Stop the drip: How to prevent cash leakage in your AP processes
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01 Oct, 2024
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3 min read
Finance departments are pretty tough, and to be honest - there isn't much that'll scare them off. But that doesn't mean that there aren't certain risks lurking in the shadows! A significant one that comes to mind are cash leakages.
Cash leakages in AP processes are financial losses from overpayments. This can be a result of errors such as duplicate payments, overstated amounts and even fraud. Here's how to mitigate (or completely avoid) the risk of cash leakage in your AP processes.
Risky business: What causes cash leakage and duplicate payments
Every leak has a source. Sure, you can clean up the mess - but if you don't fix the source of the leak, the drip won't stop. In this case, all sources lead back to manual processes (as they often do). Unfortunately, traditional manual AP processes are no longer built for the digital age, often resulting in small, but significant errors like capturing the same invoice twice, or overstating the invoice amount when capturing it.
This issue is also more common than you may initially think. According to a survey by The Boston Group, 45% of companies see revenue leakage as a chronic problem, and 73% lack automated processes to address revenue leakage. Other common causes of cash leakage include a lack of standard operating procedures, outdated pricing information, or pricing inconsistencies across different platforms.
Enter AP Automation
Risks are only as powerful as the controls you have in place to identify (and mitigate) them.
Cue AP automation.
AP automation puts controls in place that prevent unnecessary revenue leakage. It achieves this through automatic capture of invoices and validation against ERP information alongside supporting documentation. What would this mean for AP teams?
While the above practices are often standard control of any AP department (in theory), applying this properly in practice through time-consuming manual processes is extremely difficult, meaning things get overlooked, errors and oversights slip in, leading to cash leakages.
The bottom line
In a perfect world, errors wouldn't be as risky and capacity wouldn't be as stretched. However, as businesses scale, AP teams are not only expected to take on a larger scope of responsibility, but daily administrative manual tasks are becoming more time-consuming, keeping them from focusing on more strategic, value-driven tasks. System1A's AP automation platform provides teams with the tools to make their AP processes much more efficient but also much more robust against errors and/or losses by automating processes such as:
We get it. Like any good business, your goal is to pay your suppliers on time. But without the right tools, paying everyone the correct amount at the correct time, all the time, can get quite tricky.
Request your free trial here
Cash leakages in AP processes are financial losses from overpayments. This can be a result of errors such as duplicate payments, overstated amounts and even fraud. Here's how to mitigate (or completely avoid) the risk of cash leakage in your AP processes.
Risky business: What causes cash leakage and duplicate payments
Every leak has a source. Sure, you can clean up the mess - but if you don't fix the source of the leak, the drip won't stop. In this case, all sources lead back to manual processes (as they often do). Unfortunately, traditional manual AP processes are no longer built for the digital age, often resulting in small, but significant errors like capturing the same invoice twice, or overstating the invoice amount when capturing it.
This issue is also more common than you may initially think. According to a survey by The Boston Group, 45% of companies see revenue leakage as a chronic problem, and 73% lack automated processes to address revenue leakage. Other common causes of cash leakage include a lack of standard operating procedures, outdated pricing information, or pricing inconsistencies across different platforms.
Enter AP Automation
Risks are only as powerful as the controls you have in place to identify (and mitigate) them.
Cue AP automation.
AP automation puts controls in place that prevent unnecessary revenue leakage. It achieves this through automatic capture of invoices and validation against ERP information alongside supporting documentation. What would this mean for AP teams?
- With AP automation, duplicate invoices are automatically flagged or controls are put in place to prevent the capture of a duplicate invoice.
- Fraud is fought by allowing users to set payment approval limits for each user and customer.
- AP automation has automated reporting and data visualisation tools allowing users to spot exceptions more easily and detect possible errors/fraud.
- By automatically reconciling invoices against ERP generated documentation such as purchase orders and GRNs, AP automation can highlight invoices that are missing these pieces of documentation and should be investigated further before paying.
While the above practices are often standard control of any AP department (in theory), applying this properly in practice through time-consuming manual processes is extremely difficult, meaning things get overlooked, errors and oversights slip in, leading to cash leakages.
The bottom line
In a perfect world, errors wouldn't be as risky and capacity wouldn't be as stretched. However, as businesses scale, AP teams are not only expected to take on a larger scope of responsibility, but daily administrative manual tasks are becoming more time-consuming, keeping them from focusing on more strategic, value-driven tasks. System1A's AP automation platform provides teams with the tools to make their AP processes much more efficient but also much more robust against errors and/or losses by automating processes such as:
- Capture of supplier invoices
- Reconciling supplier invoices against POs and GRNs
- Reconciling captured invoices against supplier statements
- Preparation of cash outflow budgets/plans
- Payment approval workflows
- Supplier payment processing
We get it. Like any good business, your goal is to pay your suppliers on time. But without the right tools, paying everyone the correct amount at the correct time, all the time, can get quite tricky.
Request your free trial here
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