Common Accounts Payable issues - which ones do you have?

7 June 2010

Mark Chalfen

Mark Chalfen

Former SAP S/4HANA Global Lead

"It just pays my suppliers it is very simple."

"Why should I look at AP, it works?"

"If it is not broken why fix it?"

Those are some of the comments I hear when I start conversations with clients about reviewing or enhancing their Accounts Payable process regarding process issues.

Standard Accounts Payable has not really changed since the implementation of MIRO and Logistics Invoice Verification. However there are a number of common mistake clients make that impact their business. Some clients are not really aware of the issue, as they throw resource at any issue and do not know how to deal with basic issues.

Before I review the types of issues it is best to quantify what the business impacts could be by having a poor accounts payable process.

  • Loss of early settlement cash discounts from suppliers
  • Suppliers being paid twice
  • Over inflated team of Accounts Payable clerks
  • Poor reporting for Vendor spend
  • Loss of vendor volume rebates

The list of business impact should be taken very seriously. Some of the issues that cause the business impacts are very easy to resolve and the potential benefits of resolving them very high.

Accounts Payable Issues

Vendor master data:

It is important to have a clear and concise master data process. Ideally the volume of vendors should be kept to a minimum. If you can purchase the same item from a number of suppliers it is best to agree the best vendor and ensure your whole organisation where applicable uses that supplier. This will enable your procurement team to negotiate better terms of payment, or even volume rebates as well as early cash discount. In turn having a small number of suppliers will reduce the volume of invoices you need to process as you will be buying in bulk and the suppliers could have many orders on a single invoice.

Purchase Order requestors:

If any user in your organisation can request to purchase something the consistency of creating purchase orders will be affected. Some users might only be raising one or two purchase orders a year, and there is an overhead on training and data entry. The other key area of entering purchase orders is the coding of the order. If a user is not used to creating a purchase order there is a higher chance that the wrong GL account, cost center or even material is selected. This in turn will affect the approval of the purchase order as the wrong approver could be selected. This will impact the time to gain approval of the invoice or the purchase order, which in turn could see early settlement discount not being applied due to this delay. By selecting the wrong GL account and material, this will impact the reporting providing decision makers incorrect information to negotiate with suppliers.

Manual data entry:

No matter the volume of invoices that you will process there will always be a relatively high volume of effort to enter, approve and pay a vendor invoice. Some of the issues noted above could reduce the volume of invoices and so in turn reduce the effort to process all supplier invoices. However where a supplier provides a paper invoice copy to you there is still some manual involvement. There are options to automate this by scanning invoices and the entry of the invoice into the system. The number 1 tool and SAP recommended tool is by Open Text "Invoice Management". For further information follow this link.

The benefits here are significant. This should enable your organisation to reduce the head count in the accounts payable team who are entering and approving invoices. This in turn will enable the invoices to be processed via a speedier process ensuring that where possible early cash settlement discount can be taken as well as better reporting.

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About the author

Mark Chalfen

Former SAP S/4HANA Global Lead

Mark tells it straight - as an ex-boxer, what else would you expect?  Both his knowledge and experience of SAP products allow him to cut to the chase dispelling myths and hearsay.

As a result of working closely with various SAP Finance Product Management teams on product development, Mark understands these products inside out. This depth of understanding has led to him become a ‘thought leader’ in his field; after all, it is not often SAP consultants have helped shape and develop the very product they are selling.

Having such a strong relationship with SAP alongside being an SAP Mentor and Moderator means that Mark has an extensive network within SAP. For clients, this relationship proves to be a huge advantage and leads to configuration issues being resolved rapidly.

Mark has worked on short proof of concepts through to year-long multi-million pound global roll-outs. However, no matter how large or small the project, the true value Mark brings to his work is in the guidance he provides to senior stakeholders. In essence, he assists them to implement more effective processes and drive better behaviours within their finance teams.

Helping organisations transform their business with SAP S/4HANA is Mark’s current focus. The benefits of S/4HANA are numerous, including the simplification of tasks, embedded analytics and improved user engagement. Whilst the eventual move from SAP Business Suite into S/4HANA is inevitable, the journey to it is not always clear. Mark’s ability to understand an organisation’s needs coupled with his deep understanding of S/4HANA provides clarity and eases their transition.

Bluefin and SAP S/4HANA - welcome to the one horse race

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