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11 Common Accounts Payable Issues and How to Solve Them

Ira Brooker    August 26th, 2018    Updated: February 7th, 2023

Common Accounts Payable Issues

If you’ve spent any time working in an accounts payable (AP) environment, you know there’s a lot more to it than just issuing checks. Keeping track of multiple formats of invoices, fielding questions and concerns from vendors and suppliers, and maintaining communications across various departments are just a few of the day-to-day challenges your AP team navigates.

When unexpected AP problems arise, having the flexibility and knowledge to address them quickly is key to keeping your payments flowing on time and accurately. Let’s look at some of the most common issues facing accounts payable teams today, as well as methods for both preventing them and addressing problems that do arise.

Gina Armada Headshot“Simply put, automation is the key to an agile and scalable AP operation. As technology advances, finance leadership will further understand the importance of investing in a solution that allows their AP team to go from transactional to strategic.”
Gina Armada, MHC CEO

Problem No. 1: Data Entry Issues

Human error in data entry is one of the most widespread issues found in accounts payable, and it’s not a shallow one. Organizational management studies have shown that 88 percent of manual accounts payable documents include erroneous data-entry occurrences. That’s 88 percent of spreadsheets with incorrect values, dates or percentages, alongside wrongly inputted formulas and inaccurate final calculations.

In a manual system, data entry errors are not only difficult to correct; they’re often difficult to locate in the first place. That can lead to under- and overpayments, delayed payments, and time-wasting mitigation processes with the potential to backlog an entire department.

Solution: Optical Character Recognition (OCR) or Intelligent Character Recognition (ICR) Included in Data Software.

Data entry issues caused by human error can be reduced through “smart” software that automatically reads and inputs invoice values. Since this sort of problem can occur at nearly any stage of payable processes that involve typing, software that decreases manual typing will, consequently, reduce risk.

OCR software eliminates many common data entry errors by automatically scanning documents in a wide range of formats – including PDFs, Microsoft Word documents, and scans of physical documents – to extract all necessary data and enter it directly into your processing workflow.

Problem No. 2: Slow or Inconsistent Processing

Processing invoices can be a frustrating and cumbersome task without some facet of an automated system. What’s more, in large accounts payable departments, personnel may be unaware of the comprehensive process, be overwhelmed by the number of invoices or even take liberties with them. AP employees get relegated to their particular role in processing invoices, and then they don’t know where to turn when questions or inaccuracies arise.

When some element of your process requires modification, the challenge only intensifies. Making changes often requires submitting a ticket to your IT team, then waiting for your ticket to make it to the front of the queue. In the meantime, your AP team is losing valuable time that can delay processing and damage relationships with your suppliers.

Solution: No-Code Functionality

An ideal automated AP software solution offers out-of-the-box functionality with no coding required. A self-service solution that can be easily configured to your team’s specific needs cuts down on time and resources that would otherwise go to making those modifications. It also empowers your AP team by allowing even non-technical employees to make important adjustments they need to keep their workflow running smoothly.

Invoice processing takes place in four general phases before a final payment: invoice receipt, invoice confirmation, invoice recording and invoice approval. Each of these stages comes with their own process streamlining capabilities through a digital repository:

  • Invoice receipt: The repository automatically archives the invoice and notifies the necessary personnel of the received documents through email or messaging.
  • Invoice confirmation: Since all invoice history and vendor information is housed within the system, confirmation and invoice review times are cut down dramatically. Double checking numbers and dates are only a few clicks away. Central repositories can even recognize missing or potentially fraudulent invoice information.
  • Invoice recording: The repository automatically fills key information into AP records. They recognize, input and organize invoice numbers without the need for tedious manual data entry. Then they save those documents in one accessible place.
  • Invoice approval: Digital repositories make invoice auditing and paper trails a breeze. Any incoming invoice can be set up to automatically match a housed purchase order or receipt since these documents are all now stored together. Personnel can quickly and thoroughly review each file, then pass it along to the relevant section manager or department head without undue delay.

Learn more about Touchless Invoice Processing


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Problem No.3: Approval Lags

Invoice approval cycles are fundamental to accurately filing and managing all orders. They’re a serious matter, too. Accounts payable senior managers and strategists alike cite complicated billing approval processes as one of the top problems within their departments. Approval lags are only made more complicated the larger your department is and the more “hands” that invoices, purchase orders and receipts pass through.

At the bare minimum, without proper document oversight, your organization runs the risk of sloppy internal balance sheets. It also spells problems for vendor relationships and employee morale. What’s more, approval lags can directly contribute to missed monetary opportunities, such as early vendor payment discounts.

