Skip to content
Home » How Procurement Software Can Prevent Accounts Payable Issues

How Procurement Software Can Prevent Accounts Payable Issues

Dealing with a cranky vendor who hasn’t been paid.

It’s one of the least rewarding – but at the same time typically one of the most urgent – tasks that you’ll have to deal with as a Procurement Manager.

It fits into the “urgent / important” square in the Eisenhower decision matrix. You have to attend to it now, and putting it off will only make matters worse. Usually, by the time it reaches Procurement, others in the organisation have failed to take ownership of the problem.

You need to fix it, and fast.

In this article, we break these down and offer explanations of how using digital procurement solutions could help you to avoid and mitigate this. In doing so, it can increase the productivity and performance of your team by eradicating the root causes of administrative firefighting that can easily be avoided.

How to use Purchase Order Software to reduce accounts payable issues

There can be a multitude of reasons why something has gone wrong in the process. So, let’s dive in and look at the most common ones:

1) Maverick Spend (Unauthorised Purchases)


The supplier and a contact person within your organisation agreed pricing and terms, but did not ensure a PO was raised. The supplier has sent their invoice but Accounts Payable can’t pay it, because there isn’t a budget or cost centre to book it against.

How you can fix it:

Determine whether Procurement should even be involved. This can usually be determined based on some kind of threshold around the PO value or criticality of the purchase.

Managing non-strategic spend through e-procurement software with the use of supplier catalogues can be one solution you can deploy to allow stakeholders to self-serve for non-core purchases.

Specialist software for tail spend management can be another option, which helps to guide users to the preferred supplier for a specific type of goods or service.

If we’re talking about one-time project purchases, earlier procurement involvement in the process is usually the goal. A simple, affordable tool such as ProcurementFlow can be a game changer in increasing compliance in this area. If you focus attention on making communication transparent and visible at the outset of a project, this is much easier than using email silos.

In more extreme cases, you could implement a no PO, no payment policy, and make unauthorised spending a disciplinary offence.  A word of warning: if you’re going to have such a strict policy, then you need to make compliance both and easy and straightforward thing to do.

Example of what not to do: don’t force your users to raise requisitions in clunky ERP systems! To use a football analogy, you will quickly lose the support of the dressing room i.e. your stakeholders.

Make collaboration between requisitioners and buyers much easier. You’ll then reduce the likelihood of maverick spend and at the same time increase the opportunity for procurement to impose preferred vendors onto the organisation. If you remove the need for chains of emails from the process and give them a collaborative and easy-to-comply manner, half the battle is already won.

2) Human Error and Broken Process


The invoice has either been lost or never reached Accounts Payable in the first place.  Root causes are usually at least one of the following:

  1. Human error
  2. Poor housekeeping
  3. Reliance on outdated communication methods

How you can fix it:

It never ceases to amaze me how many invoices seem to get lost. I mean, delivery of emails is WAY more reliable than traditional postal services.

So, how can this happen?

Well, emails get buried. Just because your email gets delivered doesn’t mean it gets actioned . People go on sick leave or on holiday. Suppliers send the email to the wrong person (for example, to whoever raised the PO rather than to Accounts).

If your Accounts Payable department was a manufacturing process, there would be lean consultants crawling all over it. And yet, the solution to supplier payment issues is so simple:

Invest in some purchasing software that digitises the issuing of purchase orders, as well as the submission and process flow of invoices. Ensure that this software contains some features that will drastically reduce human error and process flaws, such as:

  • Use e-invoicing software where suppliers can view the status of their invoices in a supplier portal
  • Ask purchase order software providers whether basic business process automation features are included, such as:
    • Automatic PR to PO conversion
    • Optical Character Recognition (OCR)
    • Three-way matching
    • Goods receipting
    • PO Acknowledgement
    • The ability for vendors to update their own data, even if this requires an authorisation for changes to financial and tax data.

We’ve got you covered with a complete list of all the best procure-to-pay software options out there.

