4 Common problems in accounts payable

Double payments. 

This issue may occur if your vendor unintentionally double bills you. For example: if you paid the 1^st invoice right away, but before your vendor updates your account, the same bill may be mailed out a 2^nd time because your payment wasn’t posted at the time the 2^nd invoice was mailed out. This may lead you to think you haven’t made a payment yet so you mail another payment so your payment won’t be late.

Making a payment prior to delivery. 

Although there are benefits to paying an invoice as soon as you can, what if your shipment arrives and it’s damaged or has missing items? You’re not only out the amount you paid upfront on the invoice for merchandise you don’t have, but you will have to wait even longer for a replacement shipment.

Matching errors. 

If there is a discrepancy discovered between purchase orders, invoices, and other documents, a manual investigation is often required. This error may occur when you pay multiple invoices with one check. For example, You have 3 invoices and all the invoice numbers won’t fit on your payment documentation line. Your vendor may apply the whole amount to only 1 invoice instead of dividing the payment between the 3 intended invoices. Therefore, creating past due accounts on the other 2 invoices and making things more complicated.

Vanishing invoices. 

Sometimes invoices get misplaced or even accidentally destroyed before you are able to enter the data in your accounts payable system. Also, when you’re using digital invoices, you may have a hard time knowing if you have the original or a duplicate invoice.

How to solve these issues?

Update the A/P internal controls. 

You’re accounts payable team can help update the internal process. Be sure to document how the invoices should be handled. You should pay special attention to the separation of duties and full use of the purchase orders to be sure your invoices are accurate.

Use one inbox for A/P. 

When you have all your invoices go to 1 inbox, it will help reduce any chance that an invoice will be paid or received twice. You should also limit access to this billing address for authorized personnel.

Limited access to your cash accounts. 

It’s essential that no one without authorization to your cash accounts, review bank reconciliations. This will help to find potential fraud that may occur as well as uncover potentially erroneous payments.

Use caution with ACH. 

You should ensure tight control of a vendor’s automatic access to your company checking account needs. Ensure that you are receiving supporting invoices with your payments and that any automatic payments are on a timely basis.

Track key performance indicators. 

Create reports for all paid and unpaid invoices. Check out bank security features that will help identify duplicate payments and allow you the ability to control checks for confirmed payments. Your accounting software should help you identify duplicate invoice numbers and duplicated amounts.

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How Efficiency is improved by outsourcing finance and accounting functions:

• Improved focus on core activities: With the tedious and laborious work being outsourced, firms can take critical decisions more effectively, through putting in more research and longer discussions. Less focus needs to be given on the numbers and documentation.
• Accurate accounting through a proactive approach: With the use of the latest integrated tools, the experts increase accounting accuracy, and freeing up human and non-human resources. This approach gifts more time for financial advisors to address their client’s persistent issues. Through compiling and processing all the finance information, experts can provide valuable insights through interpreting the results. Inefficiencies can be pinpointed, growth opportunities with associated strategies can be identified, and brand credibility can be enhanced.
• Real-time accounting: One of the biggest advantages of outsourcing accounting and financial work is that the task is one is in real-time, unlike traditional accounting. This helps to track the performance of the firm on financial and sales metrics by conveying the information in a comprehensible and accessible format. Firms can be rest assured that traditional accounting is not eliminated, but rather supplemented by real-time accounting.
• Meeting deadlines: Firms that tend to fall short on compliance deadlines are heavily benefited by outsourcing financial and accounting tasks, as their deadlines are timely met. If these compliance deadlines are met periodically, getting third party funding becomes viable. Notifications and timely alerts of deadlines are sent by the outsourced firms to the overburdened and busy management.
• Irregularity detection: As the outsourced firm’s accounting team is highly skilled and has huge expertise in the domain, accuracy is top-notch, ensuring that accounting is irregularity free. If any such error pops up, the firm is informed immediately, unlike at the end of the period. All complexities in accounting are taken care of by the outsourced firm only, by skilled professionals, which would otherwise trouble the firm heavily.
• Managerial flexibility: With the functions outsourced, firms have the liberty to add and subtract staff anytime; and fixed costs are converted into variable costs.
• Cost efficiency: By outsourcing the functions, the highest grades of accuracy are achieved at costs lower than normal. Quality is uncompromising as the functions are carried out by skilled professionals, not the firm’s trained team or normal employees. Firms would eventually save on training costs, retaining, overhead costs, and finding people. Firms indirectly save on employment taxes and infrastructure costs.
• Security: With outsourcing, firms face a dilemma whether their data will be safe; but outsourcing firms guarantee confidentiality, privacy, and security of data. The files are uploaded to the firm’s cloud server through remote access or a secure server. Data is backed up on multiple servers for efficient disaster management and data recovery, with risk mitigation.

