Evolution of AP Automation: Past, Present, and Future Trends

Imagine a world where cutting a single check could take hours, and yet businesses thrived. Cash was king, and old-school manual processing was the easiest way to operate. Fast forward to today, the evolution of business payments is nothing short of revolutionary! This journey, fueled by technology and changing business demands, gives us a fascinating look at how businesses used to handle payments, what’s happening today, and where we’re headed.

The Past: The Reign of Paper Checks

Back in the day, paper checks were the backbone of B2B payments. They were trusted because they left a clear paper trail. But dealing with checks wasn’t always a walk in the park.

Challenges for Payors:

• Manual Labor: Writing, signing, and mailing checks was a tedious and time-consuming process.

• Fraud Risks: Checks were susceptible to manipulation and duplication.

• Reconciliation Headaches: Matching payments with invoices required a lot of manual effort.

• High Costs: Processing each check could cost anywhere from $5 to $12.

• Scalability Issues: Handling large volumes of checks meant hiring more staff, which wasn’t practical for growing businesses.

Challenges for Payees:

• Manual Handling: Receiving and processing checks involved significant manual work.

• Delayed Payments: Waiting for checks extended the time it took to get paid, hurting cash flow.

• Lost Checks: Checks could get lost or delayed in the mail, complicating cash application and reconciliation.

• Collection Problems: Chasing down overdue payments was often difficult.

Despite these hurdles, paper checks remained popular because they were familiar, widely accepted, and offered the benefit of check float—the delay between writing a check and the money leaving the account.

The Present: Embracing Electronic Payments

Today, we’re seeing a major shift towards electronic payments, though paper checks haven’t vanished entirely. Businesses now use a mix of methods, like ACH, card payments, and wire transfers, which can sometimes make things more complicated.

The Association for Financial Professionals (AFP) notes that while business check usage is at an all-time low, it’s still common. Several factors keep checks in play:

Challenges for Payors:

• Complex Payment Processes: Managing various payment methods can increase errors and complexity.

• Vendor Acceptance: Not all vendors are set up to receive electronic payments.

• Compliance: Meeting regulatory requirements adds another layer of complexity.

• Fraud Risks: Electronic payments also come with their own fraud risks, needing strong security measures.

Challenges for Payees:

• Manual Work: Many businesses still rely on manual processes for cash application and reconciliation.

• Banking Security: Protecting sensitive banking information is a constant concern.

• Cost of AP Automation: Some payees may not be aware of AP automation solutions that can pay for themselves with rebates.

The pandemic pushed many businesses to adopt electronic payments faster, seeking efficient and secure ways to manage transactions remotely. 

The Future: Full AP Automation

Looking ahead, the future of business payments is all about full automation, covering everything from electronic invoicing to accounts payable and receivable automation.

Benefits for Payors:

• Enhanced Security and Compliance: Automated systems boost security and help ensure regulatory compliance.

• Efficiency and Savings: AP automation cuts down on manual effort, saving time and money.

• Revenue Opportunities: Some payment solutions offer cash back rebates, adding a new revenue stream.

Benefits for Payees:

• Faster Payments: Automated systems speed up payment processing, improving cash flow.

• Cost Reduction: Automation reduces the costs tied to manual processing.

• Payment Flexibility: Businesses can choose from various payment methods, offering convenience and flexibility.

• Ongoing Support: AP automation providers offer continuous support, ensuring a smooth transition to automated processes.

The journey from manual paper checks, to electronic payments, and now to full AP automation, reflects ongoing technological advancements and changing business needs. As more businesses embrace electronic payments, the future looks bright with promises of greater efficiency, security, and cost savings. 

By adopting payment automation, businesses can create a seamless payment experience, ensuring vendors are paid quickly and efficiently. This evolution is about more than just technology; it’s about building a more efficient, secure, and sustainable payment landscape for the future.

Ready to transform your accounts payable process and embrace the future of business payments? Corpay’s AP automation solutions can help you reduce processing costs, enhance security, and improve vendor relationships. Get in touch with our in-house experts to discuss your specific AP challenges and goals today.