Picture this: prior to COVID-19, around 25 billion invoices were circulating annually in the U.S. Only 25% of those were exchanged electronically, and 75% still required manual intervention, according to the Business Payments Coalition (BPC). In fact, 65% of all B2B payments were made by checks before the pandemic.
Imagine, then, what the global pandemic has since done for e-invoicing around the world. Finance teams went into overdrive. Staff began working from home, and some employees were furloughed. Those companies that weren’t already using technology to support their AP (accounts payable) processes felt the pain most. Quickly, they realized that invoices were sitting in closed offices and stores. Going through a year of major disruption, many businesses have had to address and adopt these manual processes and learn how to overcome the physical barriers.
With many U.S. organizations not adopting digital advancements toward automating AP and AR (accounts receivable) processes, it’s putting the spotlight on the back office forcing it to change.
Put simply, paper invoices require substantial human intervention in a process that must be as efficient as possible. It is very hard to be an agile AP team if you are weighed down by manual processes like keying invoice information into a spreadsheet. Another impact of COVID-19 for U.S. businesses from a supplier and AP relationship is that suppliers were forced to work remotely and, in many cases, reduce staffing levels significantly. This has a double impact on finance functions as both process and performance were impacted in a matter of weeks.
There are many reasons why going paperless makes sense. From simple efficiency to reducing your carbon footprint or eliminating human errors, the case for invoice automation is clear. Businesses gain much better control and visibility, a working capital advantage, and are in a better position to make informed decisions surrounding payments.
What the coronavirus pandemic has revealed, however, is how unrealistic it is to expect businesses – particularly those in crisis – to completely change their AP processes so quickly.
Once the "new normal" for businesses is accepted, organizations will have more time to focus on improving their processes, many of which will have altered in light of the pandemic. However, those without the necessary skills or budget to be able to switch either in the short or long term may never do so.
In addition, not all invoicing needs to be electronic at source; each business must choose what works for them. What is possible, however, is for all invoices in your supply chain to look the same, or at least to be "read" in the same way by your AP software. This approach allows organizations to create an efficient and accurate file of invoices that their system can process and pay.
There is a real conflict in the e-invoicing debate. On the one hand, investment in technology and process is needed to create the efficiencies and strategic benefits most AP teams want to see. On the other hand, focus on process improvements appears to have lessened for the time being. While there are many barriers that stand in the way of true end to end automation, including the good old saying “what’s not broken doesn’t need fixing,” there are many benefits that companies of all sizes and types can benefit from.
COVID-19 hasn’t exposed the need to end paper invoicing altogether. It has made us all realize the need for agility and prioritization at a time of great uncertainty. What works for one supplier won’t work for all. A flexible AP model – one that can efficiently handle paper, data-layer and image-based pdfs, XML and portal invoices, regardless of how the team is set up – is the most reliable approach to take.
Suppliers of all sizes can then focus on delivering the best – and most efficient – service they can.
