Accounts Payable is one of the most important, yet challenging, functions within the pharmaceutical industry. With vast numbers of transactions taking place every day across hundreds of key suppliers, AP teams need to be efficient and reliable.
However, the manual processes still used by many pharma companies takes up valuable resource, whilst opening them up to financial loss through issues like fraud, duplicate payments, and other payment errors.
Identifying these Accounts Payable problems in large, global organisations can be extremely tricky – especially in industries with complex supply chains. In this blog, we’re going to look at the main Accounts Payable issues faced by pharma finance teams, and how to fix them.
Manual, paper-based and excel-reliant processes are problematic for various reasons.
Utilising spreadsheets and manual processes to approve and pay invoices is simply inefficient. Manual processes can slow down payment cycles, negatively impacting supplier relationships. What’s more, rushing tasks to keep up with demand opens the process up error.
Pharmaceutical supply chains are exceptionally complex given the number of key suppliers providing specialist goods and services. Delays in payments are therefore particularly sensitive, as they can affect more than one part of the supply chain and have significant repercussions for the end consumer – patients.
This brings us to the second issue with manual processes. Humans are unfortunately not infallible, which makes errors and inefficiencies not a likelihood but an inevitability.
If not discovered, errors in Accounts Payable can bear significant costs, and even if they are uncovered, issues can result in manual investigations that can cost companies dearly.
Accuracy is important when it comes to details like PO numbers and exact business names that need to match across systems. Manual processes open up companies to duplicate payments, overpayments and fraudulent activity.
Susceptibility to financial losses
Organisations can lose up to 5% of revenue to fraud every year, according to a report from the Association of Certified Fraud Examiners. For large, multinational pharma companies, this can be an eye-wateringly large amount.
Accounts Payable functions play a critical role in the fight against fraud, but a lack of proper controls, coupled with human-led processes, make it an uphill battle for organisations to mitigate against ever more sophisticated scams.
But fraud isn’t the only risk with manual AP processes.
Discrepancies between purchase orders (POs), invoices and goods received notes (GRNs) can easily lead to matching errors, which often require time-consuming investigations and subsequent delays that affect the whole operation, ultimately impacting the bottom line.
Duplicate payments is an age-old problem that won’t go away. These can be caused in a variety of different ways – from manual entry errors to OCR mis-scan. ERP systems will miss all but the most basic issues (such as identical invoice postings). It’s vital that AP pharma teams arm themselves with additional controls to prevent the issue of duplicates and other payment errors.
Complex and global pharma supply chains are increasingly at risk of disruption due to external threats such as cyber-attacks, financial crises, and fraud. It’s impossible to remove all risk, but they can be mitigated against using newer technology to help companies better anticipate and respond to systemic risks.
Digitisation and automation of Accounts Payable processes in pharma is the key to alleviating many of these issues.
Firstly, introducing software with artificial intelligence to the workflow can hugely improve efficiency, keeping finance teams lean and making data easily accessible and fixable.
Discrepancies can be flagged up and solved in an instant, or eradicated altogether thanks to the reduction in opportunities for human error to creep in. Automation can also ensure high levels of accuracy when it comes to matching invoices, purchase orders and GRNs.
All this speeds up the process and keeps costs down, whilst freeing up team members to focus on other higher-value tasks. Late-payment fees can also be avoided, and early payment discounts unlocked.
Built-in security features can help companies combat fraud by flagging up suspicious activity, and inbuilt processes allow companies to enforce payments policies, resulting in improved security practises.
Automate Accounts Payable with Xelix
Xelix is the world’s first Accounts Payable Control Centre and can help finance teams in pharma combat all the issues listed.
Xelix Protect automates previously manual processes such as payment audit, master data cleansing and supplier statement reconciliation. This eradicates human error and delivers faster time-to-payment and higher accuracy.
Meanwhile, Xelix Insight provides data to assist finance teams with decision-making. For example, benchmarking data to assess your Accounts Payable performance against similar businesses – and reporting to track your key metrics such as payment performance and spend.
It even offers dynamic interactive dashboards for working capital management, projecting the financial outcomes of different Accounts Payable strategies.
Try Xelix for free now
Want to discover how much money your manual AP processes could be costing you? Start your fourteen-day free trial today.