Onboarding suppliers: Digital vs. manual

We are living in the age of digital transformation, where digital technology is being integrated into all areas of a business. This transformation is fundamentally changing how businesses operate. At least, that is where businesses should be. Yet a PYMNTS white paper, “The Payables Friction Index: Barriers to Invoice Automation,” published last year in collaboration with Corcentric, shows that a majority of companies surveyed are still implementing and managing far too many processes manually and with a dependence on paper.

Onboarding suppliers is often a hybrid of digital and manual processes

The PYMNTS white paper was followed by a series of playbooks, including Old School Manual vs. Digital Onboarding,” which tracked how companies are performing this extremely important task. In a global economy with multiple suppliers who themselves are likely using sub-contractors, obtaining accurate information is essential. That includes not only the credit and performance history of the supplier (which is undoubtedly important) but also the history of how that supplier complies with a wide swath of regulations; regulations that may vary depending on the country of origin.

On the front end, the numbers are moving in the right direction. As much as 63.4 percent of all AP departments currently perform basic onboarding functions digitally to various degrees. Of the more than 1,000 AP professionals surveyed for this playbook, these are some of the findings:

• 72.1 % digitally collect credit information vs. 36.9% who do so manually
• 66.7% digitally ensure supplier is operating legally vs. 44% who do so manually
• 68.4% digitally collect data on supplier’s past performance vs. 38.4% who do so manually

Yet other functions are handled somewhat equally digitally and manually, including:

• 59.9% digitally collect basic information vs. 58.0% who do so manually
• 58.1% digitally verify acceptance of offered terms vs. 57.7% who do so manually
• 57.2% digitally validate supplier’s past performance vs. 60.25 who do so manually

Yet there is still one function where manual/personal interaction takes the lead; when it comes to specifying negotiating terms, 67.75 percent of those surveyed said they handle this in person while just under half (49.5%) do so digitally.

But when it comes to payments, all bets are off

As we have found in many other instances, when it comes to payments and invoice approval processes, accounts payable departments still cling to their legacy paper and manual processes. This study finds that is the case when it comes to handling invoice approvals and payments digitally.

Paper checks are still the main form of payment for the majority of those surveyed. A full 80.8 percent of those surveyed said their AP departments still pay suppliers with paper checks, while a surprising 45.2 percent still use cash. Invoice receipt is also still a paper and manual process. Of those surveyed, 72.4 percent receive suppliers’ invoices via mail and 43.8 percent via fax.

Who is most satisfied with their processes?

Satisfaction of current processes depends on what you are asking about. If you are asking about onboarding processes overall, those whose firms use entirely manual onboarding processes are the least satisfied. Companies that use exclusively digital onboarding processes rate their invoice processing systems as “very” or “extremely” efficient than those who rely solely or partially on manual operations.

There is one area, however, where manual processes achieved a high level of satisfaction. Of the companies surveyed, 73.6 percent that collect basic information manually express that they are “very” or “extremely” satisfied with their company’s invoice processing systems, while only about half express that if they use either exclusively digital or a hybrid of digital and manual. In this scenario, respondents are most likely to be satisfied with manual invoice processing when collecting basic supplier information manually.