The Accounts Payable Revenue Center: Why automation is the route to AP agility

By Gary Simon, BSc, FCA, FBCS, CITP, Chief Executive of FSN & Leader of the Modern Finance Forum on LinkedIn

FSN’s 2020 research – The Future of Analytics in the Finance Function* – which is to be published soon, shows that the Accounts Payable (AP) process, or more broadly the Purchase-to-Pay (P2P) process, is under-served and under-exploited as a cash generator and valuable source of information and competitive advantage. It found that AP penetration across finance functions in companies of all sizes is just 15%, yet companies that have invested in specialized capability, exhibit better mastery of data (compared to those that haven’t) and more mature, insightful analytics.

It is these latter two aspects that are crucial to elevating the AP process from a transaction-oriented process into a cash generating engine. But before any of this can be achieved it is vital that the accounts payable process is standardized and automated using the latest digital technologies. This establishes the baseline for process efficiency, staff mobility, organizational responsiveness, agility and productivity on which the higher level ideals depend.

The COVID-19 crisis has laid bare the frailty of many accounts payable processes. Lack of investment in digital technologies and a heavy reliance on manual workarounds and spreadsheets has meant that many organizations were not prepared to reconfigure and quickly re-start their accounts payable process when personnel were forced to work from home. With the need for agility is at its peak, a few issues that float to the top include suppliers struggling with their own liquidity, many paying organizations stumbling, and supplier payments are delayed. 

Yet, AP process standardization and automation are within the grasp of most organizations and have been for some time. Standardization is a matter of policy, process and technology. Although most industries can generate electronic invoices, many suppliers still submit paper versions – for context, of the circa. 6 million invoices processed through Proactis’ technology annually, around 28% are paper. For less automated and agile AP functions, this puts a strain on their operations due to the manual processing required to get them into their ERP systems and ready for approval – which is why it is so important to have an agile AP model which can efficiently handle 100% of invoice formats and process them into a digital format.

Once invoices are in the system, specialized accounts payable solutions can take over, for example, the heavy lifting of invoice coding and invoice matching with receipt of goods and purchase orders are digitally managed.  All of this, underpinned by collaborative technologies in the cloud, enables optimization of workloads between different members of staff and the quick resolution of errant transactions that cannot be processed right the first time. The approval and sequence of cash payments then becomes a vital tool in the effort to manage supplier relationships fairly, without compromising liquidity.
With the benefit of hindsight and with the exceptional Coronavirus experiences under our belts, organizations that have invested in modern, collaborative AP processes in the cloud, now have the choice about how they wish to deploy in the future.  Some may choose to go back to office-bound working while others may choose to support working from home or some hybrid position of the two.  But the crucial point is that the choice sits much more easily in those organizations that have invested in AP process standardization and digital automation.