Solution: Choose Software With Customizable Workflow Routes

Look for automated AP software that affords the following invoice approval routing flexibility:

  • Custom routing “chains” or “branches” with select personnel: You can organize and create task-relevant groups made up of only the individuals necessary to approve an invoice or order type, including back-up approvers for times when your primary approvers are not available.
  • Configurable routing “chains” or “branches” where invoices are organized by payment amount: When invoices under a certain cap are received, you can automatically send them straight to a section manager, then on to finance. Likewise, for larger invoices, you can set up chains with section managers, and department heads get notified. This ensures proper notifications are sent to the appropriate people, wasting no one’s time.
  • Email notification and approval: Some systems may even allow in-email reviews and approvals, improving efficiency and reducing approval lags.

Learn more about Remote Invoice Approval

Problem No. 4: Payment Errors

Payment errors strike even the most diligent and automated accounts payable departments. It reflects poorly on your company, however, even in cases of small errors or well-intentioned accidents. As such, AP managers continually strive for ways to reduce payment errors — such as late or double invoice payments — while maintaining simple work order processes and a system that can, in the future, scale up.

Duplicate payments are a particular concern for AP teams, with studies showing that as many as 3 percent of payments in high-performing industries are duplicated. For an organization that processes a high volume of invoices, those numbers add up quickly.

The problem has only intensified in recent years as more business has shifted online and disruptions in supply chains and the U.S. postal service have bred confusion over payment schedules. Mitigating a duplicate payment is often a time-consuming and frustrating task for both your organization and your vendor, requiring your business to issue credits and correct records.

Solution: Set up Control Account Codes for All Vendors

You don’t need more eyes on final receipts or in-depth oversight from finance to reduce payment errors. Instead, opt for a payment automation system that allows you to set up control account codes and account ledgers, or designated identifiers for each vendor or business you work with.

Individual control account codes solve a number of payment-error problems. They automatically classify invoices and receipts to the right account, then input detailed information into an account ledger that can be referenced later. They automatically flag or even reject vendor statements with duplicate invoice numbers. They code invoices immediately into any account-specific files and make sure those files are accessible to appropriate AP employees.

They can also calculate vendor-specific discounts and credits and apply them appropriately. What’s more, they help you check off orders after they’ve been paid in full, simplifying the oversight of expense lines and making sure finances are flowing to the right account, always.

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Problem No.5: Complicated Internal Processes

Disorganized, non-intuitive internal department processes don’t just make everyone’s jobs more difficult — they directly reduce employees’ productivity, happiness and company buy-in. That may seem obvious, but a 2022 survey of CFOs found that 43% of businesses have yet to implement an easy-to-use e-invoicing system.

Intricate internal processes are a key business challenge. For accounts payable departments, this can take the form of disorderly paper and digital invoicing methods, overworked or underutilized personnel, invoice systems spread out among different apps, platforms and software and managers too engaged — or too lenient — with order workflows.

Recent workforce trends make the need for an uncomplicated processing system all the more evident. The COVID-19 pandemic and the subsequent “great resignation” have made it imperative for employers to provide systems and work environments that keep employees engaged and empowered. A cumbersome or tedious invoicing process can contribute to high turnover rates amongst employees who grow frustrated at working with a system that makes their jobs more difficult.

Solution: Personnel With Clearly Defined AP Roles Working in One Software

This solution may seem obvious, yet less than 20 percent of companies in a 2016 MasterCard survey noted they had a complete, uncomplicated e-invoice system all personnel felt confident with.

That’s a big problem because disorganized, non-intuitive internal department processes don’t just make everyone’s jobs more difficult — they directly reduce employees’ productivity, happiness and company buy-in.

Intricate internal processes are a key business challenge. For accounts payable departments, this can take the form of disorderly paper and digital invoicing methods, overworked or underutilized personnel, invoice systems spread out among different apps, platforms and software and managers too engaged — or too lenient — with order workflows.

To simplify complicated personnel processes, review the following strategies:

  • How many people review an invoice? Are there approval routes tailored to the invoice or purchase order type, or a broad system without set reviewer domains?
  • How many people must sign off on expense reports or purchases? Approval routing with more than two or three people will inevitably find itself stalled
  • Do department employees have specialized, non-redundant tasks? Who approves purchases? Who files and documents invoices, and who catalogs received items? Who oversees payments, and who handles any invoice disputes or errors? Every company will have different answers to these questions, but it’s most important that the responses get tailored to what works for you.

