Paperless Accounts Payable Best Practices

What is Paperless Accounts Payable software? 

Paperless accounts payable software are modern solutions that can help enterprises streamline their accounts payable (AP) processes and improve efficiency. With hundreds of thousands to millions of invoices to be processed every year, enterprises often employ dozens of accounts payable executives to do this job.

However, even with partial automation in place, such as with OCR tools, a majority of the processing requires human intervention. With paperless invoicing, we refer to a transformational shift towards e-invoicing or electronic invoicing, with paper-based invoices gradually reduced in an enterprise. 

The problem with traditional invoice processing is that it is time-consuming, prone to errors, and requires a significant amount of manual labor. This not only increases costs but also leads to delays in payment and a lack of visibility into the AP process.

IOFM’s article on the pain points in accounts payable in a good read for finance leaders to know on the different pain points and challenges faced by AP teams across organizations. 

Why do OCR tools not help in making Accounts Payable paperless? 

Optical character recognition (OCR) is a legacy software tool used for the digitization of paper-based information assets. OCR tools transform scanned documents or photos into editable and searchable text. However, OCR tools have their shortcomings, including: 

Limited accuracy: 

OCR tools have limitation in extracting data from invoices as they are not template agnostic. This can lead to errors in data entry and validation, which ultimately impact the accuracy of the data extraction in an AP process. The best OCR tools have a data accuracy of only 60% 

Limited flexibility: 

OCR technology is not flexible enough and we are often unable to extract data from different invoice layouts and formats’ This can make it difficult to process invoices from a variety of vendors and suppliers. 

Time-consuming approach: 

OCR tools, being error prone, require manual intervention to correct extraction errors leading to increased invoice processing time and costs. 

Limited security: 

OCR tools do not provide the same level of security as paperless accounts payable software, which can include encryption and access controls to protect sensitive financial information. 

What are the benefits of paperless accounts payable? 

Advanced data extraction: 

Paperless accounts payable software uses advanced AI/ML models that drastically improves the invoice data extraction accuracy with minimal training. 

Greater flexibility: 

Paperless accounts payable software can handle a wide variety of invoice formats and layouts using AI/ML capabilities, making it easier to process invoices from multiple vendors and suppliers. 

Automated workflow: 

Paperless invoice processing software can automate the entire invoice processing workflow, from data extraction to approval, which reduces the need for manual intervention and increases overall accounts payable process efficiency.  

Read more on how paperless office can help your organization move up on the maturity curve here: paperless office to move your organization up the maturity curve 

Advanced security: 

Paperless accounts payable software has advanced security features such as encryption, access controls, and multi-factor authentication to help you protect sensitive financial information. 

Better collaboration: 

Paperless accounts payable software allows multiple user collaboration for approval based on the hierarchy defined. 

The Biggest Challenges with traditional and manual accounts payable processes? 

Handling invoices in different languages and multiple country-specific formats is a difficult proposition 

Another important challenge that enterprises face when processing invoices is the handling of invoices in different languages, including non-Roman scripts. This can be a significant challenge for companies that do business globally or with vendors and suppliers from different countries. 

Furthermore, invoices from different vendors and different countries often have very different formats, which can make it difficult for companies to standardize invoice processing. This can lead to inefficiencies in the AP process and increase the risk of errors. 

Paperless Invoice processing eliminates complex country-language barriers 

To overcome these challenges, companies can turn to AI-led paperless accounts payable software. This type of software uses AI/ML capabilities to extract data from invoices and ensures a higher level of accuracy, even when processing invoices in multiple languages. 

In addition, most paperless accounts payable software offers a template agnostic approach to invoice processing. This helps them to handle a wide variety of invoice formats and layouts, making it easier for companies to process invoices from multiple vendors and suppliers, regardless of their location or the format of their invoices.  

Traditional invoice processing has a negative environmental impact 

In addition to the operational efficiencies and cost savings that paperless invoice processing can deliver, it has important ecological and economic benefits. The cost of handling, storing, retrieving and archiving paper-based invoices can be significant for enterprises. 

One of the main ecological benefits of paperless accounts payable is that it helps reduce the use of paper and ink. This can have a significant impact on the environment, as the production of paper and ink consumes a large amount of energy and natural resources.