3) Supplier’s Invoice is Incomplete


The supplier has raised an invoice and sent it. They think everything is OK because nobody from your Accounts Payable team informs them otherwise. AP just parks the invoice because the supplier has missed certain key data (usually a PO number or adequate description) that is necessary for payment.

How you can fix it:

Similar to #2, some automation software with what are pretty standard features nowadays can alleviate this problem.

Using OCR technology to scan invoices – and reject any documents where data is missing – is a pretty straightforward business process automation task. It really is a must-have in any purchase-to-pay process.

Together with an e-invoicing portal, suppliers would then be able to see any invoices which have been rejected by the system, without the need to send emails or to involve your Procurement or AP teams in an easily avoidable problem.

Whether you’re looking for AP automation features or a more comprehensive source-to-pay technology solution, we’ve got you covered in our database of procuretech solutions.

4) Poor Vendor Master Data Management


If you fail to maintain and keep vendor master records up-to-date can result in delayed or missing payments.

This can be down to a large number of root causes, but the most common ones are:

  1. Financial or tax data is out of date e.g. there has been a change of bank account, or official company name that hasn’t been updated.
  2. Email addresses or phone numbers in the system are incorrect, meaning that communication channels are broken.
  3. Mismatches between payment terms quoted in your terms vs. the supplier’s terms and no clarity around which one takes precedence (battle of the forms). This is especially common for long tail vendors which are typically not being actively managed by Procurement.

How you can fix it:

This is one of the most frequent (and also most painful) issues that impact operational efficiency and effectiveness for transactional purchasing. Unlike #2 and #3, however, this one isn’t such an easy fix. It may require some investment and cross-functional collaboration around an overall master data management strategy.

Let’s start with the basics:

Which department in your organisation “owns” vendor master data? Sometimes it’s Procurement. Sometimes it’s AP. Often, it’s unclear, and this creates a black hole of dirty, unmanaged data.

Depending on the size of your business and your appetite (and budget) to fix the problem, there are different technological solutions out there that can help with vendor management and vendor onboarding.

Key here is to have a single source of truth which vendors can access and update / maintain their own data.

By making the supplier themselves responsible to update their date, this can lead to increased operational efficiency through self-service. Vendor management software can ensure that accuracy of vendor master data records is managed and enable the supplier easy access to their core data that you’re holding on file.

Recently, there has been a significant increase in the number of Vendor Lifecycle Management (VLM) software solutions on the market. Many of these are easily within reach of the average mid-market business. However, the obvious flaw is that if the supplier doesn’t proactively update their data, there is still a risk that problems occur.

The more advanced solution to the problem are Supplier Data Management systems. These can automatically scrape the internet and key sources of data, refreshing master data records in real time. This is one of the most exciting procurement technology trends, and one which could be a game changer.

Which vendor master data solution is best for your organisation?

What’s right for your organisation will really depend on how much data you need to keep on your suppliers. There’s no right or wrong answer as to what is best. It depends what your goal is.

“Push” systems which automatically cleanse and update vendor master data are great for tail spend vendors. However, if you need detailed compliance documents from your suppliers, you’re unlikely to be able to get these through a scraping software. Some common examples here are insurance certificates or environmental and quality documents in more regulated categories / industries.

Worst of all is if you just do nothing and have dirty data. This really is a recipe for disaster that no well-run company should consider.

If you’re interested to learn more about master data cleansing and management, and vendor data management software, we’ve got all of these covered in our directory of procurement software.

The ball is in your court

The solutions are pretty straightforward in theory.

The biggest challenge? Once you’ve provided your Procurement and AP teams with the necessary technology, you need to implement it effectively. Don’t rush the part of ensuring the right communication strategy to your external vendors and internal stakeholders.

Do you value your Buyers enough to free them from the chains of being your company’s highest paid admin assistants?

That’s the provocative question I’ll leave you with.

If your Procurement Managers are spending their valuable time fixing accounts payable issues, the solution is staring you in the face.

You don’t need a 6-figure IT budget and an army of consultants to fix it. What’s more, it will be one of the biggest productivity improvements you can give your procurement team.

If you’d like to get an idea of costs and understand the strengths and weaknesses of the different solutions out there, we’d love to work with you.