The Impact of Staffing Shortages on Finance Teams
Written by Pamela Rauseo, Principal Advisor @ Ocean Bridge Solutions | Fostering Innovation & Empowering People and Organizations through Digital Transformation & Curated Partnerships with a Focus on Strategic Change Management
November 12, 2024
Delayed Payments, Errors, Compliance Issues, and Burnout
1. Delayed Payments and Vendor Relations Staffing shortages in AP departments can severely slow down payment processing, leading to delays and strained relationships with vendors. The Ardent Partners’ 2023 State of ePayables Report reveals that businesses without automation take nearly twice as long to process invoices. For those dependent on timely payments, such delays can result in late fees, missed discounts, and damaged vendor relations. Late payments are not just an operational risk but can also impact a company’s reputation and bargaining power with suppliers.
2. Increased Errors and Reconciliation Issues Manual processing in AP functions leads to a higher probability of data entry errors and duplicate payments, especially when fewer people are managing high invoice volumes. Mistakes in processing can disrupt reconciliation and impact overall financial accuracy. Errors not only consume valuable time but also create additional work for already stretched teams, putting further strain on resources.
3. Compliance Risks and Audit Challenges Compliance with financial regulations is crucial, but understaffed teams often struggle to maintain stringent processes. Invoices must be tracked, approved, and filed correctly, especially in highly regulated sectors like healthcare, finance, and hospitality. With fewer personnel to monitor financial activities, the risk of non-compliance rises, and the costs of failing an audit can be significant. Automation can reduce compliance risks by providing secure, trackable processes and maintaining robust audit trails, yet companies without automation remain at higher risk of compliance issues.
4. Burnout and Turnover Among Remaining Staff As finance departments try to maintain workloads with fewer staff, burnout is becoming a significant concern. Burnout can lead to higher turnover, and with fewer trained professionals available to replace outgoing employees, teams fall into a cycle of attrition that ultimately impacts productivity, team morale, and job satisfaction.
Trends and Data Supporting AP Automation as a Solution
AP automation offers a solution to many of these challenges, providing teams with tools to process invoices more efficiently, accurately, and sustainably. Data shows that automated AP processes can save time and improve accuracy across departments, especially for companies operating in multi-entity, multi-location environments like hospitality and retail.
- Faster Processing Times: According to Ardent Partners, highly automated AP departments can process invoices in one-third of the time required by departments relying on manual processes. This improvement in processing speed helps companies stay on top of payment schedules, reduce late fees, and preserve valuable vendor relationships.
- Reduced Costs and Errors: Research by the Institute of Financial Operations and Leadership shows that companies using AP automation report a 60-80% reduction in processing costs due to fewer errors and lower paper and labor costs. Automation also brings sophisticated error detection features, allowing teams to identify potential issues like duplicate payments and fraud, ultimately reducing financial risks and saving time on reconciliations.
- Increased Employee Retention: The IOFM has found that companies implementing AP automation see an average 15% improvement in employee retention. Automation reduces manual, repetitive tasks, allowing employees to focus on more strategic work. This shift in focus can significantly reduce burnout, improve job satisfaction, and enhance team efficiency.
A New Era for Accounts Payable: Embracing AP Automation
For companies feeling the pressure of staff shortages, AP automation can be a transformative solution. By reducing reliance on manual processes, AP automation streamlines workflows, ensures timely payment cycles, reduces costly errors, and minimizes compliance risks. As companies across industries explore automation, AP departments are beginning to embrace tools like optical character recognition (OCR), machine learning algorithms, and advanced data analytics to better manage high volumes of invoices and payments.
Is It Time to Reevaluate Your AP Processes?
If your finance team is experiencing the effects of staffing shortages, now may be the time to consider AP automation. Ask yourself the following:
- Are delayed payments and errors impacting vendor relationships?
- Is your team struggling to meet compliance standards with limited resources?
- Are current workflows sustainable, or are staff feeling the strain?
By investing in AP automation, businesses can protect their operations from the risks associated with staffing shortages, enabling finance teams to focus on strategic work rather than repetitive, error-prone tasks. For more insights on AP automation and industry trends, stay tuned for our next edition, where we will explore the steps to assess and implement AP automation in your business.