Key aspects while selecting outsourcing accounting and bookkeeping functions include performance, efficiency, and experience. Testimonials and clientele of the client also should be thoroughly checked to assess the services rendered. Other functions that can be outsourced include bookkeeping, payroll, and its processing, payment creation, debtors follow-up, and reporting to authorities and management. With the benefit of low-cost carrying out of complex accounting, the firm can go with flexible contracts or scaling the functions.

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Until recently, for most small companies, the strategic guidance of a CFO was not even an option, since financial executives preferred in-house, permanent positions. And, for their part, because it was hard to tell when a scaling company is ready for such a commitment, small and medium-sized organizations have refused to meet the seat. 

However, things are changing: this program will finally be prioritized by small-business owners.

One justification for today’s corporate executives to move from transactional accounting services to the consulting packages of a CFO is simple: more detail is open to managers than ever before. Plus, emerging technology (and they do the job with greater precision) simplify more and more conventional accounting jobs. This frees up accountants, all focused on real-time financial and business intelligence, to make conclusions from the data and apply their skills to more operational guidance. 

What do Virtual CFOs offer?

• In order to generate accurate reports and analyze the findings, a CFO will also provide bookkeeping services that will define and monitor the bookkeeper/controller, providing insight to help guide the ship towards the specified objectives. The effect is that you understand precisely where, where, and how your team can be centered and the stakeholders updated.
• A sounding board, mentor, or guide may be a much-needed CFO. Look for a seasoned veteran who you can trust, not just someone who can fill a spot. In the end, when you strive to meet well-specified targets, you can have a team partner who understands your organization and will help keep you responsible. 
• The finance role can be placed by a CFO as a strategic advantage. If you’re financially upset, odds are your opponents are too, but they’re just not reading this article and searching for a workaround aggressively. A skilled CFO will assist you in reducing waste, effectively deploying cash, and seeking opportunities for greater development or growth. You will be in a position to get ahead of the other organizations in your niche with their assistance. 

On a limited basis, virtual CFO facilities include:

• Collecting funding. The financial tale can be generated by virtual CFOs and can do some light pitching, but do not expect them to spend six months on airplanes pitching VCs or banks around the world.
• Managing IT processes correlated with banking. Don’t expect IT workers, company networks, internet connectivity, security, or CRM/ERP systems to be handled by the virtual CFO.
• Participate in discussions of commissions. The CEO can be trained and coached by simulated CFOs and may be asked for a role in meetings.

Why is Virtual CFO growing tremendously? What are the advantages of Virtual CFO? 

Startups and businesses are now more than ever searching for opportunities to operate smoothly. Where needed, there is pressure to make cuts to personnel and outsource, and this has led to a pattern in employing automated CFO providers over the more conventional full-time CFO in-house. Some of the many reasons why Virtual CFO services are growing are mentioned below:

• Flexibility: You set the conditions for time and expense that fit well for your company when you employ a Virtual CFO (VCFO). This may mean working full-time hours for a certain amount of weeks for the VCFO and then part-time or on a fractional basis. When the specifications alter, you can scale up or down. Without losing the kind of skills and knowledge that you need, you pay for the time and deliverables special to your business. 
• Accounting Expertise: A Simulated CFO who is a Designated Accountant may be selective and hired. You recognize that they have followed the strict standards set by their discipline when you deal with someone who has received a CPA designation, and their experience is current and they are still practicing through Professional Development classes. 
• External stakeholder and professional services liaison: A Virtual CFO is a liaison with stakeholders, lenders, and specialist bodies from beyond. They give the reporting and review further reassurance, and the due diligence and competent supervision of an Appointed Accountant give the third party confidence. 
• Get Up to Speed Fast: A Simulated CFO’s life leaps into a scenario and quickly works out things. They have the experience of joining the mid-process dialog and rapidly assessing what needs to be achieved from a financial point of view, whether it is collecting data, improving financial statements, or introducing better accounting procedures. 

