Citing inertia to keep manual B2B payments is a cliche
Selling accounts payable automation internally to CFOs has become a recent challenge for firms.
CFOs are finding themselves asking two common follow-up questions of AP practitioners who pitch automation to them: Why now? And why fix what isn’t broken?
These questions can be difficult to counter because they’re so open-ended. Here are a few ways to break them down and make a strong case for change.
Why now? Managers at all levels ask this question about virtually every technological and process change. And if the change isn’t absolutely necessary to comply with regulations, very few accepted answers exist beyond the idea that the proposed change will either increase efficiency, save costs, or add to revenue.
Automating accounts payable does all three. Of course, the question of “why now” with regards to checks is beyond arbitrary. Modern paper checks date back to 17th century England, and have been largely phased out in the personal finance realm by debit cards, digital truncation and online payments. But in business, virtually all industries have kept this nearly 500-year-old payment method at the center of their AP process in one way or another.
That loyalty to one method comes at an increasing cost. According to Levvel Research’s 2018 Payables Insight Report, 48 percent of AP professionals identified manual data entry and inefficient processes as their number-one pain point. Companies with legacy paper-based manual processes waste valuable time and money spent annually on processing. Between hidden costs like payment errors, late payments, approval time, the cost of poor visibility, file storage, and headcount and hiring, the price of making a vendor payment by check can range between $4 and $15.
After years of employing manual methods, AP teams have stacked up substantial payment costs that could have been spent more effectively on process improvements and deeper initiatives. The pace of modern business has pushed AP into the grey zone between manual processes and automation after decades of paper as the default payment method.
Why now? Because time’s up. Digitization and on-demand insights have rendered paper the wrong medium for payments. Paper invoices and checks will eventually need to disappear from the payables process in order for AP teams to realize their true strategic value.
Why fix what isn't broken? This question is clichéd precisely because it makes complete sense—especially given the vivid imagery that the word “broken” conjures. We’re not pointing at a plow with a cracked handle here. But when it comes to process-automation changes brought about by tech development, it begs other questions such as why improve anything? For example, the check-writing task that your check-printing process replaced wasn’t exactly “broken”—it was just inefficient. It took up too much time, which ultimately cost your business more money than necessary.
And will it cost you more to fix it after it breaks? Your car’s onboard computer system is designed to alert you to problems before total (and expensive) mechanical failure occurs. Do you have similar alerts in place for your company’s finances—and are you paying attention to them?
The obvious next question becomes: How does your company determine when your payment process is “broken”? When payment fraud causes you financial and reputational loss? When a pay run error damages your supplier relationships?
If you stay committed to a manual, paper-based payment process, you keep risking fraud over the long term—especially if your team doesn’t fully resource proper security reviews of all parts of the processes.
Of course, this is about far more than an issue of whether or when to initiate a fix to your AP. Using automation to optimize your payment process doesn’t only improve fraud recognition and reduce errors. It makes payments more time- and cost-efficient, and gives your AP team the chance to take on strategic initiatives like negotiating better payment terms. All of these improvements give your organization a more competitive edge.
A side-note on competitive edge: while some teams may not even recognize the need to upgrade their payment process, the cost of not doing so could eventually cause employee burn-out. This eventually results in unproductive work, a high turnover rate, or both. As a manager and leader, you want to avoid both scenarios.