Despite the challenges of the past two years, there have been some positive results. One significant example is the perception of accounts payable (AP) as an integral partner to the business. According to Ardent Partners’ “The State of ePayables 2022,” 66% of businesses say that AP is very or exceptionally valuable to the enterprise, double the amount from six years ago (https://bit.ly/3H3u5uB).
CFOs cannot change the circumstances attributable to the current economic climate. The findings from the Ardent Partners report, however, highlight the importance of building out the AP function and continuing to make a significant impact on the business.
Current-State Challenges, Risks, and Priorities
According to Ardent Partners, several roadblocks keep AP teams from addressing strategy. For one, approvals for invoices and payments take too much time. Many AP teams face a high percentage of invoicing exceptions, and processing for invoices can be quite costly. A major pain point for AP teams and CFOs alike is the ongoing use of inefficient manual processes.
These challenges lead to two potential performance risks for AP. The first is that staff burnout could easily become the norm, because obtaining required approvals, completing many exceptions, and working within highly manual processes take so much time. The second is that disruptions are becoming a regular occurrence, occupying leaders’ time as they tackle larger issues.
These challenges and risks take place as companies adjust their workplaces to a hybrid approach. Ardent Partners notes that, since the pandemic, 85% of AP teams and procure-to-pay (P2P) colleagues adopted a hybrid approach.
The Need for Automation in AP
As AP teams pursue these priorities, they are making changes that positively impact the business. As they eliminate paper invoicing and reduce manual tasks, they are enabling automation and electronic submission of invoices to help free people up for higher-level tasks. As a result, AP teams can pursue improved reporting and data analytics as well as enhance collaboration and communication with procurement teams to help bolster the finance organization overall.
Because AP is fundamentally a cash-distribution function, mastery of cash management activities is crucial. Ardent Partners, however, found that AP departments may lack the technology means to do so. On average, 87% or more of businesses today do not have fully automated cash management, supplier onboarding, spend management, and exception management. Manual processes and procedures stymie efficiency and take up valuable time that could be better spent on more strategic work.
In addition, AP teams need to innovate in invoicing, as the majority of companies only have partially automated or entirely manual invoicing. This includes invoice approvals (59%), invoice receipt processes (72%), and invoice processing (73%). In fact, electronic invoicing (eInvoicing) solutions are not in use at 43% of businesses, although 31% say they plan to implement them in the next 12 to 24 months. Because automated invoicing can cost 40% to 90% less than manual methods, there is room for greater efficiency and cost-savings.
Implementing eInvoicing is becoming mandatory in Europe; this will affect businesses in the United States. In September 2021, France passed an ordinance (https://bit.ly/3VIQrWp) requiring that French companies, as well as suppliers in any country working with French companies, receive eInvoicing starting in July 2024 (other than suppliers exempt from value-added tax, or VAT, requirements). Ordinances in Germany, Italy, and Spain also will require eInvoicing at this time, and similar requirements for medium, small, and very small enterprises will take effect in 2025 and 2026.
Technology Can Be a Game-Changer
Within the next two years, nearly 68% of businesses state that they will have automated the complete P2P cycle, enabling a robust union between procurement and finance. CFOs will need to ensure that AP automation is in sync with that of P2P to ensure optimal efficiency within finance.
With the focus on automation, CFOs are increasingly seeing the need to innovate and embrace technology. Gartner research indicates that 82% of CFOs’ investments in digital technology are accelerating, exceeding investments in talent, supply chain, business services, or fixed assets (https://gtnr.it/3FjeDct). More than 80% of CFOs are expected to increase their time spent on advanced analytic technologies and tools that the finance function can use to provide more forward-looking and predictive insights.
By automating business processes, CFOs can optimize workflows to do more with less, bolstering performance while driving down operating costs. In addition, digital frameworks provide real-time updates, allowing teams to respond more quickly to challenges, become more agile, and adapt to market opportunities and customer demands.
According to Ardent Partners, implementing technology can help financial organizations become top performers. Such AP teams can process a single invoice with 76% lower cost, 81% faster speed, and a 60% lower exception rate. Because of AP’s work, 58% more of their companies’ suppliers are allowed to submit eInvoices, which results in 50% less time and resources spent responding to supplier inquiries.
Finishing 2022 Strong
Supply chain and financial challenges will likely continue in 2023. Investment in technology solutions can help solve real pain points within CFOs’ control to help them master their AP functions through innovation.