The Evolution of the modern Accounts Payable: why you need to gear up for the future
Looking at the kind of technological advances the world has achieved in the last century, it doesn’t come as a surprise that such incredibly advanced systems are available to automate and streamline Account payables, with such accuracy and efficiency.
But we didn’t get to this level of tech in AP, overnight. It has been a long winding road to this point, where the innovation was not born just for the sake of it, but because of pressing necessities that popped up with the changing business landscape. So, this was not thought up by a think tank, but rather came to be because of the need to build a better AP system for human resources to run, which would foster faster turn-around times, lesser errors and more streamlined workflows. With growing volumes of Accounts Payables, it was necessary to bring in some intuitive, intelligent muscle to run the more mundane tasks, so that the AP process could achieve operational excellence, sans bottlenecks or showstoppers.
It is necessary for us to examine this history, this roadmap, in order to understand the importance of AP automation in this day and age. Here is a breakdown of the evolution of the modern AP system.
Ever since Accounts Payable was considered an official part of accounting, somewhere in the mid-80s, Paper has been the main medium of the process. Hard copy invoices sent through mail or hand delivered, were pushed through departments with no real workflows in place, and tons of attached paperwork, only to be honoured long past deadlines. This created a scenario where vendors were left frustrated, waiting for payments, and the Accounts team itself, helpless, since there was no way to track any particular invoice at the snap of your fingers. Everything was filed and moved along at a snail’s pace.
More often than not, the invoice would be hand delivered or mailed to a person, only to sit on their desk for a few weeks if not months, or be delivered to a completely different person, who would not even be expecting the invoice in the first place. Several times, invoices would be completely buried until the organization receives a legal notice for failure to honour an invoice.
In a better scenario, the invoice goes to the right person, who approves and sends the invoice to the AP department, which, by the way, might be non-existent in most organizations, who then verify costs, cut the check and remit payment, by the 90-day payment wait period or a few weeks later.
Sounds horrible, doesn’t it? Don’t worry, we’re way past that now.
With the advent of personal computers and email servers, all the paperwork seemed obsolete. So just like several other departments the AP department switched to adopt these new disruptive technologies, where possible. Once every accountant in the AP department had a computer in front of him, it made sense to get rid of the paper trail to a great extent, albeit not completely eradicated, and move to softwares that could help calculate the costs and index everything. Also, since there were mail servers available, it was easier for accountants to converse with vendors across the globe and understand nuances or clarify on doubts. Thus, processing invoices became a walk in the park now. Or at least better than before.
Organizations were now able to focus on streamlining the process workflow, and standardizing operations. The AP department was no more just an end of the road turnpike – it was now a living breathing part of the organization which could focus on accuracy, speed and efficiency. This in turn positively impacted the P&L of the organization. Organization were slowly patching the cracks through which invoices were often lost.
However better it was than before, when the AP department was buried under a tonne of paperwork, there was still something missing. AP staffers still had to manually enter the data, which was both time consuming and error prone. Also, with the advent of new technology like computers or the internet, new ways to commit fraud cropped up as well.
These problems literally spurred the next stage of AP evolution – Automation and Cloud Tech
Today, most organizations across the world have begun looking at AP automation options to fix what’s missing in the AP process. While cost and process efficiency is still top of mind, with today’s tech advancements, it is easy to see that we can be doing so much more. Most organizations have already read the future and understand how if the AP process does not keep abreast with the changing landscape, we might see ourselves slipping back into the dark ages with the AP process, even if that does not involve paper.
From fraud prevention, to scaling operational capacity, and maintaining compliance, organizations understand that adopting Automation and Cloud Tech is the way forward for digitally transforming the organization, and not just the AP process. They understand that the AP process alone is not impacted, and that the adoption of such tech creates and opportunity for more control and visibility across the board.
With added abilities like reporting and analytics, it becomes easier for Financial Controllers and other major overseers and stakeholders to maintain increased visibility and control over the entire process, mitigating errors or the pretext for fraudulent activities. Financial controllers are not only able to stem the increase in number of liabilities for the organization, but also make informed decisions that might bring in more revenue as well. Through Automation, process optimization and efficiency is increased, and AP staffers tend to spend lesser time on mundane tasks that would eat away time and resources.
Your move now
So now, the AP department is no more just another process department, but a more strategic part of the business, which positively impacts the P&L sheet.
Are you ready to take the next step?