The Future of Accounts Payable

How Accounts Payable Was Managed Before Computerization

Before the era of computerization, the management of accounts payable was a labour-intensive and time-consuming process. Manual tasks and paper-based documentation were the norm, resulting in several challenges for organisations.

Before computerization, accounts payable involved manual tasks and paper-based documentation. Invoices were received in physical form and had to be sorted, matched with purchase orders and receipts, and manually entered into ledgers. This process was time-consuming, prone to errors, and resulted in limited visibility and control. Approval workflows were inefficient, data inaccuracies were common, and generating reports or conducting data analysis was challenging. The manual nature of accounts payable processes necessitated the need for automation and computerization to streamline operations and improve efficiency.

Accounts payable processes lacked visibility and control, resulting in difficulty tracking invoice status, monitoring payment cycles, and optimising cash flow management. Manual approval workflows introduced delays and increased the risk of miscommunication, while data inaccuracies and discrepancies from manual data entry led to delayed payments and strained supplier relationships. Generating reports and conducting data analysis was challenging and time-consuming, limiting organisations' ability to identify trends and make data-driven decisions. These limitations highlighted the necessity of automation and computerization to streamline accounts payable processes.

Streamlining Accounts Payable: The Evolution from Manual Processes to AP Automation

The modernization of AP began in the 1980s with the introduction of accounting software. This allowed companies to automate the data entry process and reduce the risk of errors. However, the software was limited in its capabilities and required manual intervention for many tasks.

With the emergence of computerization and electronic data interchange (EDI) in the late 20th century, accounts payable underwent a significant transformation. Manual processes were gradually replaced by digital systems, allowing for faster and more accurate invoice processing. Electronic invoicing (e-invoicing) gained popularity, enabling businesses to send and receive invoices in standardised digital formats. This development streamlined the AP process, reducing paperwork, and facilitating automation.

• Accounting Software:?Accounting software solutions, such as QuickBooks, Peachtree (now known as Sage 50), and MYOB, were widely adopted during this period. These software packages provided basic AP functionalities, including invoice processing, payment management, and financial reporting.
• EDI Systems:?Electronic data interchange (EDI) systems played a crucial role in automating the exchange of business documents, including invoices, between trading partners. These systems enabled the standardised electronic transmission of data, reducing manual intervention and improving the efficiency of the AP process.
• ERP Systems:?Enterprise Resource Planning (ERP) systems, such as SAP, Oracle E-Business Suite, and JD Edwards, started gaining popularity during this era. These comprehensive software solutions integrated various business functions, including AP, within a single platform, providing end-to-end automation and streamlining of processes.
• E-Invoicing Solutions:?As electronic invoicing (e-invoicing) gained traction, specialised software tools emerged to support the creation, transmission, and processing of digital invoices. These solutions enabled businesses to send and receive invoices in standardised electronic formats, eliminating the need for paper-based invoices and manual data entry.
• Document Management Systems:?Document management systems, like Microsoft SharePoint and OpenText Documentum, were utilised to store, manage, and retrieve digital copies of invoices, purchase orders, and other AP-related documents. These systems provided centralised document repositories, enhancing accessibility, security, and auditability.

The next step in the evolution of AP management was the introduction of software that could automate the entire AP process. This software, known as AP automation software, could handle everything from invoice capture and data entry to payment processing and reporting. AP automation software also allowed for greater visibility into the AP process, making it easier to track invoices, payments, and vendor performance.

• Accounts Payable Automation Platforms:?Dedicated AP automation platforms, such as Tradeshift AvidXchange, Inc. , Tipalti , and Basware , emerged during this era. These platforms provided end-to-end automation capabilities, encompassing invoice capture, data extraction, invoice approval workflows, payment processing, and reporting.
• OCR and Data Capture Software:?Optical Character Recognition (OCR) software, such as ABBYY FineReader, Kofax , and ReadSoft , played a crucial role in automating the extraction of data from invoices and other AP documents. These tools utilised advanced algorithms to interpret and extract relevant information, eliminating the need for manual data entry.
• Workflow and Approval Automation Tools:?Workflow automation software, like Nintex, Appian, and K2, became popular in automating the approval process within the AP workflow. These tools allowed organisations to define and enforce standardised approval workflows, reducing manual intervention and ensuring consistent and timely invoice approvals.
• Payment Processing Solutions:?Payment processing solutions, such as Bill.com, Paymetrics , and Bottomline Technologies, offered automation for generating payments. These tools integrated with financial systems and provided capabilities for electronic payments, including ACH transfers, virtual card payments, and check printing.
• Reporting and Analytics Software:?Reporting and analytics tools specific to AP, like SAP Ariba, Coupa Software , and Certify, enabled organisations to gain insights into AP performance metrics. These solutions provided comprehensive dashboards and reports on invoice statuses, payment history, cash flow analysis, and vendor performance.

