More discounts. Better cash flow. No faxes, far fewer ink stains and a severe reduction in paper cuts. An increase of time. Better relations with suppliers.
Those stand as the benefits of an accounts payable (AP) revolution — at least according to a recent PYMNTS webinar entitled “The Payable to Payments Revolution.” In it, Karen Webster was joined by Dan Andrew, senior vice president of sales at Corcentric, for a discussion about how to make the paper-to-digital transformation in AP.
What does “revolution” mean in the context of AP? “Becoming free from paper,” Andrew said. “Whether paper checks or paper invoices, it’s time to become completely independent of them and go completely electronic.”
That’s easier said than done, of course — but most things are, especially efforts that require a move away from legacy processes and thinking. A story from Andrew illustrates that, and also demonstrates the importance of education in bringing digital technology to more B2B payments.
During the webinar, Andrew recalled visiting a supplier in “the middle part of the U.S.,” a man who “had no computers, did not believe in computers and resisted” digital life. That supplier was persuaded to visit the mayor’s office, where there was a computer in the lobby that he could use. Andrew showed that supplier how, with a few pushes of the buttons, he could turn his purchase order into a digital invoice, and could see how the details on those documents matched each other. That not only demonstrated the efficiency of digital technology (and for documents that involved one of the supplier’s largest customers), but performed a bit of theater.
“He was amazed,” Andrew said, “and said it looked as sophisticated as the [documents from] companies that spent billions on software. He said, “‘I’m going to the mayor’s office every week.’”
Cost And Competitiveness
Amusing anecdote aside, the benefits of this transition — also called the analog-to-digital push, an area of increasing coverage from PYMNTS — are significant when it comes to money and time (pretty much the same thing in the business world, somewhat like spacetime is a single entity in astrophysics). According to data presented in the webinar, the cost of processing a digital invoice stands at $2.94. That compares to $15.96 for a manually processed invoice.
“If the competition processes an invoice five times cheaper, am I missing out?” Andrew said. “Am I losing my competitive advantage?”
The savings comes from such factors as having fewer people “touch” those documents — for instance, picking them up from mailrooms or faxes, having to reconcile misplaced numbers or picking up the phone for details that contradict each other. In addition, a digital AP process can help companies take better advantage of discounts and gain more “visibility” across the whole scope of spending, Andrew said. And reducing expenses in AP leads to better chances to leverage cash and increase available capital, which can further help the businesses doing this work.
That’s not to say that all companies even realize how much money they are wasting by keeping loyal to manual purchase order and invoice processes. “Most of the times, they don’t,” Andrew said.
So, where to start?
Taking an AP department digital is one of those tasks that seems akin to changing the direction of an ocean liner — a major, involved process that requires what business and marketing types might call a “buy in” from multiple departments. The captain/CEO can give orders until their voices wear out, but nothing really gets done unless underlings decide it is in their best interests to follow those directions (a paycheck doesn’t always guarantee that), and to do so in a way that does not slow down or sabotage the larger process.
The process of AP touches more departments than just accounts payable, with IT units and corporate controllers also playing roles. Andrew, supported by webinar charts, advised about the importance of having a leader out in front of the process (if not the controller, than perhaps the AP manager), a person who “has the ability to get team members to participate.”
Work toward a future that is fully digital for AP can start with deploying an electronics payments system, and making sure that paper documents that enter the AP department are made digital before ever leaving it. Working with suppliers is key, of course. Some will resist anything new — like that man with the computer in the mayor’s office — and need a significant dose of education. Some, frankly, will stay with their paper checks, Andrew said.
However, the suppliers that do get on board will provide opportunities to further support the wider AP digitization effort. That's because, from a supplier point of view, this is an accounts receivable (AR) issue, and any supplier that wants to better work with AR departments might integrate or deploy similar digital technology.
That turns the digital push into a “mirrored effort,” Andrew said during the nearly hour-long webinar. “Then it becomes a shared objective.”
Of course, that's not exactly an easy move, either. Going digital requires changing systems (more money and time), and if a supplier is comfortable using, say, pens and fax machines to handle B2B payments, why change — especially if the buyer or a group of buyers fail to lead the way? It seems likely that the buyer — the AP side of things — will continue to do the heavy lifting when it comes to the digital transformation.
All revolutions have wide, often unexpected, effects that go well beyond the main goals. Making accounts payable much more digital will, no doubt, conform to that truth.