Evolution of accounts payable: Everything you need to know
The world was first introduced to the system of double entry in accounting in 1494 by the father of modern accounting Luca Pacioli. Since then we have come a long way in terms of how we process AP and other monetary transactions.
During this evolution of accounts payable systems and processes we have moved from a pen and paper onto a keyboard and a screen with improved collaboration thanks to the power of technology such as the internet.
Historical stages of accounts payable
1. Paper trail
For the longest time, humans have been used to recording transactions on paper for all kinds of payments. This was a great system to keep track of all accounts until we reached the digital age which began in the last couple of decades.
2. Digitization
Computer systems and software tools such as Microsoft Excel removed the need for accountants to maintain huge folders and physical paper. Digitization made the process of accounting much easier to manage.
3. Modern AP
Building on top of digital solutions such as computers and the internet, were companies that created modern AP automation systems that brought in real-time collaboration between financial operations.
Evolution of accounts payable automation for invoice processing
Digitization
Starting to use digital platforms to manage AP instead of paper made many improvements such as not needing to store large volumes of paper files in physical locations.
Companies started scanning their paper invoices upon receipt into a system and categorizing them in their general ledger.
Capturing data
Implementation of technologies such as OCR(Optical character recognition) helped in capturing data by extracting it through the invoice and putting the data to work, such as GL coding. This also reduced the amount of manual work required.
Custom workflows
Automation was introduced in many forms within AP software. Some examples include the addition of complicated workflows such as three-way matching, automatic routing for approvals, duplicate invoice alerts, and fraud detection.
Why businesses should consider automating accounts payable?
1. Eliminates manual work
Using a digital system for handling all your AP tasks reduces the amount of manual intervention needed. It is only during crucial payment decision-making that accountants need control.
2. Cost-effective solution for businesses
Paying a monthly or annual subscription fee for a SaaS platform that automates your accounts payable rather than outsourcing or hiring more employees is a much more cost-effective solution to make your AP processes efficient.
3. Huge potential to detect errors
The chances of errors being made or going undetected are much higher when an individual is processing compared to an AP automation system. The system will be able to detect and flag errors with far better accuracy than a human.
Related read - 10 common invoice processing errors you can easily avoid
4. Uses artificial intelligence
In the evolution of accounts payable systems, the implementation of AI and ML have brought about many advantages such as error detection, predictions, and deep insights based on historical AP data.
5. Solving duplicate payments
Duplicate payments or invoices are another form of error that can cause a huge loss to your company if it goes undetected. Automation systems use AI and ML prowess to flag such issues and ensure that you don’t end up paying a vendor twice.
6. 3-way invoice matching
The process of matching the details on an invoice with its purchasing orders and the goods delivered receipt is known as 3-way invoice matching.
Doing this manually is very time-consuming. An AP automation system can do this task in a matter of seconds at scale provided it has access to the correct documents.
7. Fraud detection and prevention
In the history of accounts payable, fraud was a prevalent issue. It was tough for accountants to notice duplicate or sometimes even false invoices due to the lack of a proper verification system.
Using digital platforms and matching algorithms, software tools are able to accurately detect fraud and prevent them from occurring.
Seamlessly automate your accounts payable with Volopay
In the evolution of accounts payable processes and systems, we are now at a stage where companies look to implement an integrated financial system such as Volopay.
Our platform is a complete suite of financial tools including an accounts payable module that can be integrated with your accounting software to track and control your budgets across the organization and spend efficiently.
For businesses that have multiple vendors in different countries, it is a big hassle to process their payments due to currency and bank restrictions.
Using Volopay, you get access to a multi-currency business account that lets you hold money in different currencies and easily make payments in over 100 countries.
With access to 60+ currencies including all the major global currencies, you can easily transfer money to a vendor in their local currency and effectively avoid FX charges. This helps you save a lot of money for each transaction.
You can also create a vendor database within Volopay and save their account details so that you don’t have to add them every time you want to make a payment to them.
This makes the process of paying each invoice much more efficient and improves an accountant's productivity. Another Volopay feature that makes processing AP much simpler is the ability to create multi-level approval workflows.
You can set up to 5 levels of approvers and customize the number of approvers needed for a payment depending on the monetary range of payment.
For an even easier accounting experience, we have native integrations with industry-leading accounting tools such as Xero, Netsuite, Quickbooks, MYOB, Tally, and Deskera.