Accounts Receivable Challenges: What Your AP & AR Specialists Aren't Telling You

April 1, 2024 Sarah Dameron

accountants dealing with accounts receivable challenges

Did you know that the number one reason why businesses fail is because of inadequate cash flow? In fact, according to a report done by Business Insider, 82 percent of small companies go under due to that very reason. Hiccups in these functions and the inability to circumvent some typical accounts receivable challenges can make or break an organization, which is why businesses must make streamlining their accounting processes a priority.

Keeping tabs on your accounting processes is a fail-proof way to safeguard your business’s financial health. If you’re a CFO, accounting executive, or the like, you know that tackling issues before the onset is key to a company’s success.

So today we’re honing in on the challenges of two very specific and important roles in the accounting department – Accounts Payable Specialist and Accounts Receivable Specialist, two positions that are crucial to the accounting function. Read on to discover what accounts payable and accounts receivable challenges you might face in your office and how to prevail over them.

Read More: Top Mistakes In The Accounting Process (& How To Fix Them)

The Accounts Receivable Role

cfo talking to her employees about accounts receivable in break room

If you want to get paid, you need to have an effective accounts receivable process in place. Having a vast list of clients is great, but if they aren’t paying you, you could be hindering your business big time. When you aren’t getting paid on time, it’s often a symptom of a much larger issue that stems from within the accounts receivable process. Read on to see a few of the root issues and how to overcome them.

  1. Data Accuracy

    Inaccurate data can delay payments by weeks – and thanks to the pandemic, that’s a risk most companies are not willing to bet on. If your vendors aren’t paying you on time, or even at all, it’s time to reevaluate your ‘master’ data. In fact, getting this data wrong is more than malfunction in the system – wrong address, incorrect payment term, wrong tax rate, and more. And according to Deloitte, “companies have a bad habit of assuming the master system trumps all, but that’s only true if data accuracy is being maintained.” Here are a few ways to ensure your data accuracy is being managed.

    • Having a dedicated team – Outsourcing can be your best friend here. The more specialized you can get, the better. If you’re struggling with maintaining accurate data, it might be time to rethink your team. Do you need to add team members? Does your current AR process require an all-hands-on deck approach? If the answer is yes, it’s time to take the leap towards outsourcing.

    • Frequent audits – If you’re experiencing everyday discrepancies in your data, it’s time to perform an audit. But not just a one-off audit that happens every year. We’re talking about daily or even weekly audits that provide insight into all account receivable recordings.

  2. Time Management

    The struggle to stay afloat of tasks is real and one issue we can’t ignore in the AR process. It’s easy to get sidetracked at work and prolong assignments that should have been completed last week. Some people work well under pressure and others tend to have anxiety. Managing your timetable skillfully allows you to meet deadlines and improve your business’s bottom line. Take a look at one way to protect your time and get back to what really matters.

    • Invest in the right tools and resources – Time is something you can never get back in your day, so why waste it on projects that don’t take precedence? Utilizing time management tools such as Trello or Calendar can help you prioritize and track your tasks more efficiently.

But what is a strong accounts receivable program without an equally strong accounts payable team? Let's take a look at AP.

The Accounts Payable Role

accounts payable specialist dealing with challenges

Every organization needs to keep their cash flow circulating in the right direction. For this to work, you need to pay your bills, preferably on-time. That’s where having an organized and efficient AP Specialist comes in handy. However, there are several problems that can affect this process and create roadblocks along the way – even with the best AP team out there.

Read More: Looking For A New AP Clerk? Here Are Your Options

  1. Data Entry

    There’s nothing more alarming than reconciling your books at the end of the day, week, or month and realizing that your numbers are off. If you’re using a legacy system to record invoices, send payments, or produce reports, data entry mistakes are inevitable. Maybe someone misplaced a couple of numbers or added an extra zero by accident. Finding these blunders and fixing them takes time. Sometimes it feels like a never-ending cycle with no workaround. The good news is that’s there a simple way to overcome this issue: automation.

    Implementing automation will help you address data entry errors. Look at a few of the benefits of utilizing an AP automation tool to reduce these mistakes.

    • Time savings

    • Improved accuracy

    • Integration with other ERP systems

    With the right automation tool, your AP processing becomes more efficient and reliable. In the end, you’ll be eliminating many of the problems associated with poor data.

  2. Processing Times

    According to a study done by PayStream Advisors, a lengthy approval cycle is the biggest cause for late payments. Even if you have guidelines in place to oversee the manual process, employees might misconstrue them differently or find an alternative method. A delayed approval process incurs more than just late fees – it’s a chain reaction that hurts a company in the long run. So how can CFOs and the like solve this problem?

    • Create a defined process – Nothing describes chaos more than a disorganized AP process. That’s why it’s vital to create an approval workflow that touches every aspect of the AP process – from accounting executives and AP staff to vendors.

    • Digitize your process – If you’re spending countless hours sorting through paper invoices and documents, you’re doing yourself and your team a disservice. Go paperless – save yourself the time (and the headache).

Covid's Impact: Accounts Receivable Teams Face New Challenges

employees interacting during covid era

It’s been a whirlwind of a year. If you think your accounting process is suffering, you’re not alone. Any mismanagement of both your accounts payable and receivable processes will directly impact your business. In addition to adapting to a virtual work environment (working from home), accounting professionals are now having to rethink their accounting process.

If you’d like to explore more about how partnering with a virtual accounting talent provider can help you overcome your accounts payable and accounts receivable challenges, get in touch with one of our experts. We’ve been helping clients for over 35 years subdue their challenges in the accounting department – and we can help you too.

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