To simplify complicated software, review the following strategies:

Problem No.6: Hard-to-Manage Paper Records

Paper documents pose a range of problems for accounts payable operations. They take up a lot of physical space. They can be easily lost or damaged. Digging through folders and file cabinets to locate specific information can take an inordinate amount of time. Errors and acts of fraud are difficult to identify and harder to correct.

Relying on a paper-based accounting system also puts an organization in danger of falling behind its competitors, and may even raise compliance concerns. Mandatory e-invoicing requirements are becoming increasingly common in many parts of the world, especially in Europe. Factor in the higher costs of processing paper documents – as much as $40 per invoice – and it becomes clear that embracing newer technology is a must.

Gina Armada Headshot“Paper doesn’t seem like a cumbersome problem for an organization. But MHC customers constantly express just how thrilled they are at how MHC NorthStar gives them more space and less waste.”

Gina Armada, MHC CEO

Solution: Go Paperless. If You Can’t, at Least Go OCR or ICR.

Paperless management systems are simply the way of today’s AP world. Research shows that going paperless can reduce the cost of processing an invoice by an impressive 76%.

Even if your organization is not ready to fully convert to digital and automated accounts payable solutions, you can at least begin laying a paper-reducing strategy. Build a single template with a single format or layout that all vendors must adhere to. Track and cut down redundant papers, such as printing and re-printing purchase orders across approval phases or putting together new approval packages for senior management. Finally, incorporate technology like OCR or ICR apps that can “read” and input important paper invoice information straight into your computer.

Problem No. 7: Lack of Visibility into Processes

Errors happen in the accounts payable process, from matching exceptions to incorrect data entry to misrouted documents. When those mistakes arise, being able to track the progress of invoices and financial documents through your system is an important part of maintaining quality control.

In a manual AP system, pinpointing the root causes of those errors is often a time-consuming and frustrating process that involves retracing your steps and tracking down information from people inside and outside of your organization. When the errors have been identified, the routing process often needs to begin all over again.

A lack of visibility also opens the door for late payments, duplicate payments, and even invoice fraud. Without a clear view into where outstanding payable and liabilities are in your invoice process, it becomes much easier for financial documents to be ignored or overlooked, leading to confusion and missed deadlines that can seriously damage your relationships with important suppliers.

Solution: At-a-Glance Visibility with an Automated Process

An automated AP solution makes it easy for your team to check the progress of invoices and financial documents at any stage in the process. That in turn allows you to provide near-immediate feedback when your suppliers have questions about payment schedules, and also simplifies the process of making corrections when errors and exceptions occur.

Problem No. 8: Insufficient Encryption or Security

Data security is a rising concern for many in the accounting field. Standard advice on how to improve your accounts payable department often neglects this contemporary problem as well, leaving many ill-prepared for the equally rising AP compliance and regulatory standards.

Smaller organizations or businesses in particular face data insecurities. These organizations are more likely to be working with tighter resources and smaller teams. They may also simply lack the capacity to stay up-to-date on the latest encryption defenses. However, you risk your company’s assets and capital — not to mention its very brand name — without shoring up safe electronic payments, sensitive client information, financial accounts, ledgers and more.

The boom in cybercrime in the COVID-19 era presents another challenge for AP security. Accounts payable data makes a tempting target for ransomware gangs, hackers, and other bad actors online. Not only can those attacks grind your operations to a halt, they can also do irreparable damage to your reputation and relationship with customers, vendors, and other third-parties whose data may be compromised by unchecked cybercrime.

Solution: Follow Accounting Information Security Best Practices, Bolstered by Software Security Features

Consider if your business is utilizing the following best practices for accounts payable and accounting information security:

  • Have properly defined, functional roles within a logical department structure: Too many “cooks in the kitchen” can allow fraudulent accounting to fly under the radar, just as one employee tasked with everything can easily miss something. All employees should know who is in charge of what.
  • Participate in ethical and legal trainings on the dangers of fraudulent activity: Educate all employees on internal control policies as well as the protocol if they catch something alarming.
  • Set up checks and balances: The system doesn’t have to be complicated or time-consuming. Rather, use software to complement multi-level, manual checks. Then let that same software fill in capacity gaps before workflows go to a final managerial review.

Accounts payable software features that can help detect fraud include:

  • Transaction monitoring, to assess and identify unusual transactions in your overall software.
  • Customized access, where certain files can only be opened by certain individuals on the network.
  • Account-information masking, a form of encryption where only personnel with the digital “key” can see and edit data.
  • Chargeback protection, to avoid the common credit card scandal and so you don’t double-pay duplicate invoices.
  • Forced password resets alerts, for in-the-moment knowledge on potential hacking.
  • Data-mining tools that survey and track employee activity outside of defined areas. You can see who inputs what within the software and receive alerts when suspicious figures occur.

