Accounts payable (AP) departments have been forced to hold critical conversations about a "paradigm shift" occurring in their industry.
No longer can corporates continue to operate with paper and manual processes, particularly not today as staff continue to work remote.
But while many organizations increasingly understand the importance of modernizing AP operations, paper remains thanks to the perceived costs of digital transformation.
Speaking with Karen Webster, OnPay Solutions Founder and Chief Operating Officer Julie Negrete-Anderson explained that, contrary to what many chief financial officers (CFOs) assume, the cost of this AP paradigm shift may not be as high as once thought. Indeed, the costs of failing to act may be far higher, she said — and not all of those costs can be measured in dollars and cents.
"Sometimes, organizations don't account for those costs because it's baked into how they look at department expenses," she said. "It's hard to exact the cost of not doing something."
Buckets Of Inefficiency
Manual AP workflows create friction, but Negrete-Anderson identified three particular areas where the pain points can be felt the most when organizations fail to modernize.
Perhaps the most obvious is paper, and the physical act of moving documents between personnel, coding them, and filing them appropriately. The second bucket of inefficiency is in the financial cost of that paper, both in the form of processing physical invoices and printing checks, as well as the cost of labor associated with pushing paper. Finally, the third category is in the inefficiencies built into legacy workflows.
In this latter category, Negrete-Anderson pointed to a persistent "don't fix what isn't broken" mentality that continues to prevent organizations from changing. This is among the most difficult to address because optimizing workflows may not be achievable solely through the adoption of a digital tool.
"Sometimes, revisiting how things are being done doesn't resonate," she noted. "They've got their mindset that, if things are 'working,' then they're OK with it."
This was precisely the challenge for one prospective client of OnPay's, whose AP manager had explained that she had to physically take home the company's laser printer to continue printing checks, then bring those checks to the CFO's house to sign and mail off. Although not efficient, this paper-based workflow was functional for the company — until the pandemic hit, that is.
Easing The Paradigm Shift
COVID-19 is now forcing many organizations' AP departments to take action after what has, for some firms, been years of discussions about modernization efforts.
Negrete-Anderson noted that it's important for businesses to factor into the costs of failing to embrace AP's paradigm shift when making these decisions. There are, of course, the costs associated with manual, paper-based workflows, which can mean a single invoice costs as much as $20 to process.
But there are other costs, too, she said.
There is the cost of valuable time, which could and should be spent on more strategic initiatives, as well as the cost of a lack of payments and cash flow visibility due to inefficient and siloed operations. Today, there is also the cost of human risk associated with physically handing off paper from one professional to another.
On the flip side, she also highlighted why it's important for organizations to assess the actual costs of digital transformation.
"What's missing is the understanding that a huge, six- or seven-figure project is not necessary in order to have a transformation," she said.
Technology today offers the opportunity for organizations to keep many of their existing systems in place, and to optimize workflows without forcing teams to ditch the tools they're familiar with that are working efficiently. At the same time, identifying and procuring technologies that can seamlessly connect to those existing systems and guide AP teams through an optimized workflow, allows firms to take a gradual approach to modernization.
This is particularly important for business continuity planning as firms continue to operate in a remote work setting. By minimizing the costs of digital transformation — both financial and otherwise — businesses are finally able to take actionable steps toward change they have been avoiding for years.
"It's really never been easier for a CFO to plan a digital transformation," she said. "The paradigm shift doesn't have to be immensely disruptive to your organization."