For accounts payable (AP) departments, the pressure is on. Traditional responsibilities are shifting and AP is being tasked with driving greater value, cost savings, and efficiencies across business functions. Three industry trends are the driving force behind this change. Here’s where the pressure is coming from:
Trend #1: The Demand to Become a Profit Center
AP has long been accepted as a cost center, but that expectation is changing. The status quo is no longer acceptable: it’s time for AP to take a proactive role in adding greater organizational value. Automation is the key to making that happen. According to studies by IOFM and anecdotal information we’ve seen with clients, by automating your AP departments you can:
• Reduce invoice processing costs by 82% – from $15 to $2.74 per invoice
• Earn rebates on 30-40% of AP spend
• Realize a 6% increase in early payment discounts
• Achieve a 75% reduction in invoice processing time – from 18 days to 4.5 days
I’ve seen numerous examples of the benefits of automation and the impact it can have on generating profit. For instance, one customer earned $270K in cash-back rebates in one year on $82 million in ACH transactions. Another achieved $1.1 million cash-back rebates in one year on $168 million in ACH transactions. These savings represent budgeted funds that can be redirected back into the business to improve cash flow and support key objectives.
Trend #2: The Mandate to Provide Data and Analytics
Caught in the double vise grip of a tight economy and fierce competition, businesses today need to better manage their cash in order to make the most of their assets and have the agility to respond to changing business conditions and market demands. Consequently, more than one third of AP organizations (35%) name reporting and analytics as a top priority, and more than two thirds – (69%) of controllers cite improved financial visibility as their number one AP priority.
Data and analytics can provide you with real-time visibility into:
• Volume, trends, and status of purchase orders, invoices, and payments
• Cash analysis such as sales forecasting, inventory, and cash flow
• Liquidity management including cash balances and short-term investments
Obtaining such valuable data and analytics is only possible through the automation of end-to-end AP process. The manual processes that are used far too often create a “black box” where data cannot be captured, analyzed, and reported on. In fact, that “black box” can become a “black hole” – draining away your money, time, resources, agility, productivity, and competitive edge.
Trend #3: The Need to Tighten Security to Combat Fraud
New invoice and payment fraud schemes are forcing companies to adopt preventative measures and upgrade security policies. According to Strategic Treasurer, almost half (45%) of corporates were victims of B2B payment fraud attempts in the last year. Paper checks are particularly vulnerable to fraud: research shows that businesses experience 10 times less fraud with ACH and wire payment combined than with paper checks. But risks are present with online payments, too, such as with a prevalent business email compromise (BEC) scam where a real or fake vendor sends a fraudulent invoice and asks for payment directly into an online bank account.
One of the ways you can combat fraud attempts is by utilizing a closed payment network that validates all members and their banking information (even checking with the Office of Foreign Assets Control, or OFAC). This creates a separation of duties and prevents fraudsters from diverting your company’s funds into unknown accounts.
With the pressure from these trends bearing down, you need to ask yourself: is your AP department up to the challenge? The solution to all three of these trends is the same: end-to-end automation of your invoice-to-payment processes. Automation empowers your AP department to improve efficiency, deliver ROI to the business, ensure real-time visibility into critical data, and reduce the impact of sophisticated fraud efforts.
When all is said and done, the trends are not going to change: the change is up to you. The next step is yours.