Ardent Partners and Basware have published a new report that takes a look at how accounts payable executives are responding to market shifts, the current economic climate and emerging technologies to make B2B payments faster, easier and cheaper.
Among the key findings of the report, “ePayables 2015: Higher Ground,” is the electronification of AP functions. In 2015, the leaders in AP are ditching paper checks and the paper invoice and taking advantage of the slew of intelligent data available in digital AP procedures that can be used to make corporate spending more efficient.
Compared with 2014, AP executives this year are more concerned with improving AP reporting and analytics. This type of information is invaluable to businesses in various ways. For example, supplier-specific data found in invoices can be used to assess spending trends, which can be used by the procurement team for more intelligent supplier negotiations. AP data can be used to provide an overall image of corporate health, researchers said, or to pinpoint the value of early payment discounts.
The electronification of the AP department can lead to benefits that stem from places other than data, too. Basware highlighted the ability for companies to strike electronic connections with suppliers and procurement methods. Researchers also found that more AP officials are concerned with improving supplier relations today than they were a year ago, as well as more focused on improving connectivity to those suppliers.
AP officials should begin to think of suppliers as partners, rather than as the subject of temporary deals. “By building connectivity and trust,” the report concluded, “the enterprise will benefit from improved supplier relationships over a period of years as the business continues to change and as it becomes increasingly important to find more value and innovation in the supply chain.”
Internally, the collaboration between AP and procurement units is also key. Only 14 percent of companies surveyed said that there is no collaboration between the two groups in their business operations today. Their cooperation is crucial, as they both work as separate parts of a common process and transaction.
Basware found that where these relationships exist, they tend to follow the path of existing procure-to-pay processes. But the businesses that can strengthen ties between AP and procurement beyond P2P processes are those that benefit the most.
AP automation can help close the loop between AP and procurement departments by adding greater visibility and accuracy of procurement and payment operations. “Technology is a core component of this forward-thinking notion, as AP automation helps create scalable, repeatable, linked and more efficient processes that can drive down costs, improve the overall ‘speed’ of invoice and payment processing and enable back-end reporting that can be used to improve operations and results within AP and the larger enterprise,” the report’s authors said.
Businesses appear to be responsive to these benefits. According to researchers, more than half of AP officials surveyed said that their main goal over the next two years will be to increase the amount of automated AP processes in their operations. More than one-third agreed that collaboration and process linkage must be improved between AP and procurement departments.
Ardent Partners also found that AP departments understand how electronic AP functions will be necessary in the near future. Automation will soon be the norm, researchers said, and ePayables technology will likely replace nearly all manual aspects of the accounts payable process, from payment scheduling to invoicing.
Researchers noted that ePayables tools are ones that at least partially automate the three AP process phases: invoice receipt, invoice processing and payment. Today’s AP officials are prioritizing invoice processing automation to make it easier and faster for invoices to get approved. More than one-fifth of those surveyed said that automated invoice receipt is a priority. Only 13 percent said that B2B payments and payment scheduling are key priorities for this year and next.
Ardent Partners’ research offers an optimistic view of the AP department. AP officials are embracing technology and recognizing how electronic and automated processes can benefit the company as a whole and strengthen cash flow as well as protect partnerships with suppliers.
But there are significant challenges that researchers found that were identified by AP officials as their most difficult challenges today. Nearly half said that a high percentage of exceptions is their biggest obstacle. According to Basware, these exceptions stem from seemingly innocuous mistakes on invoices, like an incorrect zip code or the wrong spelling of a company. “Every exception slows down the AP process and is more costly to resolve than a typical invoice,” the report said.
Delays in receiving the appropriate information to validate an invoice is similarly among AP officials’ highest concerns. Electronic invoicing and automated data input can greatly reduce both of these errors.
Reducing invoice processing costs and gaining greater insight into payment data were also cited as leading reasons AP officials must explore electronic solutions to their operations.
Luckily, AP workers either already use or plan to use many of these tools. Already, 87 percent either plan to use or already use document scanning tactics. More than half said they already use automated invoice approval tools, while 65 percent said they either use or plan to use automated data capture services.
While only 35 percent of AP officials said they currently use e-invoicing tools, nearly half (49 percent) said they plan to implement these solutions in the next year or two. Similar figures were seen in the areas of procure-to-pay tools, dynamic discounting solutions and supply chain financing solutions.
As it stands, low percentages of AP workers use many of the tools they understand would help improve their operations. Just 17 percent of those surveyed, for example, said they already use a dynamic discounting solution.
But the research suggests that AP officials not only understand the benefits of automated and electronic accounts payable processes, but they also largely plan to adopt these processes in the very near future.
For example, as mentioned earlier, while just 13 percent of AP officials are prioritizing automated B2B payment scheduling, B2B electronic payments is on the rise. Today, 59 percent of B2B payments are made electronically from the AP department. And while the paper check remains popular, they are slowly being phased out in favor of ePayment methods like commercial cards and ACH.
“More enterprises today are targeting their payment processes for effectiveness and efficiency improvements as part of a larger AP or P2P transformation program,” the report said. “And, they are doing so against a backdrop of emerging technologies, platforms and strategies.”
According to researchers, not only are electronic payments on the rise within the AP department, they are beginning to take over the outdated payment methods of yesteryear.