We are often asked, “How often should we do an Account Payable audit?” The answer depends on a few things:  When was the last audit conducted, have there been any changes in the business processes, unusual spending behavior, increase in the volume of invoices, acquisitions or divestiture, or reliance on temporary staff. Whatever the fact is, we have learned that organizations benefit a great deal from doing an Accounts Payable audit every year. Let’s talk about why you should consider an audit on an annual basis.

Audit Helps to React to Change Faster:

The only thing which is constant is change. Think about things like automating Account Payable, outsourcing invoice processing, changes in personnel, or migration to a new finance or accounting software. Regular audits help you identify if any of the changes within your organization are costing you money.

Improves Cash Flow:
The main reason that drives you to have an accounts payable audit performed is to bring cash back into your account. Recoveries from the accounts payable audit can help fund various projects that are profitable for your organization.

Identifies Lost Credits:
Identifying open credits and supplier accounting errors are a part of the accounts payable audit process. Many companies have business processes to write off open credits, thus making them difficult to find.  By performing an accounts payable audit on a regular basis, you recoup the credits before the supplier takes them. Being aware of this helps you prevent huge losses.

To Recover Money ASAP:

The quicker we spot a mistake and get our money back, the better. For example, one of our clients found out they overpaid $400K, but luckily, they got it back within 20 days after we spotted the error. If we had waited longer, we might have lost that money forever. This shows how important it is to keep a close eye on the finances and fix any mistakes as soon as we find them. Waiting too long could make the problem much worse and harder to fix. Account Payable Audits help us to identify the overpayment or duplicate payment before it is too late.

Using Improved Technology:

Audits used to take forever because auditors had to travel and stay at our offices. But with improved technology, audits can be carried out 100% off-site.  This allows the audits to happen faster and with minimal impact to the Accounts Payable team.

To Find and Fix Errors Beforehand:

Regular accounts payable audits help us find and rectify mistakes faster, so they don’t happen again. For example, the way we worked during lockdowns caused some problems, but we’re catching and fixing errors more quickly now. It’s like having someone double-check on our work to make sure everything’s running smoothly.

Optimize Processes:
The Accounts Payable Audit Partner takes a closer look at how things are done in the accounts payable department and suggests ways to make the processes better. Regular audits give the company an opportunity to see if there are any bottlenecks or inefficiencies in the way invoices are processed and payments are made. By identifying areas for improvement, such as automating repetitive tasks or clarifying approval procedures, the company can streamline its Account Payable processes. This not only saves time and money but also reduces the chances of mistakes in the future. It’s like clearing out clutter from a messy room – once everything is organized and efficient, things run much more smoothly and everyone can focus on more important tasks.

Continuous Improvement:
Annual accounts payable audits provide valuable insights into the effectiveness of financial controls, processes, and systems. By analyzing audit findings and trends over time, companies can identify areas for improvement, implement best practices, and optimize their accounts payable operations for greater efficiency and effectiveness.

In the end, I would say, Regular audits help us stay on top of things, identify mistakes early, tell us how to correct and further prevent them in future, optimize the existing processes and make sure we’re doing things right. Plus, having an audit partner to help out when things get tough is always a good idea. If you’re interested in learning more, please contact AP Impact and we can chat about it further according to your convenience.