Overcoming Finance Challenges: Strategies for a Smooth Financial Process

Finance teams play a crucial role in maintaining the financial health of an organisation. However, their efforts are often hindered by various challenges that can cause significant frustration. From incorrect invoice coding to delayed approvals, these issues not only slow down the payment process but also impact the overall efficiency and accuracy of financial operations. In this blog post, we will explore the common pain points faced by finance teams and discuss how accounts payable (AP) automation can help alleviate these challenges. By understanding and addressing these issues, businesses can enhance their financial processes and foster a more efficient and productive finance department.

Top Finance Challenges

1. Incorrect Invoice Coding

   One of the major finance challenges for finance teams is non-finance staff misallocating purchases or invoices to incorrect general ledger codes or departments. This misstep necessitates finance teams to intervene and rectify the coding errors before the invoices can be processed. The implications of incorrect coding extend beyond just administrative inconvenience. It can disrupt financial reporting, leading to inaccurate budget tracking and financial statements, which in turn can affect business decisions and compliance with financial regulations.

   Incorrect coding often arises from a lack of understanding of the company’s accounting policies and procedures. Non-finance personnel may not have adequate training or access to clear guidelines, leading to frequent errors. To mitigate this issue, companies can implement better training programs and user-friendly coding systems. Additionally, leveraging accounts payable automation can significantly reduce these errors by automatically validating invoice data against pre-set rules and codes, thus ensuring accuracy from the outset.

2. Delayed Receipting of Goods or Services

   Another common finance challenge for finance teams is the delay caused by stakeholders not promptly receipting goods or services. This delay is often the biggest bottleneck in the payment process, resulting in late payments to suppliers. Timely receipting is crucial as it triggers the next steps in the accounts payable process, including invoice matching and approval. Without it, finance teams cannot proceed, leading to a backlog of unprocessed invoices and potential disruptions in supplier relationships.

   The root cause of this issue is typically a lack of accountability and communication within the organization. Stakeholders may be unaware of the impact their delays have on the payment cycle. Introducing a ‘No Receipt, No Pay’ policy can help enforce timely action. Additionally, automation tools can send automated reminders and alerts to stakeholders to receipt goods or services as soon as they are delivered. This proactive approach helps ensure that the finance team receives the necessary documentation promptly, facilitating smoother and faster processing of payments.

3. Approvers Not Approving Purchase Orders or Invoices

   Finance teams often face significant delays due to approvers not timely approving purchase orders (POs) or invoices. This bottleneck can stall the entire payment process, causing frustration among finance personnel who have to continually chase down approvals. When approvers are slow to act, it can lead to late payments, strained supplier relationships, and potential disruptions in supply chains. The delay in approvals is typically due to busy schedules, lack of priority, or inefficient communication channels.

   To address this finance challenge, businesses can implement automated workflows that streamline the approval process. Automated systems can send regular reminders and escalate pending approvals to higher authorities if necessary. Furthermore, setting up mobile access for approvals allows approvers to review and approve POs and invoices on the go, ensuring that the process does not get delayed due to their physical location. By leveraging technology to facilitate faster approvals, finance teams can ensure timely payments and maintain healthy supplier relationships.

4. Departments Refusing to Raise Purchase Orders

   Certain departments often resist raising purchase orders, which complicates the accounts payable process. This refusal usually stems from a lack of understanding of the importance of POs or a perception that the process is cumbersome. Without POs, finance teams face challenges in matching invoices to purchases, leading to delays and increased workload in verifying and processing payments. This not only slows down the payment cycle but also increases the risk of errors and fraudulent activities.

   Implementing a strict ‘No PO, No Pay’ policy can help enforce compliance and streamline the procurement process. Educating departments on the benefits of raising POs, such as improved financial control and transparency, can also drive better adherence. Moreover, integrating PO creation into an automated system can simplify the process, making it easier for departments to comply. Automation can pre-populate POs with necessary details, reducing the effort required from staff and ensuring that all purchases are properly documented and tracked.

5. Incomplete Documentation

   Finance teams are often hampered by incomplete or missing documentation required to process payments. This issue can arise from various sources, including suppliers failing to provide necessary details or internal stakeholders neglecting to attach required receipts and forms. Incomplete documentation delays the verification and approval process, leading to late payments and frustrated suppliers. It also increases the workload for finance teams, who must spend additional time and effort tracking down the missing information.

