How Much Did the Pandemic Spur Digital Transformation for Accounts Payable?
Over the past two years, many core business functions moved to electronic or digital platforms: face-to-face meetings became Zoom calls, trade shows and conferences transformed into online webinars, and portals sprung up everywhere. So, the Accounts Payable digital transformation is no surprise. After all, one of the top priorities for financial organizations is digitization, particularly when it comes to paying vendors.
A 2022 PYMNTS survey found 59% of CFOs are focused on payments digitization – with the larger companies interested in transforming their payments processes and the smaller ones looking to eliminate time-consuming manual steps.
But how much did the pandemic spur this AP digital transformation? Did companies transition completely away from paper Accounts Payable tasks, like scanning invoices and cutting paper checks? Or did they make only moderate changes to their invoice, procurement, and vendor payments processes?
Based on Nexus data, companies did a bit of both over the course of the pandemic. Many embraced automation for multiple steps in the invoice-to-payment process, while others plodded along with paper processes, particularly check payments.
Suppliers Used Direct & Guaranteed Invoice Submission Tools
The first step of the Accounts Payable process – submission of invoices – was hit hard by the AP digital transformation during the pandemic.
Often at the behest of their customers, suppliers embraced more direct and guaranteed electronic invoice submission processes. They stepped up their use of NexusConnect, a self-service portal, to submit invoices directly to their clients' Nexus accounts. And to submit large quantities of invoices, they embraced eInvoice (submission of invoices over API).
Nexus data shows the volume of invoices submitted through NexusConnect and eInvoice increased 101% from March 2020 to December 2021, compared to a 64% increase between May 2018 to February 2020.
And, it was all types of suppliers who used these methods to send their invoices directly to their customers’ Nexus AP automation accounts. They ranged from smaller companies like landscapers, HVAC, roofing, tiling, and construction companies, to larger, national retailers. Many may have switched from mailed paper invoices because they were concerned about delays and problems with USPS.
Buyers Paid More Invoices Through Electronic Payment Methods
Buyers paid more of those invoices through electronic methods, too. Based on Nexus data, buyers increased their usage of electronic payment methods, such as virtual card and ACH, at rapid rates. They also relied less on paper checks, although many paper checks are still issued.
Virtual Card Use Increased
Even though paper checks remained prevalent, suppliers seemed open – even eager - to try new electronic payment methods and forego trips to the office to open envelopes and process paper checks.
The number of suppliers who opted in to receiving their payments through a virtual card – or a one-time use credit card sent virtually – increased substantially during the months of March 2020 and December 2021.
Nexus data shows that the volume of suppliers processing virtual cards jumped 70%. And the amount of spend on those virtual cards increased a lot too, by 154%.
More Procurement Took Place Through Online Catalogs
While online shopping isn’t new, buyers placed far more orders through online supplier catalogs embedded in the Nexus AP automation solution than in previous years.
Maintenance supervisors, property managers, and other authorized users increased their orders through Nexus Catalog by 83% during March 2020 through December 2021. That compares with a 16% increase for the previous period. Given pandemic restrictions, and concerns about Coronavirus transmission in indoor settings, it’s likely that a lot of those purchases would have normally been made at brick-and-mortar stores. These purchases were migrated online, however, and allowed buyers to have more control over procurement and spend.
Suppliers Became More Excited About Digital Payments
While some buyers transitioned to digital for many AP tasks, many didn’t. And suppliers appeared to take notice.
In a survey of 200 suppliers who submit their invoices through NexusConnect, suppliers claimed they had more late payments in 2021 than in previous years. They blamed many things for this, including the USPS, buyer’s cash challenges, short staffing at AP departments, and other reasons.
The good news? Those same suppliers said they were planning to embrace the AP digital transformation as a means to shorten payment receipt. Roughly 41% said they planned to accept more electronic payments, like virtual card or ACH.