B2B Payments

Legacy Accounts Payable Has Run Out Of Excuses


Accounts payable departments can often buy their corporation a few more days without paying suppliers thanks to the age-old excuse: "The check's in the mail."

FinServ companies have cited this colloquialism as a reason some corporations aren't too happy about the advancement of payments technologies, like digital payment tools and industry faster payments initiatives. The extra few days that a paper check is physically in transit from Point A to Point B are highly valuable to cash-strapped firms, so why would they want to give that up?

A new report from AP management firm MineralTree argues that the extra padding provided by the sluggish pace of paper checks is no longer worth the extra time a company gains.

In a new whitepaper, MineralTree describes the friction associated with paper checks and other manual AP processes as "AP anxiety," and it can get messy — literally.

"If the accounts payable process sounds ancient and arcane, add in the headaches of answering anxious vendor calls ('the check's in the mail!'), replenishing depleted check stock and printing supplies, fixing stubborn printer paper jams and cleaning up messy toner cartridge explosions," the company explained.

Assuring a supplier that a check has been sent out hardly quells the concerns of the receiving end. According to MineralTree, ongoing issues of whether the supplier actually receives the check is just the beginning. There is also the challenge of manually reconciling the payment against purchase orders and invoices and triple-checking to make sure that a buyer has received the appropriate discount.

From wasted time spent cutting checks and stuffing envelopes to the cost of issuing checks and paying the employees that spend so much time on these processes, checks are pricey. But MineralTree added that manual AP processes mean corporations run the risk of actually paying an invoice twice, a problem that can take weeks to fix.

An even more long-term impact of manual AP solutions comes during tax season and auditing. According to MineralTree, a company can receive a poor audit performance because manual processes have failed to implement adequate payment controls.

"There's no excuse for antiquated AP," the company declared, citing some of the most common excuses businesses make for sticking with their legacy processes. One of the largest sees corporations questioning, "Why spend money to make payments?"

"You already do," MineralTree stated, citing research from Aberdeen and PayStream Advisors that uncovers the cost of cutting paper checks. Businesses can pay up to $15 per invoice when using manual processes, analysis said, but these costs are hidden along each step of the procure-to-pay process.

Automated AP solutions can drop that cost-per-invoice-paid down to about $4 — amounting to thousands of dollars in savings every year, according to the report.

"Controllers or CFOs might argue that those cost savings are modest and that the headache of implementing a new system is greater than the benefit it delivers," MineralTree stated. "However, advanced solutions cost just a fraction of the overall cost savings the solution will generate. And your business will realize tangible benefits in just one or two months."

There are countless justifications executives use for sticking to the old way: If it ain't broke, don't fix it; It's too much hassle to change; It's too much of an investment to adopt new technology.

And finally, the check's in the mail. Suppliers are reassured that they'll get paid eventually, and buyers benefit from unintentionally extended payment terms thanks to the time it takes for the postal service to bring a check from buyer to supplier.

But according to MineralTree, the excuses have got to go. The impact on the bottom line of taking the leap and integrating automated AP processes are far too great to ignore. Once integrated, the company suggests, automated solutions could save much more than borrowed time and an extra couple days on B2B payment terms.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.

Click to comment