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Accounts Payable Are Out To Lunch - And Other Responses To Late Payment Queries

By Expert Author: Donald Nason

Apparently that the Accounts Payable department is busy or ‘out to lunch’ comes in at number four in the list of telephone responses organisations fall back on when being chased for late payments.

This is according to commercial debt recovery lawyers Lovetts, as reported by various articles in the media recently, and who surveyed 100 customers. They found that “the cheque is in the post” is frequently used, as is that the authorised signatory is on holiday/off sick.

The survey also pointed to organisations putting payment delay down to having lost an invoice or there being a dispute about the invoice amount.

Perhaps some businesses do creatively lose invoices to buy time, but certainly mislaid invoices and the processing involved in resolving disputes over invoice amounts are recorded as major pain points for the Accounts Payable (AP) department in many organisations.

Late payments are a huge problem in the UK – in July this year Bacs reported a figure of £46.1 billion owed in late payments in the UK. SMEs (organisations with up to 250 employees) are owed £39.4 billion at any one time, and large corporates £6.7 billion. Worldwide, according to a report by Insurance News Net, $2 trillion in is owed in late payments.

And these late payments are not only a problem for the business owed money. The organisations owing payment risk losing their reputation and valued suppliers as well as being subject to late payment penalties.

In most cases late payments are not a policy decision or even due to cash-flow issues (although companies owed amounts in late payment can find they then have to default on a payment of their own), but the result of processing issues outside AP’s control.

Many organisations point to business procedures having grown and developed over the years as the organisation itself has grown and developed. Having to process paper invoices can exacerbate problems arising from ill-defined procedures, with constraints on staff having to physically move invoices through the business, the lack of visibility and control while the invoices lie on somebody else’s desk, and the inability to efficiently source information to answer queries.

In fact organisations often cite automating AP processing as giving them the push to specify and formalise procedures, to define authorisation and security levels, deadline and escalation policies.

Tracking the authorisation progress for any one individual invoice is often an impossible task, particularly when involving departments in different locations. When a query comes in how is the AP team to know whether an invoice sent out for authorisation has in fact been authorised and is on its way back to the department? Perhaps the authoriser is on leave – or has forwarded the invoice on for signing at a higher level. Whatever the actual status, time-consuming chasing is required.

Other concerns for the AP department are emerging. One concerns the wealth of information accumulated by dedicated long-serving staff. It’s great to have all that knowledge and those skills, but if it’s not backed up anywhere, what happens when a query comes in should that member of staff (heaven forbid) have left? Or even gone on holiday, off sick – or genuinely be out to lunch?

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