5 Signs Your AP Operations Are Bottlenecking Your Business Growth

AP Operations

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Did you know that 52% of companies identify slow, manual AP/AR processing as a significant contributor to business delays?

Smooth accounts payable i.e. AP operations and accounts receivable (AR) operations are crucial for business growth and day-to-day working. However, if not executed correctly, these can also be responsible for bottlenecking your business growth. 

But how do you identify that you are going wrong with your AP operations and AR operations? Let us find out! 

5 Signs Your Business Growth is Being Affected by Your AR/AP Operations

 

1. Payments are Consistently Late

A very important part of AR operations in business is to issue invoices timely. A delay in raising invoices naturally calls for a delayed payment. Late invoicing can be due to multiple reasons such as lack of internal communication, no defined process, work overload on staff, etc.         

Moreover, frequent late payments to your suppliers can hamper vendor relationships, negatively impact your credibility, and incur costly fees. Additionally, late vendor payments can lead to supply chain disruptions, jeopardizing production schedules or causing delays in fulfilling customer orders. This directly impacts sales and overall revenue. 

Solution: Streamlining and defining processes can fix this operational issue. Automation of AR/AP operations is crucial here. Automated communications also make sure that invoices are issued and sent to the vendors timely with clear payment terms. 

Moreover, 13% of the respondents of a study by the Aberdeen Group reported that not being able to capitalize on early payment discounts was a major pressure for improvement in Accounts Payable operations.   

2. Your Team is Drowning in Manual Work

If your AP/AR teams are buried under paper invoices, manual data entry, and clerical tasks, they’re spending far too much time on administrative work.  

This not only leads to decreased productivity and morale but also leaves little room for strategic tasks that directly contribute to the organization’s growth. A study by the Aberdeen Group found that manual, paper-based AP operations are 30% slower and cost 3 times more than streamlined alternatives.

Additionally, according to a report by the Institute of Financial Operations, the cost of manually processing an invoice also can impact profits significantly.

Solution: Automated AR/AP operations take over the majority of the manual work with the help of automated communication, data entry, verification, and matching processes. It also paces the invoice and payment approval workflow of a business. 

Also, automating these operations ensures standardization and uniformity is followed which is difficult to track when there is large-scale manual work is involved. Consistency in the whole process further reduces the risk of errors.

Moreover, opting for AP operations or AR operations software or tools is very cost-effective and time-saving when compared to the manual process. 

3. Financial Errors are Common

Naturally, major human involvement in data-oriented steps such as invoice processing or collections increases the risk of human error. Duplicate payments, data entry mistakes, or missed early payment discounts can all pile up to significantly impact your bottom line. 

Financial errors also create an unprofessional image of the business which ultimately damages the organization’s reputation.  

Solution: Automating AR/AP operations and eliminating the major manual involvement can heavily benefit the organizations. 

The July Playbook from PYMNTS reveals that about 63% of firms with highly automated AR processes experience fewer invoicing errors. 

So, automating not only takes the pressure off the employees but also reduces the inconsistencies. In the same study as mentioned above, 15% of the respondents called for AR/AP automation to avoid the risk of fraud and theft.    

4. You Lack Visibility into Cash Flow

A cash flow statement provides a better view of the operational efficiency and financial health of an organization. However, a lack of real-time insight into your cash position means you could be flying blind. 

Inconsistent cash flow can find its roots in inefficient AR/AP operations. This happens when a lot of flaws in the operations overlap. Late invoicing, late payments, and delays in processes can call for unplanned cash requirements. 

So, this lack of reliability in the cash flow of the organization can hamper decision-making to a great extent. Moreover, poor visibility into working capital makes planning for investments difficult, taking advantage of opportunities, or responding effectively to unexpected challenges.

Solution:

Automated AR/AP operations solutions offer real-time dashboards and analytical tools that help you make better financial decisions based on the latest data of your business.

Additionally, AR automation reduces your DSO (Days Sales Outstanding) by streamlining the entire invoicing and collection process. This paced cash conversion improves cash flow and frees up the liquidity needed for reinvestment and growth.

5. Customer Experience is Suffering

Slow invoice generation cycles, constant errors in billing, and a lack of payment flexibility can frustrate customers and lead to delays in revenue collection. Moreover, urgent customer requirements can be very difficult when cash flow is inconsistent. All of these can hamper customer relations which are of prime importance for any business.  

Additionally, no set AR operations process means lacking relevant data which helps make certain decisions. For instance, an AR automation tool gives you an idea about the no. of days on average that a vendor takes to issue payment. This will help you in deciding whether you can make sales on credit to a particular customer and also the volume of it.  

Moreover, a recent report pointed out that 82% of the C-Level executives revealed losing a client due to miscommunication in the payment process. Dissatisfied customers are more likely to explore alternative suppliers.

Solution: Automated AR can help a business improve its customer relations in more ways than one. Effortless payment processes, timely reminders, and clear communication create a smooth business experience. Additionally, AP Automation reduces the manual cost incurred in invoicing, accounting, and payment processes. This saved operational cost can be used to improve the product/service and the customer experience. 

Moreover, this professional approach showcases that you value your customers’ time. Moreover, automated processes also help them streamline their financial interactions with your business.  

Conclusion

So, can you identify these signs in your business? If not, you have probably been doing things correctly. But even if you are experiencing these problems, it is not the end of the world. 

AR/AP operations are crucial for your business growth and automating them will make your life easy. A survey by PYMNTS revealed that 93% of the companies that have at least 50% automated AR processes are highly satisfied.   

The benefits of automating these processes are several and top-level employees often regard it as a massive growth accelerator. 

You Should Also Check Out: Account Payable Automation: All you need to know! 

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