The following is a contributed article from Matt Clark, president and COO of Corcentric.
Technology has modernized many business operations, but not, evidently, the accounts payable (AP) function.
My company recently released results of a survey we conducted among finance staff at 2,500 companies, and almost three-quarters of respondents say snail mail remains the most frequent way they receive invoices, and almost 44% say they still receive invoices by fax.
In a world in which transactions can be closed almost instantaneously, the idea that the accounts payable process continues to rely on snail mail and faxes is remarkable — and not cost effective. My company, Corcentric, provides an automated payments processing platform, and so we have a vested interest in digital payments platforms. But we estimate you can reduce processing costs by 80% through digitalization.
Other findings from our Payables Friction Index survey:
- Nearly 45% of invoices take a week or longer to process.
- 35.5% of companies would like to implement e-invoicing to reduce manual processing tasks.
- A 30-point satisfaction gap exists between departments using paper checks and the payment method they would prefer to use.
Receiving invoices by fax is not equally common across industries. Manufacturing (29%) and construction firms (33%) are the least likely to receive theirs this way. By contrast, 66% of financial services firms specializing in accounting, taxes and investments and 68% of financial institutions such as consumer banks, community banks and credit unions receive supplier invoices via fax. This contributes to about half of invoices taking a week or longer to process.
The actual usage of digital payments solutions including ePayables and digital wallets is far rarer among the companies surveyed. Just 11% pay suppliers through ePayables or use digital wallets. More than one-third of companies see e-invoicing as a way to remove manual process frictions such as approval workflows.
AP teams that use digital solutions to pay suppliers report higher satisfaction rates than those using legacy methods. Nearly 70% of respondents who pay with ePayables are "very" or "extremely" satisfied, as are 74% of those who settle up using digital wallets.
In short, businesses are paying suppliers through legacy methods even when their staff would prefer to use digital alternatives.
Automated systems can be more accountable, too. In our conversations with CFOs, one of the most common value-adds from automation is securing an audit trail. Supply chain visibility and removing processing bottlenecks are regular discussion points as well.
Businesses and suppliers aren't happy with the status quo, our survey shows, and some have already begun to capitalize on digital invoice solutions.
It's clear many AP departments are stuck in a go-with-what-you-know approach. We try to make the case that's not the best way for their company.
Matt Clark is president and COO at Corcentric, a provider of source-to-pay and order-to-cash solutions for businesses in the U.S. and Europe.