Problem No. 9: Fraud

According to the Association of Financial Professionals, more than 80% of U.S. organizations face attempted or successful fraud each year. That includes both internal acts such as forged expense reimbursements and check tampering and external attacks in the form of phishing and malware schemes. As is the case with cybercrime in general, there is evidence that the challenges of the COVID-19 pandemic gave rise to an increase in accounting fraud across all industries.

Solution: Institute Automated and Manual Safety Checks

These are complicated and frustrating problems for any accounts payable office — but they’re not anything that a central, automated AP software with fraud tools can’t help solve. Automation can be a valuable tool for not only detecting fraud after the fact, but preventing it in the first place. To help catch and prevent fraudulent AP activity, begin by ensuring your employees:

  • Confidentiality agreements, both internally with employees and externally with vendors and contractors, ensuring all privacy and information security expectations will be upheld.
  • Regularly scheduled risk assessments on your network to identify weak spots.
  • Regularly scheduled data backup, especially for business-critical files and data.
  • Updated firewalls and software security, which can be included in a variety of automated AP software and software updates — yet another reason to make the paperless switch.
  • As-needed, password-protected access to sensitive data that only relevant employees can obtain.
  • Password-protected computers and networks, with quarterly to bi-annual password changes.
  • A disaster-recovery or business continuity plan, in the event of a data breach or loss.
  • Data-security training, for all employees and managers.
  • A comprehensive AP software package where security and encryption features come standard, and all data is automatically saved in encrypted files.

For a more in-depth look at some methods your organization can employ to avoid fraud, check out our latest fraud prevention webinar led by Dr. Rocco Lueck.

Rocco Lueck“If we only focus on detection, then we approach the problem like driving a car by looking through the rearview mirror. The fraud is behind us and has already occurred.”

Dr. Rocco Lueck

Problem No. 10: Invoice Exceptions Causing Processing Delays

It can be easy to overlook how much difficulty invoice exceptions pose to your AP process because they’re exactly that – exceptions. The vast majority of invoices pass through your system without incident, but even a 5% rate of error can cause costly delays and confusion in your process.

Exceptions can range from invoice data that does not match up with data from purchase orders or receipts to an unexpected add-on cost to an unfamiliar vendor varying from your usual process. Each of those scenarios requires time and attention from an AP team that likely has very little of either to spare.

Solution: Automated Exception Detection

An automated AP software solution can keep your workflow moving smoothly even when exceptions inevitably turn up. Documents that don’t meet your pre-configured standards are automatically flagged for review, with notifications sent to the parties responsible for resolving them. A user-friendly interface gives a wide range of team members access to identify and resolve exceptions stemming from their areas of expertise, allowing your team to correct errors and re-route documents for approval quickly and efficiently.

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Problem No. 11: Vendor Inquiries About Payment Status

More efficient invoice processing isn’t just a concern for your organization – your suppliers and vendors have sizable stakes to consider as well. It’s only natural that vendors will inquire about the status of payments, whether that’s because a payment is behind schedule or they’re simply doing due diligence.

A lack of visibility into your invoice processing system or a solution that relies on too many manual or paper-based processes can make it difficult to provide a quick and accurate response to vendor inquiries. That can put a serious strain on your all-important relationships with the suppliers who keep your business running smoothly.

Solution: Automated Payment Status Emails

An automated invoice processing system can be configured to send notification emails informing vendors of their payment status. A brief email check-in notifying a supplier that an invoice has been received or a payment has been issued takes one more task off of your AP team’s plate and puts your vendors’ minds at ease that their payments are being handled efficiently.

Gina Armada Headshot“Our purpose at MHC is to make people’s work lives simpler. We remain committed to delivering automation solutions that increase operational efficiency while elevating experiences for the people getting work done at their organizations each day. It is exciting to partner with a growing number of customers ready to tackle the next stage of their digital transformation.” 
Gina Armada, MHC CEO


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MHC: Your Partner With Answers to Accounts Payable Problems

No matter where your department sits in its automation capabilities, there’s an accounts-payable software solution to simplify any receiving, inputting, approval and filing needs. MHC solutions are created to work as a complement to your AP team, eliminating tedious and repetitive manual tasks, reducing time spent correcting errors and tracking down fraud, and freeing up much-needed time and resources across the entire AP workflow. We’re here to help keep AP employees empowered, engaged, and energized for the long term.

Ready to see for yourself what MHC software solutions can do to make your accounts payable problems a thing of the past? Contact us today to schedule a demonstration and move your organization into a more efficient and accurate future.


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