AS PAYMENT METHODS DIVERSIFY, WILL ACCOUNTING BECOME MORE COMPLEX?

It was not so long ago when there were only two widely used payment methods for goods received or services rendered: cash or cheques. At least, that’s true for people above a certain age; for younger generations reared from the cradle in the internet age, they’re as unfamiliar as the horse and carriage or the penny-farthing bicycle. Both cash and check are gradually being seen as quaint relics of a disappearing era.

 

The fact is that payment methods today have proliferated beyond recognition, thanks chiefly to the restlessly evolving innovations of digital technologies. There are now a multitude of payment platforms and payment apps to choose from.

 

What, though, are the implications of this for businesses and other organizations that need to accurately track money flow on a continual basis? How does accounting keep up with such a rapidly diversifying payments ecosystem – and is it inevitable that it will become an ever-more complicated and arduous process?

 

Let’s take a deeper dive into these questions.

Contrary to the conventional form of exposition (reviewing data and building an argument based on that), we’ll begin with a bold assertion: Yes, accounting today must monitor a much more complex array of payments ecosystem; but no, that doesn’t mean that it will become an increasingly burdensome and costly affair for business owners and organizational chiefs.

 

Before we explore the new cornucopia of payment methods available today, let’s begin with a reassuring statement: the dizzying pace of digital innovation in the payments sphere is being matched by equally ingenious digital modernizations in the accounting space.

 

For example, new accounts payable software can automate intricate and time-consuming manual accounts payable processes, saving businesses hundreds of hours (and thousands of dollars) by routing laborious paper workflows into paperless alternatives. The latest software smoothly and automatically links all elements of the accounts payable process, from vendors and bill creation, approvals, through to payments, reconciliation, and reporting in one digital solution. It provides complete visibility and traceability of every stage.

 

As Forbes recently noted, there will still be a place for human accountants in the world of larger business and organizational finance but, if anything, the rise in digitalized automation processes simplifies their task and lowers overall costs for clients: “automation reduces costs and improves efficiency by eliminating tedious and time-consuming manual labor (e.g., data entry, three-way-matching) and reduces human error. It drives straight-through processing, and rather than replacing human accountants, it frees them to focus on strategic tasks requiring creativity, collaboration and ingenuity — services AI cannot, as yet, reliably provide.”

 

But for medium-sized and smaller businesses, especially those without the resources to pay for a dedicated finance team, this software is a genuine boon.

 

Here’s a quick outline of why it has become so necessary in today’s multi-payment-method world.

Historically, after bartering systems went the way of the proverbial dodo, cash ruled supreme. It was the primary exchange medium people used to buy goods and services and to settle debts. A little later, when more people could afford ‘bigger ticket’ items, written checks became a more convenient (and secure) payment method than carrying large quantities of cash around. It’s easier and safer to carry a relatively slim wallet around after all, than pockets bulging with paper notes.

 

Then along came credit cards and, a little later, contactless payments, expanding purchasing power and convenience significantly (although, unless people were careful with credit repayments, also personal debt levels).

 

Step forward to today’s options, and each of these methods have now been joined by a seemingly ever-growing profusion of other digitally enabled payment choices. We can now simply scan a QR code with our smartphones or pay via peer-to-peer apps like Venmo.

 

All of this was driven by technology’s bold and brisk forward march in the digital era. The humble EMV chip (named for ‘Europay, Mastercard and Visa’) proved far more effective than its predecessor, the ‘magstripe’, in combatting payment card fraud when it was first introduced in the USA in 2015. Significantly, however, the chips also enabled two-way communication between the cards into which they’d been integrated and payment acceptance devices.

 

In turn, this advance paved the way for the rise of contactless payments, now catching on strongly in the US but very popular already in Europe and Canada. But it doesn’t end there, of course; mobile wallets like Google Pay and Apple Pay have exploded in popularity, piggybacking seamlessly on the ubiquitous uptake of mobile phones.

 

Payment acceptance methods have also changed profoundly. The old cash till of the local store is now joined by internet-enabled mobile point-of-sale (POS) devices, which can be used not only at a checkout aisle but out in the Great Outdoors for, say, curbside pickups.

While payment methods have diversified beyond imagination over the last twenty years or so, advances in accounts payable accounting software have integrated all of it. The engineering of the software might be unfathomably complex for most people but learning to activate the processes it executes certainly isn’t.

 

As payment methods multiply, accounting has become simpler and more efficient courtesy of ingenious digital technologies.