6 Common Accounting Errors and Corrections in the AP Workflow

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Accounting errors are serious business. And, unfortunately, they are incredibly common.

Human error alone makes up 41% of inaccurate numbers in reporting. Finance professionals report that manual processes in accounting largely lead to lost documents, compliance breaches, and reduced productivity.

While accounts payable professionals follow accounting principles, it’s easy to see how someone would make a mistake when entering data by hand. Accounting errors often stem from having too much to do in a very limited amount of time.

And to make matters worse, many repetitive tasks in accounts payable are boring. After all, sifting through dozens of financial statements, verifying paper receipts, inputting data into an ERP, and comparing credit card data are hardly interesting activities. 

Tasks like credit card reconciliation and expense reports can easily be done by a computer—and they should be. But until the managing team decides to greenlight automation, it’s up to the AP professional to deal with accounting errors and corrections.

6 Common Accounting Errors and Corrections in AP

There are a number of principles accountants should use to review financial statements. But even following the rules doesn’t catch all accounting errors.

Changing an accounting method may uncover mistakes, but that isn’t always the case. Manual data entry essentially guarantees errors, even if the accounting policy and principles have remained the same for decades.

In other words, an AP professional doesn’t need to wait for a significant department change to look through the general ledger for corrections. If the team inputs data by hand, they should review the ledger regularly for the following six errors:

1. Making data entry errors

Data entry errors make up the vast majority of accounting errors. There are so many things to do, and so many steps in processing an invoice, that it’s easy for an AP professional to make a typo. Some of the common data entry errors include:

  • Transposing numbers
  • Misplacing the decimal
  • Leaving out a number
  • Duplicating an entry
  • Categorizing an expense as income
  • Attributing payment to the wrong client

2. Paying twice

Duplicate payments can be caused by a variety of reasons. Manual data entry inconsistencies, failure to close POs, and late vendor follow-ups for unpaid invoices can all lead to paying for goods and services twice.

To reduce the chance of double payments, it is essential to standardize journal entries and set up specific labels for vendors. It’s also helpful to routinely review vendor lists, remove duplicated vendors, request W-9s, and verify tax information. 

3. Forgetting to close a PO

Once AP cuts a check to a vendor, it’s typical to close a purchase order. However, it can be easy to forget this final step in the payment reconciliation process. If this error isn’t corrected, it’s possible to pay twice for the same service or fail to spot overspending. 

The best way to solve this particular error is through automation that ties an expense to its purchase order. 

4. Paying before delivery

Paying before a service or product is delivered can cause confusion, especially if the vendor does not fulfill their side of the contract. While paying earlier is often encouraged to capture early payment discounts, this can create considerable issues with accounting records if not done correctly.

Ensuring that the expense is tied to a specific order or invoice is critical for seamless financial reporting and error reduction.

5. Approving unauthorized purchases

Sometimes an employee violates expense policy and due to manual data entry, the AP professional accidentally approves the expense. Failing to apply accounting policies correctly is one symptom of a prior period error. Other examples of prior period errors, or errors made in earlier payment periods, include fraud and factual misrepresentation.

Generally, unauthorized purchases or expenses tend to stem from miscommunication. After all, two-thirds of employees haven’t read their company’s expense policy. HR can add an expense policy section to the employee handbook, but whether an individual worker remembers the policy or not is another story. 

Either way, the lack of transparency around expenses makes it more likely for errors to crop up during financial reporting. 

6. Not recording a transaction

Not recording a transaction or adding it later can result in double payments, strained vendor relationships, and other accounting errors. This type of error normally occurs when financial professionals have too much on their plate.

When this happens, the ERP will misrepresent the company’s net income and disrupt accurate cash flow projection. As a result, the organization will think it has more money to spend than it really has. 

The best way to avoid this error is to enter a transaction into the ERP as soon as it occurs. 

Streamline your workflow

The best way to correct accounting errors is to avoid them in the first place. Expense reporting and credit card reconciliation automation can streamline AP workflow and reduce, or completely eliminate, data entry errors and other errors on this list. In fact, automation can reduce the time wasted on accounting errors and corrections by 90%.

At Gorilla Expense, we provide automation for expense reporting, timesheets, and credit card reconciliation. Our API plugs into all major ERPs, including Sage, Lawson, or Microsoft Dynamics. Automation shaves hours off expense processing and reconciliation and provides 100% visibility of all transactions.

Finance professionals can review their accounting records, handle flagged policy violations, and seamlessly push approvals to their every journal entry through the intuitive and easy-to-use Gorilla Expense dashboard. 

To learn more about how Gorilla Expense can transform your AP workflow, book a demo with us today.  

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