Everything CFOs, Shared Services, P2P and AP leaders need to know about the rapidly evolving landscape of AP technology and processes.
It wouldn’t be too dramatic to say Accounts Payable is experiencing a perfect storm. For years, AP has been a number crunching back-office department.
Today, it’s rapidly becoming a strategically important function for successful organisations.
So, what’s happened and how does your organisation measure up?
Our second eBook on the evolution of Accounts Payable looks at the relentless march of technology and processes within AP. We help you understand where you sit on the maturity curve and how technology, processes and people must align to achieve significant efficiencies.
You’ll also discover what best-in-class looks like and how you can further digitise your AP processes.
What's covered
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What’s the state of Accounts Payable?
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Where is your organisation on the Accounts Payable maturity curve?
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What does a ‘best-practice’ AP team look like?
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Adopt a holistic approach
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Where should you go from here?
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About Xelix
What’s the state of Accounts Payable?
CFOs have discussed it for years. Some have dabbled, but it’s really happening now. Digital transformation has reached Accounts Payable.
In fact, many stakeholders expect it. Directors expect high performance, suppliers expect efficient communication, and employees expect less monotony and more tools to accelerate their work. Not to forget career progression. According to Ardent Partners in 2022, 67% of business executives believe their AP team is ‘valuable’ or ‘very valuable’. This has risen from 52% in 2018.
Poised for transformation this year onwards, all eyes are on Accounts Payable.
Pandemic impact
Like so much in life, the Covid pandemic had a profound impact on AP and accelerated the need for digitisation. Before March 2020, 85% of finance teams worked from the office. Today, that figure is just 22%, with 43% working remotely all the time (Pinnacle research 2022).
Sustained working from home exposed the challenges of manual systems. Staff still had to go into the office to pick up paperwork and gain signatures. Systems couldn’t work without paper shuffling between everyone.
As supply chains became increasingly fragile due to shipping issues and the rising cost of materials, good supplier relations were crucial. That meant prompt payments to keep goods and service flowing.
Many organisations experienced recruitment challenges too as The Great Resignation took hold. With big shifts in the labour market and the need for new skills, top talent continues to be hard to find.
And right on the back of the Covid era came further global economic challenges and a looming recession.
70% of finance leaders agree that Covid became a catalyst for back-office digitization (Pinnacle). In fact, it prompted a new and exciting era for AP.
AP challenges hampering productivity
AP might be strategically important these days, but it’s not without endless hurdles to overcome.- Invoice and payment approvals taking too long (57%)
- High percentage of exceptions (45%)
- Too much paper (28%)
According to the research, it takes 10 days on average to process an invoice. This slow progress costs more (average $9.25 per invoice) and does nothing to strengthen supplier relations. The survey highlighted that 22.5% of all invoices in 2022 were flagged for an exception. This resulted in excessive manual intervention, draining resource that could be used elsewhere.
Finally, Ardent Partners confirmed most AP teams lack sufficient reporting and analytics. Data and insight that’s essential to moving forward effectively.
There’s a common theme: excessive manual work. The AP function cannot become more strategic without minimising resource give to process-oriented tasks.
Best-in-class describes the 20% of organisations with the lowest average invoice processing costs and the shortest average invoice cycle times. Only 9% of organisations have a fully automated AP process, whereas 74% have automated invoice approval (Pinnacle).
Barriers to change
As the AP function looks to evolve and deliver huge efficiencies for organisations, challenges such as excessive manual intervention and lack of data-driven insight must first be overcome. With digital transformation comes a plethora of automation and AI-driven tools to embed in your processes, moving you rapidly towards a touchless system. With the right approach, you can recruit top talent and upskill your current team to achieve the skills you need for a fully digitised department.
So, what’s holding organisations back?
According to Pinnacle (2022 State of AP report), the main problem is reluctance for change. Many organisations (42.2%) prefer to stick with their traditional, manual methods, believing they’re working. There are of course other barriers to overcome, such as lack of technical resources and ERP integration challenges (20.2%) and lack of a clear business case (16.2%). Even lack of budget (12.2%). And with a recession on the way budgets will certainly be scrutinised this year. But technology must remain a central focus, according to thought leadership association TMA.
But the biggest barrier to change is apathy – a mindset that everything’s fine as it is
