Why AP Automation Adoption Is Struggling Due To No Standardization
The US Federal Reserve has been pushing for AP automation adoption for years now. In fact, convincing B2B companies to adopt e-invoicing is now on its priority list. Recently, a report was published by the Federal Reserve Bank of the Minneapolis’ Payments, Standards, and Outreach group. The main findings of the report revealed that there was immense potential for the US market to embrace invoice standardization.
How The Lack Of Standardization Compounds The Adoption Problem
In a related study, it was found that only 49% of businesses in the US have already incorporated electronic invoicing. Although a greater percentage of US-based companies have shown a desire to incorporate e-invoicing.
Even though the digital invoicing process is highly efficient, there are still several barriers a business will face when switching over to it. According to the Federal Reserve, the foremost barrier to incorporating e-invoicing for businesses is their trading partner’s reliance on sending and receiving invoices electronically. The lack of a consolidated electronic invoicing platform necessitates reliance on paper-based processes.
US businesses still have a long way to go in regard to digitizing their transactions. A lack of invoice standardization contributes heavily to the slowing of digitizing. Greg Bartels, president and chief executive officer of IPS, is fearful of the toll this lack of standardization may take on the businesses that are hoping to improve their accounts payables network.
According to Mr.Bartels, the IPS is working in collaboration with the Federal Reserve to come up with a set of standards for invoice suppliers. The lack of a standardized format leads to various problems for the AP departments. These departments have no way to predict the format of incoming invoices. Receiving invoices in several different formats requires the recategorization of data and formatting for invoice reconciliation. This causes further delay in the already extensive process of invoicing.
Why Failure To Adopt Is Costly
Failure to adapt to electronic invoicing will cost businesses both time and labor. E-invoicing is an automated system that integrates itself into a company’s backup system. The AP department will first receive an invoice in the form of an email. The system will then automatically receive, reconcile, approve, and initiate the payment. Without this integrated system, these steps are manually performed and cost employees a significant amount of time and labor. This puts considerable strain on a company’s finances because it’s unable to make better use of the worker’s labor and time. Delays in invoice processing, reconciliation, and approval are all contributing factors to unfulfilled payments.
Manual invoicing isn’t only laborious and damaging to a business’s cash-flow, but it also prevents businesses from making possible financial headway. Digitized invoicing allows businesses a real-time overview of their financial statistics, the payment status, and real-time cash flow.
To be able to access this information in a second’s notice gives businesses the advantage to gain quick insights and make relevant short-term decisions. Companies are deprived of such valuable business tools and benefits when they still rely on paper-based processes. Such dated processes only continue to expend a company’s resources unnecessarily.
How E-invoicing Adoption And Fintech Can Help
The potential for e-invoicing adoption has provided Fintech with the opportunity to resolve these barriers by introducing automated invoicing technologies. Fintech’s automated tools help capture data and support automated entry, even when the invoice has been delivered in the form of an email.
Similar to Productivity Wrx’s newest feature introduced by the IPS, automated technologies help businesses embrace straight-through processing. This function supports invoice data capture whether they’re sent via email, supplier’s portal, or file transfer protocol.
According to Bartels, the more businesses that flock towards adopting e-invoicing, the easier it’ll be for them to optimize transactions. Such optimizations will mean faster invoice payments and reduced internal workload. There are many incentives for companies which make timely payments. Therefore, CFOs are pushing for an acceleration in switching processes.
E-invoicing comes with some major incentives for business owners. An efficient transaction record helps businesses qualify for early payment discounts, extend its DPO (days payables outstanding), receive commercial card rebates, and reduce the risk of fraud.
Companies in the US have a long way to go because of their reliance on paper-based invoices and transactions via checks. However, automated invoicing is slowly making its way into the realm of B2B businesses. For e-invoicing to revolutionize the B2B landscape, both senders and receivers will have to integrate e-invoicing. Thanks to the great benefits of invoicing standardization, businesses now have more incentive to supplant manual invoicing processes with e-invoicing in the near future.