Categories: Accounts Payable

What No One Saw Coming In AP Automation And What Comes Next

Predictions are hard, goes the old saying – particularly when they’re about the future.

David Disque, CEO at CSI, and Amit Patel, head of strategic sourcing and payments at The Witness Group, told Karen Webster in a recent webcast that the coronavirus showed that chief financial officers and treasurers may not have been well-prepared for the demands of shifting to digital payments – but they’re quickly catching up.

At a high level, said Disque, the embrace of automated accounts payable (AP) processes has been consistent across verticals. CSI, he noted, has insight into a number of industries, where the payment processing platform (focused on integrated payables) aggregates and accepts payments on behalf of a wide range of businesses.

“April was the low point from the standpoint of transaction processing,” said Disque, “and from there, it’s been a reverse hockey stick” along a long and slow U-shaped recovery.

Beyond the particulars of check disbursements or ACHs (and the detailed instructions that accompany any payment between buyer and supplier), Disque said automating payments into enterprise resource planning (ERP) or cash management functions (thus eliminating manual touchpoints) are especially beneficial in a remote working environment. Automation reduces the tech infrastructure requirements, too.

CSI’s own surge in activity was initially largely underpinned by companies looking to automate and digitize check payments — and from there, vendors have been willing (and able) to branch out and embrace alternative forms of payments.

“There is a working capital benefit a card gives that supports both the buyer and supplier. The supplier gets guaranteed payment, and the buyer now gets some additional working capital. This is mission-critical, especially in these more challenging times,” said Disque.

More efficient working capital management is especially desirable as the pandemic stretches on longer than most observers would have imagined.

Patel and Disque both noted that as COVID-19 made its way across borders, many executives thought the impact would last a few months, perhaps 90 days. But as PYMNTS’ own data and SMB surveys have found, the waiting game is stretching out — and many people now expect the pandemic to impact firms across more than 200 days.

Along the way, chief financial officers, treasurers and small suppliers have had time to look at what is working from a payments/cash flow management standpoint — and what’s not working well.

Noted Disque: “We had businesses that were doing digitized ACH and digitized card payments, but they were still printing and mailing checks separately.”

The entire procurement cycle has become increasingly digital, he said, and has moved to a cloud-based environment.

“The change is happening,” said Disque, adding that the pace is only accelerating. “There are quality suppliers, there are FinTechs like CSI. Banks have great solutions. A lot of times, banks are partnered with FinTechs … to support businesses that are ready to make this shift.”

Drilling Into The Hospitality Sector

To get a sense of how the coronavirus has upended the very way industries operate — and how buyer/supplier dynamics can be improved through automation — consider the fact that Patel’s firm operates within the hospitality industry, specifically in hotel investment and construction.

Though occupancy levels are down a bit, they’re still up markedly from the nadir of the pandemic — down by a third, where not long ago, 80 percent to 90 percent of rooms were vacant. What recovery there has been, said Patel, has been tied to what he termed the transient consumer.

These are the individuals (and families) who have become incrementally more comfortable with the security protocols that have been put in place at various hotels and other venues. And, of course, many people just want to get out of the house — and by and large, they’ve been sticking relatively close to home.

But the recovery has hardly been widespread.

As Patel related to Webster, “Most of the hospitality industry — unless you are destination-based — focuses on corporate clients, meetings and conventions.” Perhaps not surprisingly, the events that were not canceled outright have been pushed well into 2021 — which means the events calendar has been reduced meaningfully.

“The reduction is going to last well into 2021,” Patel predicted.

Against that backdrop, most firms have found new (virtual) ways to conduct communications and meetings that would previously have been done face-to-face. Patel said that finding and onboarding suppliers to help build properties (on time and within budget) includes understanding how those suppliers want to be paid.

Suppliers’ preferences are changing, too, said Patel, moving toward virtual and automated means of interacting with buyers — and creating greater transparency across supply chains.

Before the coronavirus struck, “the biggest friction points were that people were unfamiliar with anything other than the standard payables processes — checks or ACH,” noted Patel. “Their infrastructures were built to circle around that type of payment structure.”

Fast-forward a bit to the spring of this year — when suppliers, in general, were forced to move to remote work areas and/or reduce staffing levels.

“From a supplier’s standpoint, the concept of trying to do something a little bit better from a relationship standpoint ... was important,” he said.

Suppliers found that by accepting and promoting card payments, they could accelerate their receivables collections. Patel noted that buyers have been able to take advantage of additional “float” by using corporate credit cards or other card transactions, while allowing suppliers to get caught up on the receivables side.

In the middle of it all, for companies like The Witness Group, said Patel, “automating payables allows us to spend more time on an analytical basis and less time on a manual process basis." He said that utilizing third-party solutions to foster AP processes (in this case, CSI) allows the third party to approach suppliers and have the “automation discussion” on Witness’ behalf.

When that automation is in place, noted Disque, vendors know when invoices have been approved and when a payment has been processed — and the added transparency eliminates the phone calls that ping-pong between back offices.

“All the human touchpoints, and the risk, goes away. You often get immediate settlement, you get data flowing right into the ERP systems, which eliminates a lot of data entry across back offices,” Disque said. “There’s not just a working capital benefit — there’s a human capital benefit.”

Looking ahead, Disque and Patel said that though 2021 may prove to be a tough year (especially for the economy at large), the stage is set for an even greater embrace of AP automation.

According to Patel, “There is an opportunity here not just from a relationship standpoint, but also from a cash management standpoint and an infrastructure standpoint. Had we pushed a little harder to get a lot of our suppliers converted, we would have seen many more efficiencies for those suppliers when it became almost a mandatory remote working environment. Many people only had a couple of choices when COVID hit, which accelerated that conversion process to a more technology-driven type of process.”

Added Disque of the drive toward automated payments: “We've settled in, and we know the pandemic is going to have a much longer-term impact, and it's going to be a gradual recovery back to a more normal state. I think all businesses are looking at their processes, trying to retool and to become better suited to operate long term, no matter what the future brings."

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.