FYI- Corporate Cutbacks Cause Costly Accounts Payable Issues

Downsizing and computerizing, especially in accounts payable departments cause problems. There is no substitute for people. Cutbacks and computerization have slashed accounts payable payrolls but also have cost companies billions of dollars in overpayments, sparked conflicts with vendors and opened the way to fraud. Replacing personnel with computers in payable departments never works as well as top management thinks it will! It causes overpayments to vendors by hundreds of thousands of dollars.

Paying Twice

Two purchase orders end up with different numbers being issued for the same service, and the computer never notices. A payables clerk with experience would spot the errors. A computer only spots an error if it's programmed specifically to catch the exact mistake. The vendor often keeps both checks, saying it would apply the second payment to future bills. It is lost money until you use that supplier again. Not good when you have no intention of using them again or no longer work in that state to utilize them again.

Gains and Losses

If you cut your payable staff you slash labor costs, but duplicate vendor payments or missed discounts on purchases will increase or double. With staff reductions you can't check paperwork face-to-face with the department head ordering the goods or services. Substituting electronic checking for manual checks by clerks casues you to drop important procedures. There is no more comparing invoices and purchase orders at the front end before they are actually paid to vendors. Checks of payables are conducted only after the money has been disbursed. Payroll costs may go down but duplicate payments and overpayments to vendors will go up. Accounts payable errors, whether by man or machine, directly affect the bottom line.

Computer's Limitations

Computers don't always catch errors, which are hidden in mountains of paperwork. There are progams where a computer can check purchase orders against invoices to spot duplicate payments but then fails to kick out such payments if the order and invoice didn't have the same identification number. The computer also misses double payments if the prices on the purchase order differed from those on the invoice. It doesn't catch discounts for fast payment. Computers also don't catch payables fraud. Imaginary vendors are created by humans. Humans program computers to overide their fraud. Computers can't catch these scams unless specifically programmed to do so. In fact, no one can program a computer to catch every conceivable error. Computers can catch most major payables errors if human beings do occasional audits of payables trails. The check of a suspected overpayment that used to take a day when the payables clerk was down the hall from the purchaser can take three or four days when the two are hundreds of miles apart. The delay reduces the chances of recovering any lost money.

Annual and Complete Accounts Payable Audits are Essential to your bottom line!