Conclusion

If your business is increasing exponentially and in the near future you plan to require investor funding, a CFO could be important in securing the financing. A CFO can be highly productive in the preparation and transformation if you need to build an in-house financial IT system. A virtual CFO will help ensure that everything goes smoothly if you plan to take on any big financial deals, such as a merger or takeover, and assign responsibilities and challenges to the right people at the right time to prevent missteps.

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Lead in a Way that Lifts Others and Leverages Strengths

Entrepreneurs are among the most driven and vision-minded individuals around. While vision is critical, it can’t reside in only one person if a business is to achieve sustainable success. Are you a leader who sees yourself as smarter than everybody else in the room and gets frustrated that people can’t keep up? Or are you a leader who hires others you believe to be as smart or smarter than you in one or more areas and moves with little ego towards common goals? This personality type can be highly effective; however, All-About-Me, Inc. is not a viable path to long-term business health.

Practice and Appreciate Patience

Being highly driven and restless for results is admirable, and so too is patience. Rome wasn’t built in a day, and Google wasn’t either. You can’t perform brain surgery by simply watching a YouTube video. In our space, controllers don’t all become fully realized CFOs in 90 days, and for those that do, it happens over years of experience. In short, the passage of time is important and something to appreciate. Think about your career and business over a longer continuum and avoid self-induced pressures that create anxiety about the destination and lessen your enjoyment of the journey. Time will expose you to experiences and insights that collectively, not instantaneously, advance your objectives.

Balance “Let’s Go Do It” and “Let’s Stick to It”

Many entrepreneurs are idea people with grand designs on changing the world. This can lead to an ever-shifting focus on shiny new objects. There’s a balance to be struck between acting with urgency to try and capitalize on potential opportunities and in staying the course.

Prioritize Your People

Focusing on one’s core product, technology, service, whatever, is great, but it can’t happen at the expense of people. Finding and keeping excellent employees is incredibly tough today, and so too is navigating compliance issues, development needs, and related responsibilities required to manage a workforce. Successful leaders put the necessary support in place for their people. Ensure that you or someone on your leadership team treats this as the top priority it is. You can also tap outside experts for help if needed.

Mind the Money Like It’s Someone Else’s

In CFO early days, an Austin-based venture capital firm hired CFO to produce accurate, repeatable, and consistent reporting packages across their portfolio companies to provide better information for making decisions and to keep a finger on the pulse of their respective financial health levels. We have since done that for numerous other funding sources. They did so because, in the early stages of a business, it’s important to know how long one can last without securing more funding and how effectively existing resources are being utilized. Discipline in managing money can unknowingly and unintentionally relax too much. Minding the money like it’s someone else’s (and often it is) with accurate measures and objective processes, brings about a mental discipline and accountability that new businesses need.

Build a Business, Don’t Idle with Ideas

Business ideas and fully sustainable business models are two very different things. Bringing an idea to fruition requires a clear articulation of what you can do, where you can go with it, and how to get there. That means laying out a multi-year business plan that answers fundamental questions – Is there a market for this? How much capital will be needed and when? How many people will it take? What will sales look like? What are key milestones? Developing sound business plans and projections give leaders something to measure against to gauge progress and provides evidence to potential investors as to the company’s viability and promise.

Don’t Go it Alone

If there’s one bit of advice to leave new and emerging business leaders with, it’s that you don’t have to do it all by yourself. Sure, it can be lonely at the top, and early on one’s responsibilities typically span a very wide range by necessity. The good news today, however, is that even if you can’t currently develop or hire for specific capabilities within, you can rent them in small doses – whether it’s getting someone to build a website or handle your payroll. For example, not everyone needs a full-time CFO, but anyone managing a business model of any complexity can get a slice of a CFO, which was the genesis of our own business. Engaging fractional experts to fulfill certain functions for you is far more advantageous than trying to do it all yourself and foregoing some crucial advice and guidance along the way.

To every new and emerging leader out there who is diving into the daily grind of building a business, we thank you. We would not have a business if you weren’t doing what you are! We also offer you a challenge – before you look for those individual fires to fight each day, reflect on the bigger-picture perspectives that will help you and your business be healthier and more successful for the long haul. It will be time well spent.

