While businesses have long relied on an accounts payable (AP) process of some sort to facilitate the process of issuing and matching purchase orders and managing payments, the tools and systems that support such critical business functions have changed dramatically over the years. Here’s a look at accounts payable solutions of the past and present, and how far the industry has evolved in a comparably short time:
Roots in paper-based systems. Before businesses had the luxury of incorporating technology into their processes, accounts payable processes were reliant on manual processes. Until the early 1990s, businesses of all sizes had little choice but to manage AP functions with hard copy-based systems that inherently included redundant processes like data entry, invoice matching and payment issuance. Though some larger companies made attempts to streamline the process of managing invoices and purchase orders as early as the 1960s, corporations who experimented with electronic data interchange (EDI) systems, could transmit information electronically between a sender and a recipient — but the proprietary system was usable only to the company that initiated it. As a result, even these early attempts at AP automation demanded a continued reliance on hard copy systems, even for companies with the financial resources to experiment with improvements. By and large, the norm of AP processing was all about hard copy documentation: Invoices were prepared and printed on paper, mailed, and processed manually for approval and payment.
In the late 1990s, the introduction of the Internet and subsequent availability of business-management software began to change how companies viewed their AP processes and systems. Recognizing an opportunity to improve efficiency and reduce costs, the first iteration of what we know as AP automation was brought to market. Though the systems weren’t as robust as the accounts payable solutions that exist today, the core intent was similar: To provide Web-based tools that allowed for electronic data transmission, file upload and electronic invoicing. In addition to the fact that such systems eliminated the time-consuming human processes that manual accounts payable systems entailed, they offered new capabilities, including the ability to automate discounted prices for certain vendors, and to customize how much sensitive information a vendor could access in the system.
When cloud-computing technology entered the collective business consciousness in the mid 2000s, AP automation evolved even further. Today, accounts payable processes can be conducted in a virtual environment, allowing companies to better manage the hard costs associated with paper and its processing, and to minimize human error associated with data entry and manual payment processing. The result is an accurate and efficient accounts payable solution that can even automate processes like purchase order (PO) matching, approval routing and redundant data entry. Because many AP automation systems also have the capability to meet the needs of desktop and mobile office environments, they can result in direct savings of hundreds of thousands of dollars to organizations, in efficiency and reduced paper and process-related waste.