In today’s dynamic business environment, marked by persistent inflation, economic upheaval and geopolitical tensions, the ability to swiftly adapt, persevere and strategically pivot is paramount for organizational success. Within this landscape, a robust Accounts Payable (AP) management system emerges as a beacon of strategic empowerment for businesses to unlock tangible value, drive bottom line growth and optimize overall business operations.
According to the International Monetary Fund (IMF), global growth is projected to fall to just 3% in 2028, the lowest medium-term forecast since 1990. Concurrently, a study by Ardent Partners also revealed that organizations have an opportunity to leverage strategic potential benefits within their AP functions to drive essential business outcomes, such as operational efficiency and workforce productivity.
That means in the current economic climate, finance leaders will rely more and more on leveraging AP automation to deliver the spend visibility needed to understand how and where the company is spending, and identify any areas where cost savings can be realized.
Here are three ways in which organizations can respond to emerging trends, which include rising capital cost, increasing invoicing mandates globally, and growing opportunity for value to be gleaned from AP data.
1. Mitigate the impact of non-compliant supplier spend
Over the years, many organizations have shifted to remote and hybrid work, and fraud is a real risk that can threaten the bottom line if an organization does not ensure spend compliance. In 2022, 40% of AP departments globally experienced multiple cases of attempted or actual payment fraud.
Together with the growing trend of key suppliers and partners being located all over the world due to cost-cutting exercises, a global supply chain equates to more global invoicing mandates that results in more complexity for AP.
Therefore, it is vital for organizations to proactively address non-compliant supplier spend through measures such as partnering with their legal and compliance team to understand local requirements, and leverage on AI and automation tools to manage their invoices and spend in one place.
2. Maximise AP efficiency and visibility into supplier spend
As budgets continue to shrink across all organizations, AP departments are being tasked to do more with fewer resources. However, this is not ideal, as an inefficient AP team puts businesses at risk of cash flow crunches, missed opportunities due to delayed payments to vendors, and unhappy suppliers who demand to be paid faster.
Organizations can enhance AP efficiency and increase the team’s visibility into supplier spend by centralizing and automating the entire invoice management process. This involves reducing manual work and leveraging near real-time data to generate reports and streamline work processes, hence allowing the AP team to work at peak efficiency and enabling them to make better decisions, improve supplier spend, and better manage cash flow.
In addition, with critical AP data that comes from automation and advanced reporting tools, AP can solidify its position as a trusted department of knowledge. These data are crucial in helping business leaders reshape their view of the business, especially in terms of cash management.
3. Transform AP into a profit center
In recent times, capital cost has increased as interest rates continue to climb around the world. Everything from corporate bonds to revolving credit facilities have been impacted. To help ensure that AP is seen as a vital department that can enhance business readiness, organizations need to transform AP into a profit center, rather than be perceived as a cost center.
This is critical as AP operations often has a direct and sizable impact on bottom-line results. For example, when an AP operation has visibility into its liabilities and B2B payments, it can work with finance executives to strategically manage the invoice payment process and optimize working capital.
Research has found that AP departments that lack automation and consistent processes spend 4x as much to process an invoice as departments with end-to-end automation and consistent processes.
Streamlining and cutting invoice processing time can help optimize an organization’s payables program. Specific steps to take include eliminating manual data entry by automatically extracting and capturing data from invoices, and implementing automatic workflows such that payment requests have the right information needed for approval.
When an organization’s AP process is automated, AP employees can better focus on high-value work that can drive profitability, such as identifying areas for savings, taking advantage of early payment discounts and rebates, and negotiating better pricing and delivery terms with vendors.
The AP team can also emerge as a key function to mitigate the impact of higher capital costs on the overall financial health and sustainability of the business.
The future is unpredictable, placing AP teams in a pivotal role to help companies navigate challenges while ensuring seamless business operations. By implementing intelligent finance systems and processes, pertinent stakeholders can access reliable data, enabling informed decision-making. This adaptability, agility, and proactiveness will be vital to driving organization growth.
This opinion piece is written by Mr Christopher Juneau, Head of Market Strategy at SAP Concur, the world’s leading brand for integrated travel, expense, and invoice management.
