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Accounts payable (AP) management has changed dramatically throughout the decades. In the 1950s, businesses relied on paper-based methods, and processing a single expense report could take weeks due to lost documents or slow communication between departments. Today, businesses can submit, approve, and reimburse expenses in minutes by using advanced software like ExpenseOnDemand.
However, this drastic improvement didn't happen overnight.
In this article, we'll explore how accounts payable management has transformed throughout the past 75 years. We'll look at how businesses managed accounts payable in the past, what technologies are used today, and what the future holds for AP management.
During the 1950s through the 1970s, businesses relied heavily on manual, paper-based processes to manage accounts payable.
The typical workflow began with the receipt of physical invoices from vendors, which were then manually sorted, reviewed, and approved by the appropriate personnel within the organisation. This process often involved multiple handoffs and approvals, leading to delays and potential misplacement of documents.
Once approved, invoices were manually entered into the company's financial records, typically maintained in paper ledgers. This data entry process was long, tedious and susceptible to human error, resulting in inaccuracies that could lead to incorrect payments or disputes with vendors.
To ensure proper record-keeping of what a business owes or has paid, physical copies of invoices, purchase orders, and other supporting documents were filed and stored in filing cabinets or file boxes. Retrieving documents could be a tedious task, especially as the volume of paperwork grew over time.
When it came time to process payments, the accounts payable staff would manually prepare checks or initiate bank transfers, often on a predetermined schedule. This manual payment process was not only time-consuming but also made it difficult for companies to take advantage of early payment discounts offered by some vendors.
During this era, AP departments struggled to maintain accurate accounts payable management. The lack of internal controls also increased the risk of duplicate payments and fraud. These manual processes negatively impacted cash flow and vendor relationships, as late payments resulted in missed discounts and supply chain disruptions.
The introduction of computers in the workplace during the 1980s and 1990s marked a significant shift in accounts payable management. Early computer programs like Quicken (now Quickbooks) suddenly made it easier to manage accounts payable. Computerised systems reduced human error, allowed faster invoice processing, and made it easier to store and retrieve documents. Electronic data entry and storage also provided finance teams with more timely and accurate financial information.
However, these early systems had limitations, including lack of integration between applications, complexity, and the need for specialised training. While they improved efficiency and helped with calculations, manual intervention was still required for tasks like invoice approval and payment processing.
Despite these drawbacks, the rise of computerisation laid the foundation for future advancements in AP management. As technology progressed, businesses sought more integrated, automated, and user-friendly expense management solutions to further streamline AP processes and improve financial management.
The incredible growth of the internet in the 2000s and 2010s brought about significant changes in accounts payable management. The emergence of online payment processing platforms revolutionised the way businesses handled their financial transactions. AP departments could now process electronic payments faster, more securely, and with greater accuracy, reducing the risk of errors and fraud.
With the introduction of electronic invoicing, automated data capture, and cloud-based storage systems, managing accounts payable became easier than ever. These advancements reduced manual tasks, such as data entry and paper-based record-keeping, and made it easier to process invoices and send timely payments to vendors.
Moreover, the internet enhanced vendor management and communication. Suppliers could now submit invoices electronically, track payment status, and communicate with AP departments through online vendor portals. This improved transparency and collaboration between businesses and their vendors, leading to stronger relationships and more efficient dispute resolution.
Overall, the internet era marked a significant step forward in accounts payable management, paving the way for greater automation, efficiency, and security in financial processes.
The 2010s marked the beginning of the age of automation and integration in accounts payable management. The development of AP automation solutions and supplier portals has transformed the way businesses handle their financial processes.
Modern expense management tools have automated invoice processing, approval workflows, and payment processing, significantly reducing the manual intervention required to manage accounts payable.
Compared to previous generations, where integration between different apps was difficult, today's software can connect seamlessly to other programs.
For example, ExpenseOnDemand integrates with popular accounting software such as Xero, QuickBooks, and Microsoft Dynamics, ensuring a smooth flow of financial data between different accounting systems. This integration eliminates the need for manual data entry and reduces the risk of errors.
Automated expense receipt and invoice processing comes with many benefits. With receipt scanning tools, expense data is automatically captured, placed into an accounts payable category, and routed for approval. This workflow reduces processing times and ensures compliance with company policies, while enabling AP staff to focus on more strategic tasks, such as vendor management and financial analysis.
AP automation software has also improved cash flow management for businesses by providing real-time visibility into outstanding invoices and helping businesses identify early payment discounts. Reporting and analysis also give businesses enhanced oversight of their expenses, which can improve budgeting and decision-making.
Finally, the age of automation and integration has strengthened internal controls and reduced the risk of fraud for businesses. With automated workflows and digital audit trails, accounts payable departments can ensure all financial transactions are properly authorised, recorded, and monitored, minimising the chances of fraudulent activities.
Technological advancements in AP processing have already been significant. With tools like ExpenseOnDemand, companies can perform AP processes in just a fraction of the time it would take a few decades ago. But as technology continues to evolve, the future of accounts payable and accounts receivable management looks even more promising.
Looking ahead, there will be further advancements in automation, with more sophisticated tools that can handle complex invoicing and payment scenarios. Artificial intelligence will also play a significant role in improving AP processes, allowing AP systems to learn from past transactions and make intelligent decisions based on data patterns.
Moreover, there will be an increased focus on data analytics and strategic decision-making. AP departments will have access to real-time financial insights, allowing them to optimise cash flow, identify cost-saving opportunities, and make informed decisions that drive business growth.
Some tools are already adapting this technology, For example, ExpenseOnDemand uses AI-powered receipt scanning to accurately extract receipt and invoice data. With its advanced features, seamless integrations, and user-friendly interface, ExpenseOnDemand is well-positioned to help businesses navigate effective accounts payable management in the future.
Book a demo with ExpenseOnDemand today to automate your accounts payable process.
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