Most will have spent time and energy selecting fuel-efficient vehicles and ensuring they are properly maintained to help contain fuel costs. Some may even use data-driven route planning to minimise fuel use. Others will have a corporate fuel card to lower costs and better manage employee spend.
However, achieving an accurate understanding of total business costs can be difficult, not least because expenses claims tend to be submitted in arrears. It is almost impossible to calculate an exact cash position in this situation.
But it’s not just fuel expenses that create headaches for accounts payable. Your AP team will be very familiar with other common expenses like:
‘Petty cash’ and ‘sundries’ purchases
Each of these expenses brings its own pain:
Time – The amount of time spent chasing down receipts, obtaining managerial approval, processing payments, calculating VAT etc. Every expense has to be verified, adding to the processing time. When time is money, each expense grows exponentially beyond the amount printed on the bill.
Duplicate processing of invoices – When paper invoices need to be processed manually, there is always a risk of duplication. Duplication of processing and payments is not unusual in AP teams that rely on manual operations.
Lack of standardisation – Each supplier has their own preferred payment method. Some may have their own online invoicing and payment platforms. This all adds to the complexity of paying bills. And that’s before you consider the headaches associated with varying payroll every month to repay out-of-pocket expenses to your employees.
Lack of control – With no way of capping expenditure, monthly expenses can quickly spiral out of control. This means that employees may circumvent purchasing rules and bypassing conventional purchasing channels at additional cost. Worse still, you don’t know when this has happened until after the event.
Lack of transparency – With expenses claims running a month in arrears, it’s virtually impossible to get a real-time understanding of your cash position. If you don’t know how much has been spent, you cannot accurately calculate current cashflow. If purchases are not available in your accounts system, your reports, estimates and forecasts are likely to be inaccurate and out of date.
Fraud – Sad but true, some employees can try to ‘pad’ their expenses by rounding up costs or similar. Detecting fraud can be difficult and time consuming, particularly where your AP department relies on manual invoice processing. Whether the fraudulent amount exceeds the cost of investigating suspect claims or not, your business is still losing money unnecessarily.
There is no single cure for all these AP headaches – but there are steps you can take to lessen them. Automating common processes will help to reduce errors for instance. And standardising your payment methods could deliver greater transparency and control over spending.
So why not see what can be done: