Accounts payable is probably used to being under-recognised in the business environment. While software investments have become commonplace in many aspects of business, AP departments have retained a relatively high level of manual labour-intensive processes. Most companies automate less than 50% of their back-office operations and fewer than 20% of AP departments are reckoned to have achieved ‘process maturity’, a metric which captures the degree of operational consistency suitable for full automation.
In the current climate, with talks of a recession looming businesses are looking to make cost savings wherever possible, with underperforming AP departments often at significant risk. There are, however, signs that the AP outlook is changing. While most AP managers are still in the early stages of their automation journey, the range of software solutions is increasing and end-to-end automation is increasingly visible as an achievable horizon.
Effects Of The Current Economic Climate
Businesses across all sectors have been looking to tighten their belts as talks of an economic downturn continue in the media. Virtually all company departments are aiming for leaner operations as staff shortages and overhead cost pressures bite. For AP, the risks are particularly acute.
Though over three-quarters of AP departments are utilising some form of automation for invoice processing, inefficient practices remain. Paper is still too common, and the prevalence of individual decision-making means that consistent standards are not maintained, leading to errors and delays. The danger is that management sees AP as an issue rather than a locus of value generation.
The Value Of Automation
Business automation software can now handle many aspects of business administration. It is recognised as an important driver of cost and time savings. But AP departments have, until recently, been lagging behind somewhat in the uptake. However, things are changing.
Automation for AP improves the precision and speed of invoice handling. Lost or duplicate invoices become less common, reducing the financial burden of late payment fees and repeated payments for the same goods or services. Early payments can be leveraged to garner discounts if applicable, or payment timings can be adjusted to achieve optimum capital retention, which may benefit cash flow.
Improved Value For Businesses
The efficiency and accuracy improvements gained by automation software can change the profile of AP departments in the company. AP begins to show its value as a locus of investment rather than a problem. Specifically, with automation software, invoice processing becomes more transparent to business stakeholders. Greater oversight of outgoing payments means that spend management is facilitated more easily. And a full database of accounts and transactions gives invaluable tools for budget forecasting.
The result for AP is that, even with cuts and shortages of accounting staff, it can still be seen as a source of value for the business. The future for AP, therefore, lies in greater consistency, process maturity and full automation.
What Next?
If you’re interested in the value that automation can bring to your department in difficult times, you can book a live demo with Cogent Consulting to see the software in action.
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