As companies change how they deploy capital, accounts payable (AP) processes have become more complicated. When they decided it was more efficient to put spending into the hands of all the individuals in a company, it created a roadblock between those who are spending the company’s money and those who must account for what’s going on.
“It’s efficient to deploy capital that way, but it’s also created some problems with visibility and control,” Darcie Lamond, director corporate brand at Airbase, told PYMNTS.
This new way of doing things leaves the AP manager chasing receipts, trying to track down what each invoice is for and making sure they’re paying the right people the right amount. As a result, there’s a lot of pressure on the people who are making the payments to make sure they’re doing it correctly.
“Unless a problem rises up to the top, you have these people performing these heroics, kind of on the ground level, without much insight into how much they’re actually doing to keep all these plates spinning,” Lamond said.
Dealing With Issues Around Visibility
One key problem AP managers must deal with is visibility. If they’re being asked to send money to a vendor, they must determine if it’s an approved spend and if it’s within budget. They must also establish whether it’s the amount that the company contracted for and if it’s a duplicate spend.
“There are all these issues that have to do with being asked to put company money out there,” Lamond said. “So, I would say the first [problem] has to do with all the ones that go along with the visibility.”
Eventually, auditors are going to ask the person who paid the bill for evidence that it was approved. The AP person must then know where to find the Slack message, email or phone call they need, so creating an audit trail is important.
On the tax side, things also need to be thoroughly tracked. For example, for certain vendors, the company will need to have a W-9 on file and will have to remember to send the contractor a 1099.
“There’s a lot of follow-up work that has to take place associated with paying your vendors,” Lamond said. “So, the problems do multiply over time, especially with some of the compliance issues.”
Automating to Take the “Crazy” Out of the Work
When closing the books, the AP person must reconcile the numbers to make sure they’re correct. If there are things that don’t reconcile, they must chase them down. That often involves getting in touch with the person who spent the money, which can be difficult if people share a corporate card.
“The accounting team sort of becomes this private detective firm trying to go back through history and figure out what happened and make sense of it all,” Lamond said.
In response, many companies are trying to automate these tasks. With Airbase, for example, the employee’s request to spend gets routed to the right person, the approval is made, the employee creates a virtual card and sends the number to the vendor. The transaction information is then recorded and passed into the general ledger.
“There’s no hands-on [work] that has to happen and there’s no passing information back and forth where things can fall in the cracks,” Lamond said. “Spend management is all about automating all the workflows around spending — not just the accounting workflows, but also the pre-accounting and post-accounting, where you want reporting of it.”
When the need to chase receipts and do manual reconciliations is eliminated, the people in accounting and finance are freed up to do more important work, such as analyzing the numbers.
“We really love to see accounting teams find ways to automate this and take a lot of the crazy out of the work that they do,” Lamond said.
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