Digital Payments

It’s Time To Digitize AP And AR

digital accounting

Hundreds of billions of dollars annually are spent collectively by companies whose idea of “electronic invoice” still involves outmoded fax machines spitting out paper invoices.

That was before a mutated respiratory virus turned the world upside-down in mere weeks. As touching items, surfaces — and even paper invoices — puts people increasingly ill at ease, the digital-only mantra is permeating discussions around how best to handle accounts payable (AP) and accounts receivable (AR) functions now. Many see it as an opportunity for needed change.

“Digital technologies like virtual cards and eInvoicing could enable firms to break the vicious cycle of payment delays and inefficiencies,” according to PYMNTS’ April 2020 Optimizing AP and AR Playbook, a collaboration with OnPay Solutions. “Research shows that digital AP and AR automation has the potential to collectively save firms billions of dollars. Such solutions can also help teams work remotely and minimize physical document exchanges; considerations that are becoming more important as public health measures restrict individuals’ movements.”

You Can’t Afford It

The cost of legacy AP-AR systems is steep, with a Federal Reserve bank estimating that “… large-scale adoption of [eInvoicing] could collectively save U.S. businesses more than $100 billion,” the report states. While larger players are pursuing it vigorously, uptake has been dragging.

Research reveals that part of the holdup in upgrading legacy accounting systems are fears of greater exposure to cybercrime or incidents that could damage client relationships.

“AP and AR innovations’ slow progress is rooted in several factors, including businesses’ perceptions that migrating to digital systems will expose them to more fraud risks and complicate their supplier relationships,” the report states.

“This underscores the importance of establishing that AP automation can improve said relationships by accelerating payments and offering enhanced data visibility. Virtual cards randomly generate one-time card numbers tied to the payer and the payee for a specific dollar amount, effectively eliminating credit card fraud risks.”

As the April Optimizing AP and AR Playbook makes clear, “Reliance on manual processes can hamper businesses’ day-to-day operations. Paper-based invoices are the most-cited source of AP friction … costing businesses an average of $171,340 per year and 125 hours per week.”

AI, Virtual Cards and the Manual Review Takedown

Automating AP and AR functions has crucial benefits that are becoming clearer as business reinvents itself for a post-COVID-19 connected economy full of new fraud vectors and horrid amounts of manual review, especially with trillions in relief dollars now flowing hither and yon.

“AI-based systems can be particularly useful in reviewing and processing reports and invoices on the back end, identifying and flagging suspicious patterns that might indicate fraud, funds misuse or policy violations,” the report states. “Such tools can liberate companies’ staff from conducting routine reviews and allow them to focus on areas that require human judgment, such as fraud analysis.”

Virtual cards also play a role in the digitization of accounting, offering corporate treasurers finer spend controls and better risk mitigation than traditional corporate card products.

“Digital technologies like virtual cards, eInvoicing and digital workflows can bring AP operations into the 21st century, allowing firms to leverage sophisticated computational systems such as AI to better execute and track routine invoicing processes,” the report states.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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