   To mitigate this finance challenge, organizations can implement document management systems that ensure all necessary documentation is captured and stored efficiently. Automation tools can help by flagging incomplete submissions and sending reminders to relevant parties to provide the missing documents. Training suppliers and internal stakeholders on the importance of complete documentation and providing clear guidelines can also improve compliance. By ensuring that all necessary information is provided upfront, finance teams can process payments more quickly and accurately.



6. Manual Data Entry Errors

   Manual data entry is a significant finance challenge for finance teams, leading to numerous errors and inefficiencies. Human error in keying in invoice details, such as amounts, supplier names, or dates, can result in incorrect payments, duplicate payments, or missed discounts. These errors require time-consuming corrections and can undermine the accuracy of financial records. The repetitive nature of manual data entry also reduces productivity and job satisfaction among finance staff.

   Automating data capture can drastically reduce these errors and improve overall efficiency. Advanced invoice automation systems can extract key data from invoices AI and machine learning algorithms, ensuring high accuracy and speed. By eliminating the need for manual data entry, finance teams can focus on more strategic tasks and reduce the risk of errors. Additionally, automated systems can validate the captured data against predefined rules, further enhancing accuracy and reliability.

7. Inefficient Communication Channels

   Poor communication between finance teams and other departments can lead to delays and misunderstandings in the payment process. Inefficient communication channels, such as relying solely on email or face-to-face interactions, can result in lost or ignored messages, delayed responses, and a lack of transparency. This communication gap can cause frustration among finance staff who must repeatedly follow up on pending actions and clarifications, slowing down the entire process.

   Implementing collaborative tools and platforms that facilitate real-time communication and document sharing can greatly improve efficiency. Tools like project management software or dedicated finance communication platforms can centralize all relevant information and updates, ensuring that everyone is on the same page. Automated notifications and reminders can also keep stakeholders informed and prompt timely actions. By enhancing communication channels, finance teams can reduce delays and improve the overall efficiency of the accounts payable process.

8. Lack of Visibility and Reporting

   Finance teams often struggle with a lack of visibility into the accounts payable process, making it difficult to track the status of invoices, approvals, and payments. This lack of transparency can lead to missed payments, poor cash flow management, and an inability to identify bottlenecks or areas for improvement. Without comprehensive reporting tools, finance teams cannot easily generate the insights needed to optimize their processes and ensure timely payments.

   Adopting advanced reporting and analytics tools can provide finance teams with real-time visibility into the entire accounts payable process. Automated systems can generate detailed reports on invoice statuses, approval timelines, payment schedules, and more. These insights can help identify inefficiencies and areas for improvement, allowing finance teams to take proactive measures. Enhanced visibility and reporting capabilities also support better decision-making and strategic planning, ultimately improving the overall efficiency and effectiveness of the accounts payable process.

Addressing Finance Challenges for Improved Efficiency

The frustrations faced by finance teams, from incorrect invoice coding to delayed approvals and purchase order delays, can significantly impact the efficiency and effectiveness of financial operations. However, by understanding and addressing these finance challenges, businesses can improve their accounts payable processes and support their finance teams more effectively.

One of the key steps in overcoming finance challenges is to identify the root causes of these issues. For instance, incorrect invoice coding often stems from a lack of training and clear guidelines. Addressing this finance challenge involves implementing better training programs and user-friendly coding systems. Similarly, delayed receipting of goods or services can be tackled by enforcing policies like ‘No Receipt, No Pay’ and utilizing automation tools to send reminders and alerts.

To resolve the finance challenge of delayed approvals, businesses can streamline approval processes by implementing automated workflows and providing mobile access for approvals. This ensures that approvers can act promptly, regardless of their location, reducing bottlenecks and ensuring timely payments.

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Author: James Kearns
James supports businesses who want to automate the most time consuming processes in finance. With a background in Management Consultancy, James takes a process driven approach to understand his client’s requirements with a view to maximising automation, to give as much time back as possible to busy finance departments. James has been involved in over 100 Kefron Accounts Payable automation projects and regularly shares industry expertise and advice on successful software implementations online – from building business cases to stakeholder management and everything in between.