CFO Perspective: The Impact of AP Automation on Financial Planning

Simon Dadswell
Simon Dadswell,
As part of a CFO Research Series, PROACTIS set out to determine the impact of different levels of maturity in Accounts Payable (AP) processes and departments in the supporting the CFO’s cost containment agenda, by surveying more than 100 European medium-sized businesses.
Here are some of the research insights:

Cost containment pressures tighten

The CFO agenda has a sharp focus on containing costs. CFOs are rethinking the Finance function – how it works, what the objectives and measures are, and how skills can be best utilised. 

Accounts Payable is coming of age

Many companies have automated specific elements (e.g. invoice matching) but have not created a truly end-to-end enterprise procurement framework. CFO’s primary drivers are initially to reduce costs by automating cumbersome, repetitive manual processes and achieve more accurate budgetary control over expenditure. 

“Spend” control not “spent” control

Maverick spend is viewed as a major problem for over 80% of CFOs and AP departments. Without an automated purchase-to-pay process that supports corporate procurement guidelines, employees are free to conduct workarounds in purchasing. They will seek the easiest route to satisfaction which is often outside corporate control. The result is limited visibility of expenditure against budget and AP coping with the management of what is already “spent” versus control “spend”.

Stressed out Accounts Payable operations

In 62% of organisations interviewed, AP staff spend over 70% if their time trying to reconcile invoices with purchase orders and goods received notes. 

Running blind: lack of cost visibility

Over two-thirds of purchasing happens before an order is even raised and 38% of companies estimated that in excess of 60% of inbound invoices were “invisible” to their organisation prior to receipt by AP. This impact of this is uncontrolled cash flow, lack of compliance to corporate budgets and a clear risk exposure to the business.

Real-time procurement and system integration

Although 57% of CFOs report they have made progress in automating AP processes, many of the key elements of the procurement process are manual driven and/or managed in separate systems which makes it difficult to obtain a clear and accurate view of commitments against budget and authorised spend.

AP “old-school thinking” increases costs

Manual purchasing processes are time consuming, prone to error and open to fraud. Often they lack the transparency and auditability required by world-class organisations. 

Mixed views on AP structure and design

For 23%, reshaping the AP function is of “high priority”. They are looking to change the design or structure upon which they can redesign processes and adopt best practices. Centralised and shared service structures are perceived to deliver tighter controls and provide better performance, however less than 3% have “fully implemented” these structures.

CFO leadership and technology enablers

Most AP leaders have either “ad hoc” or “regular” interaction with the CFO or Financial Controller. Only 23% have “continuous interaction”. There is also strong linkage between the take-up of technology utilisation to the level of interaction between AP and the financial stewards of the company. “Excellent” rated companies believed they had 75% or more of spend under management.

Want to know more? Download the research paper ‘Accounts Payable Automation: The CFO Perspective”. Alternatively, read our next blog post titled “AP Automation - Top 10 Recommendations”
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