B2B Payments

Accounts Payable’s Opportunity To Become A Profit Center

There’s much discussion about the friction associated with traditional, manual, paper-based accounts payable (AP) processes, as well as about technology’s opportunity to address pain points.

The opportunity to help AP professionals save time and foster elevated supplier relationships is an attractive one to businesses large and small. Automation means less time entering data, and more time for strategic analysis and other value-added endeavors. And more recently, AP technology service providers have also brought suppliers’ accounts receivable (AR) pain points into the fold, adding yet another incentive for companies to digitize and automate.

Yet in business, money talks, and often the cost of transforming internal AP operations and implementing cutting-edge technologies can be a significant turn-off for companies unable to see the dollars and cents behind benefits like faster invoice processing or stronger vendor relations.

PYMNTS’ latest Next-Gen AP Automation Tracker explored this conundrum, which remains widespread in the business community. According to the Tracker, less than half of AP professionals said they currently receive invoices through eInvoicing portals, while 48 percent acknowledged their top priorities for AP as reporting and data analytics.

Both statistics highlight a gap between wanting digital, automated AP solutions, and actually deploying them.

Discovering AP Automation’s ROI

The Next-Gen AP Automation Tracker’s feature story explores the journey corporates can embark upon to analyze and realize AP automation’s return on investment (ROI).

“Consumers’ payments have increasingly shifted toward digital methods, but AP departments and B2B payment processes have remained dependent on cumbersome, paper-based practices,” the Tracker noted. “This should shift as more AP professionals and business leaders realize automation’s potential ROI, however.”

At a higher level, capabilities like the ability to obtain invoice data and efficiencies gained through automation can save on operational costs, from invoice processing to labor costs of AP professionals taking time to manually input data. Research has found manual invoice processing costs an average of $10.08.

The risk of errors in manual data entry can yield a significant financial impact, too, whether it be from avoiding over-spending on a single invoice, or taking the time to go back and fix errors when AP personnel could be doing more strategic work.

Beyond these more “passive” strategies to save money, an elevated AP strategy can also yield significant savings and revenue generation for corporates’ bottom lines, as the Tracker highlighted.

Take, for instance, the ability for businesses to secure early payment discounts from their vendors. With the average invoice taking more than eight days for processing, companies can struggle to act quickly enough to secure those early payment discount opportunities before it’s too late, not to mention help companies avoid late payment fees.

Further, AP automation often comes hand-in-hand with the embrace of electronic payment tools like commercial cards and premium ACH programs, which can be linked to lucrative rewards and rebate programs for business spenders.

“These rebates signify a new source of cash for businesses and help turn AP departments into profit centers,” the Tracker highlighted.

Fraud, too, is a significant threat to AP departments today, and implementing AP technologies with built-in fraud mitigation capabilities means not only avoiding the costs of paying a potentially fraudulent invoice or fake supplier, but avoiding the knock-on costs of the impact fraud may have on a company’s reputation.

An organization’s actual ROI when deploying AP automation technology, of course, depends on many factors. But with so many companies continuing to rely on manual processes and paper, and with so many professionals interested in exploring AP automation’s ROI — PYMNTS research has found 81 percent of corporate financial decision-makers agree AP automation could lower costs — companies can begin to at least chip away at churning AP from a cost center to a profit center.

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LATEST PYMNTS REPORT: MARCH 2020 B2B API TRACKER  

B2B APIs aren’t just for large enterprises anymore — middle-market firms and SMBs now realize their potential for enabling low-cost access to real-time payments and account data. But those capabilities are only the tip of the API iceberg, says HSBC global head of liquidity and cash management Diane Reyes. In this month’s B2B API Tracker, Reyes explains how the next wave of banking APIs could fight payments fraud and proactively alert middle-market treasurers to investment opportunities.

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