How COVID-19 Has Revealed Hidden Costs in Traditional Accounts Payable Systems
COVID-19 has been one of the most disruptive public health and economic events in recent memory. Even if you or others you know haven’t been infected, the economic consequences of this global pandemic have been all too real. Because of this, every business must tighten its belt and think about maximizing its cash flow to ride out this extremely uncertain time.
Regardless of the size or sector of your business, one of the best ways that you can accomplish these objectives is to take a hard look at your working capital management. Cash is always king, but it is especially so when it’s unclear whether your customers will pay you on time. At the same time, you likely have plenty of pending invoices and suppliers who are waiting for full payment from your company.
Ultimately, these challenges aren’t impossible to navigate amidst COVID-19. That being said, this global pandemic has made it much more difficult for businesses that have traditional accounts payable systems. While these systems may have been adequate in a pre-coronavirus world, they are showing their warts at an extremely inconvenient time.
Issues with Traditional Accounts Payable Systems
Traditional accounts payable systems are often a hodgepodge of analog systems and procedures. Paper invoices are kept in certain files or filing cabinets. Physical checks are cut and mailed to suppliers as necessary. While there may be some electronic system that can send reminders on when payments are due, team members in these finance departments may need to review physical contracts to remind themselves of payment terms.
The above is a generalization, yet there are plenty of businesses and organizations that have implicitly embraced the analog approach. And even if they have embraced technology, there are still some processes that rely on paper or analog procedures.
Much of it comes down to inertia. As the old saying goes, “If it ain’t broke, don’t fix it.” According to one study by iPayables, 31% of invoices received by the respondent organizations were paper invoices. Out of those invoices that were submitted via paper or email, 20% of those invoices were manually keyed and 21% were scanned via OCR. Even though we live in a time where the latest and greatest websites and apps take up our societal conversation, a sizable number of finance departments are still managing their payables with old fashioned pen and paper.
Living through COVID-19, we can clearly see why these traditional accounts payable systems are flawed. We are now living in the era of remote work. While there may be some differences depending on the state of their business, businesses classified as non-essential are closed. Even if they do operate an essential business, there may be situations where members of their accounts payable team are not able to physically show up to work. They may have COVID-19 or may be in a situation where they must care for a family member that is infected. Because we are being encouraged to stay at home, it is difficult for accounts payable professionals to do their work at the office.
There is a Better Way
Ultimately, these traditional accounts payable systems are inefficient and costly. The good news, however, is that there is a better way to efficiently complete your accounts payable work — all from the comfort of your own home. It is through an accounts payable payment solution.
AP payments solutions leverage both technology and automation to make the accounts payable process much easier. This includes everything from easily reviewing contract and invoice terms to automatically paying invoices on time. Rather than remembering every single detail of every account, you and your colleagues can rely on sophisticated software. Human error is greatly reduced and you’ll experience fewer headaches when managing suppliers and upcoming invoices.
One of the best parts of AP payments solutions is that you can get a granular look at your payables from one dashboard. Whether you are at your headquarters or home office, you can quickly get a granular look at every invoice or payable within your system. Not only that, but AP payments solutions let you get full access to the payment cycle and see the performance of your entire accounts payable team. You’ll have up-to-the-minute data at your fingertips, whether you are working from home during this pandemic or are on the road and need to check-in.
Along with this, AP payments solutions let you embrace the power of automation. You and your team can automate things like invoice capture and payments, ensuring that your company is not suffering from any late fees or penalties. In the busyness of day-to-day work, both before and during COVID-19, it can be all too easy to forget about imminent or upcoming deadlines. AP payments solutions can essentially be your second brain, allowing you to free up your schedule and have the full confidence that your business is satisfying its contractual commitments.
In the end, AP payments solutions can improve morale and increase your bottom line. One study has shown that accounts payable automation can help your company save $16 per invoice or more. Another study revealed that accounts payable professionals who automate the capture of invoices and payments can save an average of one hour per day. No matter the size of your business, AP payments solutions provide a wealth of advantages over traditional accounts payable systems.
Surviving (and Thriving) Amidst COVID-19
COVID-19 has forced all businesses to ask some serious questions about their internal operations. Whether or not they were on financially sound footing before this global pandemic, this is the time to become leaner and more efficient. This is true for all parts of the organization — including the finance department.
As you can see, traditional accounts payable systems present many challenges today. Yes, these accounts payable systems may have worked in the past. But even so, we are now living in a “work from home” world. Finding that one paper invoice or contact at the office is much more challenging.
For many reasons, AP payments solutions can offer immense value — they help your team become more efficient all while keeping some of your organization’s cold, hard cash in its pocket. Ultimately, these benefits are real and will only become more important in the future.
To learn how your company can tap into the benefits of digitizing AP, contact Finexio here to schedule a quick call with one of our payments experts.