- Delayed payments strain supplier relationships, damage a company’s reputation and cost more money.
- Many payment slowdowns are due to manual workflows and poor visibility.
- Automating invoice payments gives companies greater control over their cash flow.
“Where’s my 5 million dollars?” Del asks, his hands around Marty Byrde’s neck.
The series premiere of “Ozark” finds Marty cornered in a warehouse office, stammering to explain the missing money. Thankfully, most accounting teams don’t have to answer to Navarro Cartel enforcers, but that doesn’t mean vendors don’t get frustrated when they don’t receive their payments on time.
Marty’s problem is that his greedy partner Bruce is skimming from the cartel money-laundering scheme. For most businesses, the issue is an outdated reliance on inefficient processes. It’s not typically bad enough that the AP team has to quit their day jobs to go run a casino in the Missouri Ozarks, but slow payments do strain supplier relationships, lead to errors and ultimately drive up costs — and companies need a better system.
The Problem: Delayed Vendor Payments
Small businesses are especially prone to liquidity issues. It’s hard to make payments without cash on hand. But in many cases, slow invoice processing has nothing to do with cash flow.
Quadient Accounts Payable Automation by Beanworks' account executive Nico McEown says that these delays aren’t without consequences. Vendors need their money, and failing to pay on schedule can damage key relationships with suppliers.
As part of Quadient AP's webinar “Accounting Life: Movies and Shows,” Nico draws another connection to “Ozark.” Just as Bruce steals money without Marty realizing it, lax procedures can lead to some shady business practices — either an intentional act or an error of omission when a purchase is never recorded.
“Without a system in place that can track everything for you, you can have illegitimate accounting practices happening right under your nose,” Nico says.
Beyond strained vendor relationships or possible accounting errors, late payments are also more expensive. Forty-nine percent of all business invoices in the United States end up overdue, and these bills often come with late fees or interest. It’s an endless cycle unless teams can identify the cause of the delayed payments.
Why Payments Are Late
Mid-sized businesses in the US spend an average of 14 hours per week chasing down unpaid invoices. In the UK, more than £23 billion in outstanding payments is owed to small businesses, putting thousands of companies at risk of insolvency. But why are so many payments late?
Once again, especially with small and medium-sized businesses, late payments may be an issue of insufficient funds. Conversely, some corporations prefer to hold onto their cash and essentially take out a free line of credit with their suppliers. Yet often a business has every intention of paying but is so bogged down by manual systems that processing the invoice takes weeks.
For a money launderer like Marty Byrde, hiding the paper trail is the whole point. But for upstanding businesses, preventing approval bottlenecks requires clear workflows and data visibility.
Perhaps a physical copy of an invoice is waiting on someone to type it into the system, or maybe the approval process needs multiple signatures and takes several days to land on the manager’s desk. Payment by check could take another three to five days to process — and this is assuming that everyone saw the invoice come through and it wasn’t missed in the system.
In any case, it’s an excruciating process, and vendors won’t put up with it forever.
The Real Cost of Not Paying
Marty Byrde needs to uproot his life and family to move to the Ozarks in order to appease the Navarros. Without digitized invoices, many small businesses also waste valuable time assuring unhappy vendors that payments are on the way.
Suppliers will typically send friendly reminders (or not-so-friendly ones) and tack on late fees for a few months, but too many missed payments may sever the relationship. Under the threat of a canceled contract, AP teams may try to expedite the process and leave themselves more prone to errors.
“They might end up paying an invoice twice or paying a higher amount than they were supposed to,” Nico explains. “You can end up losing relationships entirely, which causes your company to spend time seeking new suppliers.”
When business leaders are left scrambling to find a new vendor, they often have to settle for a higher-priced deal because there isn’t time to shop around and collect bids.
Quadient AP's client Magnum York, an Alberta-based property management firm, had three managers tasked with approving more than 300 invoices each month — all on paper. With envelopes stacked high on managers’ desks and constant angry phone calls from vendors, it was clear that something needed to change.
Solutions with Automation
Accounts Payable automation gives real-time document access and 100% visibility to reduce the risk of errors or fraud. In other words, Marty’s partner Bruce would have no chance of siphoning $8 million if his partners in crime could instantly view every invoice.
Instead of piles of envelopes and paper checks, Quadient AP allows for a transparent approval process and payments in the vendor’s preferred method. AP teams can sort invoices based on aging lists and schedule payments with auto-release so they never miss a due date. Plus, smart data capture reduces the need for manual data entry and catches duplicates to avoid accidental overpayments.
For Magnum York, automation saved the company’s reputation. They went from being 45 days late on payments to processing invoices the week they were received.
More visibility into its AP data has given Magnum York more control over its cash flow, allowing the company to institute a Preferred Vendor Program in which certain businesses are scheduled for weekly payments. This gives managers a much better option than ignoring angry vendor voicemails for two months straight or fleeing to a riverboat in the Ozarks.
See How It Works
Quadient AP’s solutions integrate with the most common accounting software including Quickbooks, Sage Intacct and more. We help businesses reduce errors, improve supplier relations and reclaim their time through industry-leading automation tools.
See our plans to eliminate redundancy and streamline AP processes, and get in touch for solutions built for your business.
