This piece in Enterprise Times is about the accounts payable function(s) and how a lack of modernization/automation thereof may indeed be holding back some organizations’ ability to grow financial operations to meet business expansion needs. This is not a new story, since we have been discussing it in these pages and in various member research papers for years. The author goes into a bit of detail and includes some interview quotes from execs at the fintech who recently conducted a UK/US-based survey about the space.
‘80% of organisations are not ready for growth. This stark finding from a Tipalti report based on a survey of 500 finance leaders in the UK and US within fast-growth businesses entitled: AP Trends in Fast Growth Businesses. The reason is the respondents feel that their account’s payable function cannot scale. No doubt the 80% is much higher if considering the wider business…
Historically accounts payable has been a manual process, including invoice processing, PO Matching and payments. Some organisations may have automated invoice processing using OCR technology. However, that is only a small component of what can be automated. The impact is felt beyond the time and cost within finance. It can lead to cash flow issues and customer and employee dissatisfaction. Perhaps the biggest risk is fraud. 82% of finance leaders believe fraud and risk exposure is the biggest AP challenge.’
The 80% ‘not ready for growth’ statement might need a bit uncovering since growth is normally associated with the ability to find markets and sell goods and services, versus the ability to keep up with financial operations to support the cash cycle activities. This is especially interesting given the data from various sources (surveys, internal vendor data on digital adoption, etc.) during the pandemic time which clearly suggests an accelerated trend around automation. But we suppose this depends upon what is being automated.
As we have recommended constantly, the real need is to review end-to-end operations across the enterprise, regardless of size, to get a complete view as to how all the moving parts are optimized through proper solutions and integration. So ‘not ready for growth’ is a bit nuanced, meaning they will grow if they can sell, but may have trouble paying bills, which has been of particular concern in the UK in recent times, especially among smaller businesses. Worth a read to see how the case is made.
‘As firms grow, if they do not automate, they bring additional pressure on existing staff. 78% of respondents say that too much manual work is overwhelming staff. 73% admitted staff productivity and morale is a concern. 32% believe it could lead to burnout and churn. Hiring new staff will not be easy as Glassdoor or other platforms could share employees’ woes…
One of the biggest risks for firms has always been cash flow, where AP automation can also help. Israch explains, “Businesses that still rely on manual AP processes and no formal purchase requisition process will always struggle to plan for the spend required on a month-by-month basis. Only when they have the foresight of the spend as part of an automated end-to-end AP process, are they better placed to forecast and proactively manage their cash flow.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group