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We compare the two based on some of the main factors that come into play.

Experience

Finding an in-house CFO isn’t a quick interview away. It may require an extensive search to find a CFO who has prior experience working with your type of business. However, a virtual CFO (or vCFO, short) tends to have more experience in a variety of SMBs since they tend to work with more clients overall. Plus, they often work for companies that have other CFOs they can collaborate with to give you the best service.

Cost

When you hire an in-house CFO, you’re looking at paying a full-time salary, plus benefits and paid vacation time — a significant chunk of change for startups. Now, this may be cost-effective for you if you require a lot of work done every day and can factor in the cost of benefits, etc. On the other hand, you can find a full-time, part-time, or fractional CFO who only charges for the work they actually do for you — and don’t require any extras.

Plus, when you have an “employee” who doesn’t actually work in the office, you’ll save on overhead by not having to have a desk and/or office set up for them. Perhaps you only have a home office or small space to work in, so it’s beneficial for you to not have extra people on site.

Fit

Whenever you hire a new employee to work in-house with you and the rest of your staff, there’s always the question of “fit.” Will they fit in seamlessly into your office and work well with the rest of your employees? Company culture is an essential part of a working environment, but when you hire a virtual CFO, this is one less thing to worry about.

Communication & Training

Training a new employee generally means a lot of face-to-face time and being on-site to clarify anything as they need it. While this might be true, vCFOs have a lot of experience working with a variety of businesses, meaning they can slip into a position quickly. They also tend to have knowledge of different computer systems, formats, and reporting styles so they can adapt to the way your organization does things. 

Any employee on-site is there to address any questions or solutions that crop up on the spot, but that isn’t to say that a virtual CFO won’t understand the importance of quick responses. Working on multiple projects means they’re excellent multitaskers, so they’ll know how to respond promptly.

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Time management techniques for working from home all have to do with better planning. Ultimately, you’re in charge, so you have to map out your work ahead of time if you want to be most productive.

We’ve already covered how to stay productive when working from home. Now let’s jump into how to manage your time better when it’s just ‘me, myself, and I’ at the ‘office’ all day.

Plan Your Time
Depending on the nature of their work, some remote employees will have to stick to strict working hours, just as if they were coming into an office.

But for many of us, working from home offers us the freedom to find a schedule that works best for our lives and other commitments. That doesn’t mean, though, that you should roll out of bed whenever you feel like it, work whenever you feel like it, and change course whenever you feel like it.

It may take a little experimentation at first, but make a daily schedule for yourself, and stick to it. Write it down, and share it with your team, so that you’ll be more likely to hold yourself accountable.

If you’ve been struggling with at-home work, you might be surprised what a difference a real schedule can make.

Plan Your Breaks
Part of managing your own time is managing your own breaks. We all need breaks to avoid burnout and stay productive. Again, exactly when to take breaks will be individualized, but make sure you’re scheduling them in – and then actually sticking to them.

Plan Your Physical Space
We’re (sadly) well more than a year into the pandemic. And (sadly), things are far from back to normal. The reality is that most of us can expect to work from home at least some of the time, well into the future.

So take the time to set up a workstation that is separate from the rest of your home/life. Even if that’s just clearing out a closet for your desk, having separate spaces for work and not work can help you stick to that schedule we just discussed. When you have a place to ‘go,’ it’s easier to manage your time once you’re there.

Plan Your Digital Space
This is really key for managing your time at home. Make sure you’re using an app or software that helps them keep track of your time, your schedule, and your tasks. For example, Asana is one of our favorite apps for remote teams. It’s a great way to keep on track and stay in the loop regarding projects, workflows, and team collaboration.

And while we’re on the topic of your digital world, try to set some guidelines regarding your own use of social media and other online distractions while ‘on the clock.’ You wouldn’t let your boss catch you killing time on Instagram, and it’s probably not the best idea for when you’re working at home, either.

Plan To Connect
When we feel disconnected, it’s easy to feel unmotivated and start wasting time. To counter this, make connecting with your team part of your regular routine. See our tips on how to keep your remote team connected here. Finally, if you’re struggling with time management while working from home, maybe it’s time to take a few tasks off your to-do list. We love helping tech-based startups stay in control of their finances, so they can focus on what matters. To find out if a Virtual CFO is right for you, please reach out.

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