Additionally, the transportation and storage of paper-based invoices can also lead to increased carbon emissions. By switching to paperless accounts payable, companies can significantly reduce their environmental footprint. 

For more on how to plan and successfully transform your AP, read: Secret ingredients for a successful AP transformation 

How to Implement a Paperless Accounts Payable process 

To implement a paperless accounts payable process at your organization, you should assess your current processes and then review possible automation solutions. 

Assess the Pain Points in your Current AP Process 

Understanding where you are first can help you see what’s possible and where you want to go. Identify current pain points so that you can find solutions that will address them. 

The biggest pain points are manual processes, which are time-consuming and error prone. Your vendors may call wanting updates, and you may not be able to answer their questions.

Obtaining approvals or tracking down physical copies of documents may take too much time for your department. Burnout may result from repetitive tasks. Take a look at your entire AP process and make a list of these problems. 

Review Automation Platforms 

Once the problems in your current AP processes are identified, you need to hunt for AP platforms that solve all your problems. Most importantly, your AP platform should need to integrate with ERP system to have a holistic AP transformation. 

What to look for in a paperless accounts payable software 

Below are some of the best practices to follow while selecting a paperless accounts payable software product. But before you start looking at successful AP Automation strategies and advantages, The Institute of Finance and Management (IOFM) suggests financial leaders understand some nuances before you or your organization is in the process of proposing or implementing an automated solution 

Functionally at its Best: 

The software product should be able to handle a wide variety of invoice formats and layouts and should include advanced data extraction and validation capabilities. It should support multiple languages and scripts. 

Easy Integration: 

The product should be able to integrate with the company’s existing systems, such as accounting and ERP systems, to ensure a seamless accounts payable paperless workflow. 

High Security: 

It should include advanced security features, such as encryption, access controls, and multi-factor authentication to protect sensitive financial information. 

User-friendliness: 

It should be easy to use for business users and should offer a compelling user experience (UX). 

High Scalability: 

The product should be able to handle the organization’s current and future needs and scale up as per the organization’s growth. 

Support: 

The product should be offered with comprehensive support and training to ensure that the organization’s staff can effectively use and maintain the system. 

Read Our Whitepaper about: best 6 attributes of a good AP software 

To know more on what the top challenges are to keep in mind while designing a paperless AP system, read: Tackling AP automation challenges 

True Accounts Payable maturity can be achieved by going beyond OCR and manual processes to a paperless office. A paperless strategy can lead to a whopping 82% cost reduction on invoice processing.

Zycus recommends a combination of electronic invoicing and an inclusive supplier enablement strategy that can help AP departments overcome the limitations of scanning and OCR technology and obtain the vision of paperless office. Get acquainted with the best-in-class strategies employed by mature accounts payable organizations towards charting a successful AP maturity story. 

To know more on how to leap up the AP maturity curve, read: the paperless office 

Conclusion 

Choosing the right paperless invoice processing software product is an important decision and it’s essential to evaluate the various products based on several key criteria. AI-led AP automation can transform the AP function of an enterprise while delivering paperless invoicing. Explore and discover the benefits of Zycus’ AI-led AP Automation in your organization with a free solutions exploration call.

FAQs: 

What are the types of paperless invoice? 

The 5 main types of paperless invoices are: 

1. Email invoices sent directly to customers 
2. PDF invoices in a digital format 
3. Online invoicing platforms for creation, management, and payment tracking 
4. Electronic Data Interchange (EDI) for business-to-business transactions 
5. Cloud-based solutions for remote access to invoicing information. 

What can be automated in accounts payable? 

There are 7 main processes that can be automated in Accounts payable. 

1. Invoice processing and matching to purchase orders and receipts 
2. Approval workflows for invoices 
3. Payment processing and scheduling 
4. Vendor statement reconciliation 
5. Electronic fund transfers and direct debit payments 
6. Sales and use tax calculation 
7. Audit and compliance reporting. 

Related Read:

What is Invoice Approval Workflow?

Setting Up Internal Controls in Accounts Payable Processes

Top 5 Proven Accounts Payable Best Practices in 2023

Top 7 reasons to Digitize Accounts Payable

5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool