Reactive instead of proactive planning, late payments, a lack of visibility: Accounts payable professionals in the U.K. are making progress in their operations, but according to new data from Invu, they clearly have a long way to go.
Accounts payable automation firm Invu released its latest survey, “Changing trends in the purchasing processes of U.K. businesses,” last week to highlight the ways in which AP professionals are and are not improving. This progress does not only have an impact on AP executives’ organizations — though, Invu noted, accounts payable can have a profound impact on profits and cash flow. But the effects of AP operational behavior can be felt all the way down the supply chain of suppliers, researchers noted. Plus, AP professionals are revealing their concerns that current operations are not protecting their companies from fraud.
“Although we’ve seen a slight reduction in the amount of financial decision makers concerned about fraud, it is clear that concerns remain high within Britain’s business community and that not enough is being done to protect companies from becoming victims of fraud,” said Ian Smith, general manager and finance director at Invu, in an interview with Global Banking & Finance Review.
In its survey of 200 financial decisions at U.K. companies, Invu assessed the supplier payments, invoice management, planning and overall efficiency, and survey respondents drew a startling conclusion: A significant portion of companies assessed are in need of “urgent” changes to their purchasing and payment processes. This week’s B2B payments Data Digest rounds up top statistics from Invu’s report that led the AP automation firm to call for change.
Twenty-three percent of survey respondents say purchasing processes must be fixed ‘as a matter of urgency.’ Nearly a third said purchasing processes are difficult to use, and 54 percent noted that purchasing processes are not fit for purpose — an 18 percent increase from 2016. Nearly a third also said that these processes are “fragmented” and rely on multiple systems, and 41 percent said their processes are either entirely manual or rely on legacy tools like spreadsheets. One-third of small businesses said they are using paper and manual processes for their accounts procedures.
Forty percent of professionals said accounts payable relies on manual processes, with 16 percent noting that their AP departments are entirely reliant on paper, while nearly a quarter said AP professionals are required to scan paper documents. This is a slight improvement from 2016 when 45 percent of companies said they were using paper processes in their financial endeavors.
Forty-eight percent of finance processionals do not proactively use budgets to make purchasing decisions. Instead, they wait for data from management accounts and compare performance to budget after the fact. Similarly, 31 percent said management accounts are also reactive, waiting on invoice processing and not relying on accruals. A fifth of respondents said they know they have a backlog of supplier invoices to process.
Sixty percent of decision makers said their firms struggle to pay supplier invoices on time. Fifty-seven percent of medium-sized businesses say they struggle with on-time supplier payments, compared to 64 percent of large businesses that say the same. For a fifth of survey respondents of all sizes, late supplier payments are a “significant problem.” While vendors may view these statistics with disappointment, researchers at Invu noted that they are an improvement from 2016 when 83 percent of companies said they struggled to pay their invoices on time.
Seventy-two percent say at least one of their financial processes exposes their company to the risk of fraud, with mid-sized companies revealing greater concern than larger enterprises that their AP departments are exposing their companies to the risk of fraud. Less than a quarter said they are “completely confident” their current purchasing and invoice processes can detect fraud, an increase from the 17 percent that said the same in 2016.
Thirty-two percent of companies make duplicate supplier payments on a regular basis, another statistic that highlights a lack of trust in corporate accounts payable departments, Invu noted.