We are now arriving in the digital economy – turn your watch back 40 years

Posted by Pete Loughlin in AP Automation, e-invoicing, e-Procurement, Electronic Invoicing, Purchase to Pay 26 Jan 2016

40 years ago – a little more than 40 years ago actually, the UK pound was divided into 20 shillings. Each shilling was divided into 12 pennies. There were thrupenny bits and tanners, half crowns and florins. How do I know this? Because I was taught how to deal with money (add it up, calculate change etc) in “old money”. I remember the sorts of sums we had to do in class: “If Mr Brown the butcher buys quarter of a hundred weight of Ox tongue priced at one pound thrupence ha’penny a pound, how much change would he get out of 30 guineas?”  But it was pointless. By the time I would have to actually use money, the shilling would exist no more and we’d be using a standard decimal currency – new money.

I’d like to think I don’t remember it, that I read about it somewhere, but I do remember it  – vividly. And these were the days when everything was on paper. Purchase orders, quotations – book keepers really did use books. Even the computer programs were stored on cardboard.

But things worked. Nothing broke because it was paper. Big businesses grew and thrived. People did clever things, scientist discovered things, cars were built and sold and exported and imported. Yes, it was slower and there was less of it but the world economy thrived long before the internet. So why do we demonize paper processes? Why is it that we see the paperless office as a virtuous aspiration?

Site LogoThere are of course many answers. The digital economy is faster and cheaper. Business at the speed of light means we can do more things more quickly. We can also do some things that were not feasible 30 years ago like big data. That’s right – we can do big data. And on a more mundane level we can do things like send and receive invoices electronically, automatically match them to purchase orders and be ready to pay immediately. Which begs the question – why is it, in 2016 that when a supplier queries an invoice sent electronically the response is sometimes “We can’t find it”?

Go back again 40 years and think about how things were done then. An invoice was received into a post room and it’s stamped to record the time it arrived. It may even be photocopied before it’s directed to an approver who perhaps takes another copy to file with the copy of the purchase order before sending it to finance who may take yet another copy before checking the approver’s signature and filing it pending receipt of a copy of a goods received note. There’s a lot of paper in this process and a lot of time. But there is also lots of skills required – skills that we’ve lost.

Some would find this unusual to describe the old paper process as requiring “skills” but administering a world of paper, maintaining an audit trail and keeping an organisation ticking over required office skills that are no longer taught. In an age were even email seems fuddy duddy to young people entering the job market, these skills are shunned because we don’t need them any more apparently. But we do need them. Why? Because, for the most part, we haven’t learned the new ways of working yet.

The digital ecosystem – and I mean this in its widest sense whether that’s buying and selling online or B2B interactions like e-procurement and e-invoicing – only really works when its implemented in a fully integrated way. That doesn’t happen overnight and for the bits of the ecosystem that are yet to be joined up need to be managed in the old fashioned way. Take for example the practice of sending soft copy invoices via email. Unless the process of receiving, storing and reconciling these invoices is automated, it’s not a joined up process and manual intervention is still required. This impacts any business case predicated upon the assumption that old world skills and the people who use them will no longer be required.

We have a problem. Despite investments in P2P technology, there’s still pieces of paper flying around (including the digital versions of them). We’re not replacing old world with new world – we’re building new and keeping bits of old world that seem a bit too difficult. We are in many respects no further on than 40 years ago. We are, quite rightly, embracing the digital economy but until we’ve finished building the digital ecosystem from end to end we will still need to retain some of those old world practices and the knowledge and skills to follow them. This is why half-baked P2P technology implementations are so bad. They are like moving from old money to new money without getting rid of the old money. Half a system is worse than no system at all and it is critical that when P2P technologies and processes are put in place, that a fully holistic approach is taken.

Pete Loughlin can be found on twitter @peteloughlin

  • Neil Robertson February 2, 2016 at 11:56 am /

    Hi Pete – I enjoyed this post as I too grew up with pounds, shilling and pence. I also sold my first computer accounting system in 1979 (British Olivetti BCS 2030 with OPAL software) to replace a Kalamazoo 3in1 manual system.

    37 years on, accounting and ERP solutions have evolved to the sophisticated solutions they represent today – and that evolution continues.

    Whilst I love the idea of the ideal of a real time digital world, we will only get there through evolution.

    The single biggest change in my career for the accounts payable function is the very recent universal adoption of sending invoices via email and the ease in converting them to e-invoices. At last, we can rid rid of the paper at the outset, saving a huge amount of time doing a task that adds no value whilst delivering real time information to the budget holders that really need it.

    No, delivering emailed PDF invoices as e-Invoices is not utopia, but it is a very significant evolutionary step towards it, simply because every business can now benefit from it.

  • Cathy K February 2, 2016 at 2:11 pm /

    I enjoyed your article!

    I have often seen “… the paperless office as a virtuous aspiration” in places I have worked. My response to my clients is usually, “the paperless office is about as likely and desirable as the paperless bathroom.”

    Digital does not automatically equal quality in and of itself. Technology has no inherent value – it does not possess goodness nor badness. However, if you pick the wrong solution because there are not clearly articulated, documented and agreed to processes from which to develop the solution, agreed upon definitions of what success looks like and the measurements to prove that success, the likelihood of a solution doing to what is should is probably small.

    P.S. In almost all places I have worked (more than 30 years) there are few that know the difference between a process, a procedure and a policy.

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