Inefficient accounts payable processes plague retailers of all sizes. Recently, the U.K. suspended world-renowned engine maker Rolls-Royce from its Prompt Payment Code because of the company’s inability to consistently pay at least 95% of its supplier invoices within 60 days. This penalty highlighted how retail companies of all sizes struggle with the same invoice tracking and processing issues.
Even when they don’t result in this kind of penalty, late payments affect small retailers worldwide. In a 2017 survey of 505 U.S. small businesses, 41% said they had cash flow problems and 59% said those problems were consequential. Across the globe, 10% of invoice payments are late, costing small businesses up to $3 trillion each year.
What Takes So Long?
When retail businesses fail to pay invoices on time, it’s not necessarily caused by a cash-flow problem. Typically, it’s because they struggle to accurately track, analyze, and record data from hundreds of suppliers in a timely fashion. If invoices contain incomplete or inaccurate data, then accounts payable departments can’t keep their payment schedules efficient.
Within many retail companies, accounts payable still runs on paper, and having to manage it all is inherently inefficient. Paper invoices take up space, are costly to store, and are substantially more at risk of errors than digital records. Misfiled invoices can take hours to locate, and an unexpected audit could create a logistical nightmare for an overworked accounts payable team.
On top of manually tracking paper documents or requesting invoice copies from suppliers, accounts payable departments are also bogged down by slow approval processes that drag out payment turnaround times. In the days or weeks it takes to complete the process, small businesses can be left unable to cover expenses and in jeopardy of being charged exorbitant late fees.
The Better Ways to Manage Invoices
Retailers of all sizes can master invoice management with these few strategies:
1. Digitize the accounts payable workflow
Manual workflows and paper invoices are the main sources of accounts payable inefficiency. By converting manual efforts into touchless automated tasks, digital payment processing speeds up every AP workflow. As the workflow improves and invoice payments stabilize, you can take advantage of early discount payments, volume rebates, and more.
2. Clarify the purchase order matching strategy
While it’s essential to the AP workflow, gathering and reconciling purchase orders, invoices, and approvals often leads to bottlenecks and delays in payment processing. An automated invoice processing system leverages technology to match purchase orders, customize guidelines, and configure percentage tolerances for each individual supplier.
3. Lean into artificial intelligence
When invoices come through, accounts payable records and verifies the data, spotting exceptions and making decisions case by case. AI technology can do the heavy lifting by recording, verifying, and identifying potential issues automatically.
Since Rolls-Royce’s suspension from the U.K.’s PPC, many more retail companies have been penalized or suspended for late invoice payments. Now, their only choice is to improve their invoice processing systems, but other retailers still have time to readjust before they suffer the same consequences.