As far back as 2550 BC, the ancient Egyptians were jotting down their first hieroglyphic musings on sheets of papyrus. And while the advent of the humble piece of paper would go on to change civilization forever, more recent history has seen a dramatic decline in the usage of this once prized resource. Every year since 1999, in fact, demand for paper products has fallen in the United States, with 35% less paper being produced today as e-mails, e-readers, smart phones, and tablets continue to streamline modern living.
With that in mind, it’s striking that one recent study found the primary driver for change in Accounts Payable (AP) working practices was the difficulty of finding or managing a deluge of paper-based documents. Underscoring the point, research published last month by Ardent Partners revealed that businesses still receive 70% of invoices and make almost half of all payments via manual, not electronic, formats.
Although these statistics may seem almost surreal at first glance, they are a very real indicator of the dramatic technology shortcomings many AP departments are forced to work with as the world around them moves relentlessly into increasingly automated processes. It’s little wonder that the same Ardent Partners study saw 83% of businesses say that they expected AP processes to be largely automated within the next two years. At the very least, they know it’s high time.
Underlying the inevitable move towards increased automation in processing and paying invoices, is a growing realization that an AP department unburdened from a “tornado of paper” is freed up to provide precious insights into spending patterns, make more calculated contributions to budget forecasts, and secure early payment discounts. As an Aberdeen Group report of 2013 put it, “The correlation between superior AP performance indicators and the bottom line is no coincidence.”
Other top challenges for AP listed in Ardent Partners’ research included a lack of visibility into invoice and payment data (cited by 27% of respondents), and invoice/payment approvals taking too long (43%).
Issues such as lack of visibility speak to the necessity for a stronger working relationship between the AP and Procurement departments— a trend 69% of businesses say they expect to see develop in the near future. A stronger bond between these two often disconnected stakeholders allows for more educated decisions on the procurement front, and a more comprehensive overview of invoicing issues in AP. The third key factor in this relationship, however, is a dynamic payments platform that mitigates the status quo of static, disconnected B2B payments. Even with a healthy relationship between AP and Procurement, reliance on a payment system that can’t handle rich data or respond to the 25-30% of business transactions that are altered in some way seriously diminishes the value of increased working harmony between the two. This undermines the potential of the relationship to optimize working capital and increase AP’s overall strategic significance.
Therefore, beyond the need for automation in AP processes lies the need for good automation. Aberdeen’s report states that Best-in-Class companies are engaged in “strategic refinement” of their automation toolset that involves, for example, expanding the usage of cloud-based technologies (10% more common among Best-in-Class companies) that allow for scalability, collaboration, and real-time monitoring of events and data. Leading companies are also 43% more likely to have a mobile application for financial transformation, and 54% are more likely to have standardized payment processes. Overall, according to a 2014 report, Best-in-Class companies are 85% more likely to have enabled full AP automation.
Ultimately, the move towards increased automation in Accounts Payable is regarded as a necessary inevitability. From enhancing customer relations to saving time and money—as much as 59% on remittance per transaction—the benefits are beyond question. All that remains is for companies to choose wisely as they seek out the systems and software that will be most advantageous when the time comes to take their liberating steps off of the paper trail.