AP Red Flags:

Is Your AP Team Signalling Change?

Is Your AP Team Signalling Change?

Finance Manager, Imelda Sweeney, has identified a number of red flags that are often present in accounts payable (AP) departments and indicate the need for improvements in AP processes. This post discusses the people issues that arise in inefficient AP departments. It is the first in a three-part series that will also cover the process, technology, and governance red flags that highlight the need to reform existing AP processes.

1. High staff turnover and unplanned absences

The manual, cumbersome nature of processing invoices, as well as the lack of noticeable improvement of processes, can lead to frustration and demotivation in valuable employees. This can convince employees that there are no future plans for improving their roles or working conditions, which may drive them to make the decision to leave.

AP roles in a manual environment can be dominated by repetitive tasks such as data entry or manual three-way matching. This kind of repetitive behavior can negatively impact productivity. As workers are repeating the same tasks, they tend to complete the same volume of work as their peers because there is no incentive for high performance.

2. Increased use of temporary resources

If your company is growing and the volume of invoices is increasing, the AP department will need to get temporary staff to tackle the workload. Similarly, during busy periods, such as year-end or other peak periods, temporary staff are needed to deal with a larger volume of invoices. This is a prominent red flag that highlights the insufficient processes in place. With effective processes, the need for temporary staff would be substantially reduced, or eliminated altogether.

3. On-boarding

On-boarding temporary AP employees for busy times of the year or to replace those who have left the company is a regular occurrence. As existing employees will sometimes be required to train the new joiners, there will be inevitable interruptions to their normal day’s work. New joiners, in the meantime, will not be working to their full potential – if at all – during the training periods, as they are still learning. The productivity levels of the entire team, both existing and new workers, will be low.

If there isn’t a standard AP process in place, as tends to be the case in a manual environment, it’s difficult to formally train new employees, and instead, all that can be done is to learn “on the job”. A better on-boarding process will shorten the learning curve for the new employees, allowing them to reach optimum productivity levels as soon as possible.

4. Inaccurate assessments

Each member of the AP team will tend to have a different view of the “as is”, i.e. what’s actually happening in terms of the workload, how employees are performing AP tasks, and within what timelines. As there is no accurate way of monitoring what’s happening, managers must rely on the employees’ assessments, which are almost always conflicting accounts from person to person and, for the most part, inaccurate. This results in little visibility over day-to-day activities and a lack of managerial control.

5. Lack of ownership

Without a sufficient emphasis on owning work and ensuring that work assigned to you is completed when you’re absent, the work will not be delegated and subsequently not completed on time. This lack of ownership generally manifests as a result of the culture of the organization and the lack of appropriate processes in place to ensure that all work gets completed within the deadlines.

You’ve identified red flags… Now what?

If any of the above red flags are applicable to your organization, process improvements by way of review, re-design, and automation may be necessary steps to take. By reviewing processes, you can identify inefficiencies that may have previously gone unnoticed. By re-designing processes to address the inefficiencies, you can ensure a much more standardized, secure, and controlled environment. Automating these re-designed AP processes maximizes efficiency, ensures compliance with internal controls and external regulations, and equips management with full visibility and control over the end-to-end AP process. These benefits allow your organization to seamlessly absorb additional volumes and tasks without the need to hire, as well as highlight areas for continuous improvement.

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