations within the department itself. With these notes and insights written down, you can start to craft a SWOT Analysis. Your SWOT analysis may look like this:
Accounts Payable Department SWOT Analysis
Strengths
- Payments regularly made on time to client
- Highly-structured system to itemize invoices
- Well-trained staff with high competency to manage accounts payable numbers
Weaknesses
- Persistent issues with duplicate invoices and vendor information
- Too much time spent searching for specific invoices
- Few resources to verify accuracy of data inputted by staff
Opportunities
- Save time, effort and resources used to track and correct errors
- Can reduce AP errors with automated processing
- Software to track data analytics as a means of reducing AP errors
Threats
- Loss of vendor/supplier because of too many errors
- Loss of profits and customers if unsatisfied vendors/suppliers sever ties
- Tarnished reputation in sector due to payment issues
With your SWOT analysis such as the one above, you now have a foundation on which you can build a strategy to strengthen your department.
- With your strengths, the obvious goal is to find ways to continuously deliver stellar performance.
- With your weaknesses, you’ll want to spend time thinking about how you can either turn them into strengths or minimize their effects.
- With your opportunities, you’ll want to think about the actions you can start taking to improve the efficiency of your accounts payable department.
- With your threats, you’ll want to keep them as reminders for taking action, but also, you’ll want to revisit them with the intent of making these issues less detrimental.
Data Analytics As the Centerpiece
The accounts payable department in every company functions differently, with different processes and different tools at the disposal of staff members. Of course, the end goal of all accounts payable departments is likely the same (to ensure timely payments are made to suppliers).
But there’s a missing element among many accounts payable departments – a reliable data analytics component. The majority of companies don’t have a piece of software that can do the heavy lifting of finding accounts payable issues that slip human detection. Some may think that such a tool is unnecessary, just a luxury.
If you could eliminate impossibly long hours needed to verify all accounts payables and proactively correct errors that are costing you money on a monthly basis, that tool would seem less like a luxury and more like an asset.
Unfortunately, many organizations don’t have this asset by their side. They waste time and resources correcting or searching for inaccuracies (if in fact, they look for them at all). They are more likely to wait for a year-end audit or review to spot data inaccuracies. This is an even bigger mistake, because your outside accountants are not there to find these issues and their engagement letters clearly state this.
Data Analytics Can Spot Accounts Payable Errors That Others Would Miss
The larger your organization, the more data you need to process. For accounts payables, that likely means bigger invoice amounts and a higher volume of vendors and suppliers to pay. That also means a higher risk of errors.
For example:
- Someone may accidentally duplicate an invoice payment or send an invoice to the wrong department
- A staff member could enter the wrong details, whether it be names, invoice numbers, prices or dates.
Anyone of these mistakes could happen due to fatigue, a major internal change (ie. moving data to a new system) or miscommunication. There are numerous factors that could make the most experienced, skilled and detail-oriented individuals to make these mistakes.
That’s where data analytics software comes into play. Taking a look at your weaknesses on the SWOT analysis, you can run regular reports targeted at your perceived problems. For example, if you have a recurring issue with sequencing numbers, you can run a report to detect invoices with inconsistent number sequencing or formatting.
Within minutes, you can have a list showing you invoices that have these problems. There’s no need to manually check for these issues or hire external auditors to find them.
Streamlines Your Accounts Payable Process
In many companies, there are rules followed and steps taken for certain tasks simply to counteract a poorly managed issue. They are draining, time-consuming and add extra strain on a business.
Data analytics software can take a great deal of this burden off your staff’s shoulders. This software ideally allows for regular and fast reporting. It makes it easy to stay on top of weaknesses you may have identified and find weaknesses you were not aware of.
More importantly, it allows your staff to redirect their energy towards maintaining the strengths of your account payable department. The need to focus on damage control becomes less of a priority.
Identify Issues That Could Take Years to Uncover
The consequences of accounts payable issues are almost never immediate. Think of a mudslide: years and years of soil erosion takes place without residents noticing. Tragically, it isn’t until after a mudslide occurs that the effects of that soil erosion become known.
The same is true of data integrity problems. Vendors and suppliers cutting work ties, accusations of fraud and other serious consequences often come from years of unresolved issues in the accounts payable department. It’s the business equivalent of soil erosion.
The key to avoiding this is quick and early detection, a very difficult feat to achieve without some sort of automated process. Data analytics software fills the gap by allowing you to conduct regular reports which can find the errors which would be considered a weakness in your SWOT analysis.
GLAnalytics Does All of the Above and More
GLAnalytics reports on all of the issues mentioned in this post and dozens more. We built the software with the understanding that data analysis is a time-consuming and costly process which many businesses don’t have access to.
The GLAnalytics algorithms parse through data to find inconsistencies in minutes. This allows everyone in the accounts payable and all other departments to find errors quickly so that they don’t mushroom into serious data problems.
Don’t Manage Your Accounts Payable Data In the Dark
Many companies assume that their accounts payable data (as well as data in other departments) has no weaknesses when it comes to accuracy. But these errors often fly under the radar. It isn’t until time passes, when suppliers may start to make inquiries or accusations, that a company turns towards its data for answers.
You can avoid this in your organization by proactively using data analysis tools to catch errors before they balloon into bigger problems. GLAnalytics can detect such errors fast, so that you can quickly make changes to your data entry where necessary. More importantly, it gives you the legroom needed to focus more on growth-related operations instead of damage control.
