Three Accounts Payable problems undermining retail in 2022 (and how to fix them)

High competition and low-profit margins in retail mean every penny counts. So there’s no room for inefficiency in Account Payable in the retail sector. Finance teams can’t afford to make mistakes – and business leaders need to understand the root cause of AP problems in order to prevent them.

If you’re a transactional finance leader working in retail, you might think your AP processes are performing well. But our experience tells us otherwise…

1. Human Error

If your finance team is relying on manual processes and data entry, the likelihood is you’re leaking money and don’t even realise it. Accuracy is essential in Accounts Payable. Order references, PO numbers, business names, etc need to match exactly across multiple documents and data sources. Otherwise, there’s a risk of paying suppliers twice, making overpayments or missing fraudulent invoices.

Maintaining focus and accuracy when dealing with complex data is difficult, which means mistakes can happen. This problem is compounded when your team is burdened by manual processes, understaffed or overworked.

2. Inefficient processes

Time is money – so efficient processes are essential for fast-paced retail businesses. Manual processes take longer, require more employee time than automated processes, and drive-up processing costs. They also impact time-to-payment, which can undermine supplier relationships. It’s no good working in fast fashion or FMCG and keeping your suppliers waiting months for their money. If you don’t prioritise their cash flow, you might not be their priority next time you need a product. And that’s bad for business.

3. Lack of insights

OK, so you agree that efficiency is essential. But what do efficient AP processes look like? How do you know if your Accounts Payable team is performing well? You can’t manage what you don’t measure, so access to metrics is essential if you want to improve AP performance. Ideally, you need access to data from other retailers to benchmark your performance. This enables finance leaders to make data-informed decisions that streamline and supercharge AP performance.

A Supplier statement is a report from your vendor’s accounting system(s) that lists information like your outstanding invoices or credits that are due back to you.

Supplier statement reconciliation is comparing these against your purchase ledger and making sure they match up.

It’s an opportunity to:

• Check all invoices and credits have been received as expected
• Spot any discrepancies between your ledger and supplier statements
• Proactively resolve any errors that could prevent suppliers from being paid on time

What are the most essential AP metrics to measure? 

Take a look at our list of the 10 top AP metrics you NEED to track

How AP issues turn into financial losses

It’s easy to underestimate the impact of AP process problems in your retail business. They’re not high-profile problems that can derail your business overnight. But like water undermining the foundations of a building, they consistently compromise your financial performance.

Direct financial losses

An overworked AP team – using manual processes – isn’t equipped to prevent, identify or reclaim financial losses in your business. Financial losses may result from:

• failure to identify duplicate or fraudulent invoices
• paying an invoice multiple times
• overpaying due to data entry mistakes
• paying an invoice to the wrong supplier
• paying an invoice in the wrong currency
  
  

Once this has happened, it can be difficult to reclaim that money. If the error is even noticed…

There’s also the risk of incurring late payment charges for slow payment – as well as lost opportunities to claim early payment discounts.

Indirect losses

There are also indirect financial losses associated with poor AP processes. Retail businesses depend on their suppliers to provide the products their customers desire. So, supplier relationships are essential. Late payment, errors, and poor supplier communication…these issues all undermine that important dynamic. In extreme circumstances, this can result in the suspension of services, which means lost sales for your stores.

It isn’t just suppliers you need to keep on your side either. AP staff are in high demand and hiring is getting harder – leaving employers struggling to get the AP talent they need. AP experts are looking for more enjoyable work, where they feel empowered and appreciated. Trap them in tedious manual roles and you’ll experience high turnover – and the associated costs and disruption of staff churn.

These aren’t the only ways that poor AP processes dull your competitive edge. Take a look at our article on the real-world value of AP process improvements for more.

Invoice intelligence – the solution to AP problems in retail

Fortunately, there is a solution to the AP problems undermining your financial foundations.

Xelix is the world’s first Accounts Payable Control Centre. Our Xelix Protect module automates previously manual processes – including payment audit, master data cleansing and supplier statement reconciliation – eradicating human error and digitising AP processes. This delivers faster time-to-payment, higher accuracy and happier suppliers, as well as unlocking more early payment discounts.

The Protect module also enables AP teams to identify and prevent costly fraud, as well as to detect historic overpayments that can then be recovered. Some of our customers surface six-figure AP losses with our recovery audit.

Xelix’s Insight module delivers further benefits by providing data for decision-making and continual improvement. For example, benchmarking data to assess your AP performance against similar businesses – and reports to track your key metrics such as payment performance and team efficiency.

It also offers dynamic interactive dashboards for working capital management, projecting the financial outcomes of different AP strategies.

See Xelix in action

Get in touch with us to discover how much money your manual AP processes could be costing you.