How AI Will Revolutionize Accounts Payable

While AP automation software has improved the AP process, it still requires manual intervention for some tasks. This is where AI comes in. AI can automate even more of the AP process, reducing the need for manual intervention and improving the speed and accuracy of the process.

One of the key benefits of AI in AP management is the ability to automate data entry. AI can read and extract data from invoices, eliminating the need for manual data entry. This reduces the risk of errors and improves the speed of invoice processing.AI can also improve the accuracy of the AP process. AI algorithms can analyse invoices and flag any potential errors or discrepancies. This allows AP staff to focus on resolving issues instead of manually reviewing every invoice.

Another benefit of AI in AP management is the ability to predict payment dates. AI algorithms can analyse past payment data and vendor behaviour to predict when invoices are likely to be paid. This allows companies to better manage their cash flow and take advantage of early payment discounts.

AI-based software tools and technologies have revolutionised the field of financial fraud detection and prevention, empowering CFOs and companies to make better-informed decisions.

• Machine Learning (ML) Algorithms:?ML algorithms are employed to analyse vast amounts of financial data, identifying patterns and anomalies that may indicate fraudulent activities. These algorithms can detect unusual transaction patterns, anomalies in spending behaviour, and outliers in financial data, enabling early detection of potential fraud.
• Predictive Analytics:?AI-powered predictive analytics tools utilise historical data and ML algorithms to forecast future trends and identify potential fraudulent activities. By analysing patterns and behaviours, these tools can assess the likelihood of specific transactions being fraudulent, allowing CFOs to take proactive measures to prevent financial losses.
• Risk Scoring Models:?AI software tools develop risk scoring models by analysing various data points, including transaction history, customer profiles, and external risk indicators. These models assess the risk associated with each transaction or customer, flagging high-risk activities for further investigation and reducing the occurrence of fraudulent transactions.
• Fraud Detection Platforms:?AI-driven fraud detection platforms, such as SAS Fraud Detection, IBM Safer Payments, and FICO Falcon Fraud Manager, combine multiple AI technologies to provide comprehensive fraud prevention capabilities. These platforms leverage advanced analytics, ML algorithms, and real-time monitoring to detect and prevent a wide range of financial fraud, including payment fraud, identity theft, and insider threats.

Skills Required to Cope with the Change in the AP Process

As the AP process undergoes changes due to automation and digital transformation, different skill sets are required at various levels within the organisation. Here's a breakdown of the skill sets needed to cope with the changes in the AP process at different levels:

Entry Level

• Technological Aptitude:?Entry-level professionals should have a basic understanding of digital tools and technologies related to AP automation, such as accounting software, document management systems, and data entry tools.
• Attention to Detail:?With automation reducing manual intervention, entry-level employees need to focus on accuracy and attention to detail when performing tasks like data entry and invoice processing.
• Adaptability:?As the AP process evolves, entry-level professionals should be open to learning new tools, processes, and software platforms to effectively navigate the changing landscape.

Supervisor Level

• Process Management:?Supervisors need to have a strong understanding of the end-to-end AP process and be capable of overseeing and managing the automated workflows and exception handling processes..
• Analytical Skills:?Supervisors should possess analytical skills to interpret data, identify trends, and generate insights from AP analytics and reporting tools. This enables them to make data-driven decisions and optimise the AP process.
• Communication and Collaboration:?Effective communication skills are crucial for supervisors to liaise with team members, vendors, and other departments involved in the AP process. Collaboration skills are essential to facilitate cross-functional teamwork.

Leadership Level

• Strategic Thinking:?Leaders should have a strategic mindset to envision the future of AP and align it with broader organisational goals. This involves evaluating emerging technologies, assessing industry trends, and making informed decisions on AP process enhancements.
• Change Management:?Leaders play a vital role in leading the organisation through AP process changes. They need to possess change management skills to drive adoption, manage resistance, and ensure smooth transitions during automation implementations.
• Vendor and Stakeholder Management:?Leaders at this level should have the ability to manage relationships with vendors, technology providers, and other stakeholders involved in the AP ecosystem. This includes negotiating contracts, evaluating service levels, and fostering collaborative partnerships.

Conclusion

In conclusion, the accounts payable process is rapidly evolving, and companies must adapt to stay competitive. The emergence of AI and other digital tools is revolutionising AP management, automating repetitive tasks, and improving accuracy. AP professionals must develop technical, analytical, and communication skills to keep up with the changes. Furthermore, they must embrace digital transformation and invest in AP automation software and other digital tools to optimise their workflow. Companies that fail to invest in AP automation risk falling behind their competitors and missing out on the benefits of increased efficiency and accuracy. The future of accounts payable is bright, and those who embrace the changes and invest in their skills and technology will reap the rewards.