At face value, the role of accounts payable in most companies seems relatively straightforward: tightly managed day-to-day processes, such as invoices and payments. However, rapid, ongoing innovation in the finance industry has presented new opportunities for financial directors and their teams to push the boundaries of AP’s core functions – not only streamlining integral processes, but also providing the mechanisms to deliver value to functional partners and their enterprise as a whole.
Leaders in the AP space have joined the race to harness new tools and ideas – in pursuit of initiating full transformations to become strategic business partners for their companies, and move away from their traditional roles as backend business functions.
Why Innovate?
Transforming AP operations necessitates a combination of time, energy and resources; however, recent research from Ardent Partners’ The State of ePayables 2018 report shows that, if done properly, the undertaking is a worthwhile investment with countless advantages down the line.
The report captured the experience, performance, perspective, and intentions of Best-in-Class enterprises, defined as the 20% of businesses with the lowest average invoice processing cost and shortest average invoice average process cycle times.
The Ardent Partners study revealed that the Best-in-Class businesses surveyed have adopted e-invoicing at rates nearly double their competitors – 71% vs. 38%. Additionally, the study described that the strategic value in the Best-in-class AP departments surveyed was mainly derived from this group’s reliance on Procure-to-Pay (P2P) automation (52% vs 24%) and business networks (48% vs 28%).
The study revealed that these Best-in-Class enterprises enjoyed a broad range of performance advantages over their peers. Costs to process invoices averaged at around five times lower compared to competitors, time to process a single invoice averaged at two and a half times faster and invoice exception rates were cut in half.
Challenges
In the past, automating manual tasks was an end goal for progressive AP organizations, but times have changed. To be considered a strategic business process, financial directors and their teams must first understand that general automation is only the first step of their department’s metamorphosis. Only after day-to-day processes have been automated and the tasks involved with each function consolidated, can AP departments shift focus to more strategic and valuable aspects of the operation – such as data gathering, analysis, and dissemination.
Despite the successes of Best-in-Class AP leaders, a much larger group of AP teams still struggle with the concept of automation to streamline operations, and to ultimately assume the position of a strategic partner. This is because in general, AP departments are commonly overlooked for a company’s investment in innovation and digitization. In any state, it is critical for financial teams to take the prospect of process innovation seriously. Automated tools give real insight into working capital and provide a holistic view of the entire P2P process and its intricate functions.
Leveraging Technology for Success
The pressure is on AP to not only adopt a fully automated work flow across the spend cycle, but to also understand the implications of new and emerging technologies on current business processes and the availability of new types of intelligence and value that may be generated for key stakeholders.
As new technologies like artificial intelligence, machine learning, and blockchain pervade critical areas of today’s companies, AP teams must place their focus on developing plans to explore and adopt these new solutions. In the next few years, these new technologies will offer an excellent window of opportunity to drive business functions in new and exciting ways. However, insight isn’t delivered until a company takes advantage of the automated tools at its fingertips. For the newer technologies to make an impact they will need to build upon and integrate with existing technology aids.
Because of the capabilities and flexibility of tech solutions, it is truly up to AP teams to do their due diligence by working with their company’s IT team and other business functions to understand how the rest of the enterprise has approached digitization and what new technologies have already been deployed. By learning from and collaborating with IT and other internal experts, AP can better harness the power of their solutions to take functions to the next level, and align their digital approach with the goals of the greater organization.
Significant losses can also occur if companies miss the opportunity to streamline their AP functions. Companies often don’t recognize the impact of AP insights and data on a company’s bottom line – when in fact, AP is a crucial source in understanding the processes that make the business tick. Because people and companies are using the wrong venders, over spending, double spending and not taking advantage of discounts, they incur significant losses that undermine bottom line savings and erode the efficiency of business operations.
Looking Forward
This new approach to AP – utilizing existing and emerging P2P solutions to streamline processes, like purchasing, invoice processing, and payment – enables businesses to execute more persistent procurement processes, implement more holistic transactions, and increase visibility of enterprise spend.
The initial benefits from automating accounts payable functions are certainly significant; however, once day-to-day processes have been streamlined, AP leaders must push themselves to continue to investigate new ways to generate other forms of value. As the finance space adapts to market and institutional pressures, AP teams are looking forward to a path paved with transformative, innovative, and effective strategies that drive enterprise value.
Matt Clark is the President and Chief Operating Officer for Corcentric, a leading provider of procurement and finance solutions that transform how companies purchase, pay, and get paid. Corcentric’s procurement, accounts payable, and accounts receivable solutions empower companies to spend smarter, optimize cash flow, and drive profitability. Matt can be reached at mclark@corcentric.com