The evolving AP landscape

Accounts payable (AP) departments serve as the financial backbone of organizations, managing vendor relationships and ensuring timely payments that keep business operations running smoothly. Yet despite their critical importance, AP teams consistently find themselves navigating a dated landscape filled with operational challenges and inefficiencies.

And these challenges are not going away. From the increasing volume of invoices to complex approval workflows and the pressure to contribute strategically to the organization, AP professionals are being asked to do more with less while maintaining accuracy and compliance.

This article explores the five most significant challenges facing AP teams today and examines how forward-thinking finance departments are leveraging technology and process improvements to overcome these obstacles.

Challenge #1: Manual invoice processing

Despite significant technological advancements across industries, many AP departments remain trapped in paper-based or semi-manual processes. The reliance on manual invoice processing creates a cascading effect of inefficiencies that ripple throughout the organization.

The real cost of manual processing

Manual invoice processing isn't just slow — it's expensive. When AP teams manually enter data from paper invoices or PDFs, each invoice can cost between $15-$40 to process, compared to just $2-$5 with automation. But the costs extend beyond just dollars:

• Data entry errors: Studies show manual entry has an error rate of 3-5%, creating downstream issues that require additional time to correct
• Processing delays: Manual handling means invoices take 8-10 days to process (versus hours with automation)
• Limited visibility: Paper-based systems provide no real-time tracking or analytics capabilities
• Document storage challenges: Physical storage requirements create compliance risks and make document retrieval cumbersome

For many organizations, the majority of invoices still arrive in formats that require manual intervention. This translates to AP teams spending a lot of their time on data entry rather than higher-value analysis and vendor management tasks.

Moving beyond manual

Forward-thinking organizations are implementing intelligent automation solutions that can:

• Extract data automatically from any invoice format using OCR and AI
• Validate information against purchase orders and receiving documents
• Flag exceptions for human review while automatically processing standard invoices
• Continuously learn from human corrections to improve accuracy over time

The transition away from manual processing isn't just about efficiency — it's about freeing AP professionals to focus on strategic work that drives business value.

Challenge #2: Bottlenecks in invoice approvals

Even when invoice data makes it into the system, the approval workflow often creates significant bottlenecks. The traditional approval process is fraught with delays, lack of visibility, and communication gaps.

Why approvals get stuck

Invoice approvals get delayed for numerous reasons:

• Unclear approval hierarchies: When roles and responsibilities aren't clearly defined, invoices get stuck in approval limbo
• Approver unavailability: When key approvers are traveling or otherwise unavailable, invoices sit pending
• Lack of mobile options: Many approval systems don't support easy review on mobile devices
• No automated reminders: Without automated nudges, approvals can be forgotten
• Insufficient context: Approvers often lack the necessary information to make quick decisions

These bottlenecks result in late payments, missed early payment discounts, and strained vendor relationships. Many organizations report that approvals account for more than 60% of the total invoice processing time.

Streamlining the approval flow

To overcome approval bottlenecks, leading organizations are implementing:

• Clear approval matrices with delegation rules for absences
• Mobile approval capabilities that allow on-the-go authorization
• Automated reminder systems that escalate after predefined timeframes
• Contextual information delivery that provides approvers with all relevant data
• Exception-based approval workflows that only route non-standard invoices for review

By streamlining approvals, organizations can drastically reduce processing time while improving compliance and control.

Challenge #3: Late vendor/supplier payments

Late payments to vendors and suppliers represent one of the most consequential challenges for AP teams. These delays damage vendor relationships, incur late fees, and can ultimately impact the supply chain.

The ripple effect of late payments

The consequences of late payments extend far beyond a simple calendar delay:

• Supplier relationship damage: Consistent late payments erode trust and can result in stricter payment terms
• Financial penalties: Late payment fees typically range from 1-3% and add up quickly
• Lost discounts: Missing early payment discount opportunities (typically 1-2%) represents significant lost savings
• Supply chain disruptions: In extreme cases, suppliers may delay shipments or reduce credit limits
• Credit rating impacts: Payment history affects company credit ratings and future financing costs

Research shows that nearly 60% of small and mid-sized suppliers experience late payments from larger clients, with the average payment arriving 10-15 days past due.

Building payment punctuality

Leading AP departments are tackling late payments through:

• Automated payment scheduling that aligns with optimal cash flow timing
• Dynamic discounting programs that incentivize early payments when cash is available
• Electronic payment methods that reduce processing time and provide better tracking
• Predictive analytics that highlight potential payment issues before they occur
• Better visibility into outstanding liabilities through real-time dashboards

Organizations that implement these approaches typically reduce late payments while capturing up to 75% more early payment discounts.

Challenge #4: Staff productivity and turnover

AP departments face significant challenges related to productivity and retention. With repetitive tasks leading to burnout and disengagement, many AP teams experience high turnover rates and struggle to maintain consistent productivity.

The human factor in AP efficiency

The productivity and retention challenges in AP manifest in several ways:

• Monotonous tasks: Data entry and manual reconciliation are repetitive and unsatisfying
• Constant firefighting: Many AP professionals spend their days handling exceptions rather than strategic work
• Limited growth opportunities: Traditional AP roles offer few pathways for skill development
• Institutional knowledge loss: When experienced staff leave, critical knowledge walks out the door
• Training investment cycles: New hire training requires significant time investment

Industry data shows AP departments experience turnover rates 23% higher than other finance functions, with each departure costing between 50-200% of the employee's annual salary when recruitment, training, and productivity loss are considered.

Elevating the AP function

Progressive organizations are addressing these challenges by:

• Automating routine tasks to focus staff on higher-value activities
• Creating clear career development paths within finance
• Providing training on analytical skills and strategic vendor management
• Implementing knowledge management systems to capture institutional expertise
• Measuring and recognizing performance beyond transaction volume

By transforming AP roles from transaction processors to strategic analysts, organizations can reduce turnover while improving overall productivity.

Challenge #5: Decentralized invoicing across the company

Many organizations struggle with decentralized invoice receipt and processing across different departments, locations, or business units. This fragmentation creates significant challenges for visibility, standardization, and control.

The decentralization dilemma

Decentralized invoicing creates numerous complications:

• Inconsistent processes: Different departments follow different procedures
• Duplicate payments: Without centralized controls, the same invoice may be paid multiple times
• Limited spend visibility: Finance lacks a comprehensive view of commitments and spending
• Compliance gaps: Local practices may not adhere to company policies or regulatory requirements
• Negotiation weaknesses: Fragmented purchasing reduces leverage with suppliers

Organizations with decentralized invoicing typically experience duplicate payments and lose 10-15% in potential volume discounts due to fragmented purchasing power.

Centralizing without constraining

Forward-thinking organizations are addressing decentralization through:

• Centralized invoice receipt points (physical and digital) with distributed access
• Standardized processes with appropriate flexibility for business-specific needs
• Unified systems that provide enterprise-wide visibility while supporting local workflows
• Clear policies regarding authorized approvers and purchasing authorities
• Regular auditing and analysis to identify improvement opportunities

By implementing these approaches, organizations can reduce processing costs while significantly improving compliance and control.

Transforming challenges into opportunities

The future of accounts payable isn't just about paying bills — it's about optimizing working capital, strengthening vendor relationships, ensuring compliance, and providing strategic insights that drive business value. Organizations that recognize and address these five key challenges position themselves for financial operations excellence in an increasingly competitive business landscape.

Ready to transform your AP operations? Learn how Vic.ai's autonomous AP solutions can help your team overcome these challenges and unlock new levels of efficiency and strategic value.