Breaking Free Of The (AP) Paper Chase

In finance departments, paper is as sticky as a Post-it note, MineralTree found in its second annual payments survey. And when it comes to accounts payable management, professionals know that paper and manual processes are so … last century, yet cling stubbornly to those outmoded practices. MineralTree’s CEO, BC Krishna, and CMO Adine Deford delved into why paper makes us creatures of (bad) cash flow-tracking habits.

Cash flow is oxygen for firms, and no one wants to be short of breath. And yet, inefficient management of documents and day-to-day information can stymie even the best-run businesses.

In the newest payments report by MineralTree, titled “Exploring the Invoice to Pay Process,” respondents revealed a lack of modernity plaguing accounts payable departments, and a few key findings emerged. Among them, detailed through responses across more than 150 finance professionals: No one really knows just how much it costs (in both dollar and human terms) to process an invoice.

In an interview with PYMNTS’ Karen Webster, MineralTree CEO BC Krishna and CMO Adine Deford noted that many of these businesses surveyed sometimes “don’t know what they don’t know.” Roughly 31 percent of respondents did not know the cost at all (research shows that the cost can be as high as $20 per manually processed invoice, said the report).

“They don’t know what they don’t know, because they do not bother to find out,” said Krishna, who stated that executives “don’t bother to find out, because they do not think that it is a problem.”

In one analogy for accounts payable, he noted that an individual’s decision to go out and buy insurance is usually not set in motion until they absolutely have to go out and do so, and when they do undertake the process, they spend time learning about insurance itself.

Scrutiny of accounts payable also can vary by the size of the organization; Krishna stated that an entity like the Mayo Clinic processes about 150,000 invoices every month.

“When you have that volume of paper floating around,” he said, “you have no choice but to ask the question.”

But with firms that have significantly smaller invoice volumes, “you have to be growing to face the question [about accounts payable costs],” he said.

Beyond the simple (but important) notion of cost, the survey found inefficiencies in the actual process of invoice management, as 91 percent of respondents said that between two and five people, on average, touched an invoice as it went through the payments process.

“When you think about the cost,” said Webster, “that’s a huge one. You lose things. You don’t pay bills on time,” which can translate into reputational issues.

To embrace efficiency, said Krishna, it may not be necessary or even advisable to cut down on the number of touchpoints, as they represent a control factor within the company, but it is advisable to cut down on the amount of paper. For example, a finance department staffer need not get a paper invoice to see who may have done what work and whether a payment should be approved.

In reference to payments themselves, MineralTree said it has seen a spike in the use of corporate cards, especially at smaller companies, where Webster said such payments were a form of “quid pro quo,” especially in light of certain cashback rewards.

Of payments in general, “Checks, everybody knows them,” said Krishna. “Cards are new, and ACH is caught between a rock and a hard place, not knowing what its role in life is.”

To embrace cards, he added, “we’ve seen, fairly consistently and without much hard work, it get to about a 5 percent check-to-card conversion rate,” indicating that at least some suppliers are overcoming trepidations about accepting this payment method and even negotiate overt terms.

The survey found that middle-market firms, when looking at process, also focused on fraud, and Deford said that fraud scored a bit higher on the list of overall concerns as compared to last year (the first year MineralTree conducted the survey). That might be expected in a year dominated by high-profile hacking activity and, possibly, the executives noted, that they themselves had been targeted in cyberattacks. Hacking “is starting to be a lot less theoretical and a lot more real,” said Deford.

The solution to concerns about fraud lies in part with adopting controls within the organization that make data theft attempts more difficult, said Krishna, though “there is not a silver bullet” and good risk mitigation hinges on multiple efforts.

“One of the most basic controls that every business should adopt when it comes to payments … is the person who issues the payment should not be the person who originates the payment,” he said. But, he asked, rhetorically, how many firms do that? How many firms even have two people who can divvy up those responsibilities? Such divisions of labor can reduce the risk of online account takeovers quite handily.

Surprises? A few were in the offing, as Deford said she was surprised by the timeframe it took before firms predicted becoming truly paperless — stretching out over at least five years in some cases.

“That’s sort of astounding,” she said, pointing to “all of the efficiencies that people understand” in eliminating paper. Large discrepancies exist, she said, with the way finance professionals pay bills at home (usually online) and the way they pay bills when it’s the company’s turn. In the latter case, paper still reigns, amid “signing checks for hours.”

And though automating accounts payable has, as Krishna said, “not completely caught fire yet … the level of maturity of the market is growing steadily.”

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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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