B2B Payments

Corporates Explore The Path Of Least Resistance To AP Automation

With a newfound sense of urgency, corporates jump-started their digitization efforts almost immediately after stay-at-home mandates began. With accounts payable (AP) departments no longer able to step into their offices to print, sign and send checks, supplier payments quickly moved to the center of companies’ modernization discussions.

Now, weeks into working from home, there may be some questions about how serious businesses were about migrating AP operations to the cloud and digitizing vendor payments.

 

In a recent discussion with Karen Webster, Neal Anderson, president and CEO of OnPay Solutions, offered a perhaps surprising reality check into where organizations stand today.

“The reality check is, the enthusiasm for digital transformation has not waned at all,” he said. “If anything, it’s even more top of mind.”

While the motivation to automate AP has persisted, so has an aversion to change that has historically kept so many businesses operating on legacy tools and workflows. Now that businesses have had time to consider their AP automation strategies, Anderson offered insight into what middle-market and large enterprises need to consider to ease the pain of change without hampering their modernization inertia.

Preserving The Bank Relationship

With traditional financial institutions (FIs) often unable to offer the agility of AP automation that corporates now require, the logical path to follow is to consider collaborating with a FinTech. This is an effective strategy, said Anderson, but can also threaten to add more disruption to the AP modernization process than is necessary.

“What a CFO needs to decide is whether they are comfortable with somebody taking possession of their money,” he said. “If you’ve got $1 million in disbursements this week, are you comfortable having a FinTech pull that money, then disburse it to vendors?”

For smaller firms, having a FinTech obtain company funds and push it out to suppliers may be an effective solution. But for many larger organizations, retaining control of the cash is critical. It’s for this reason that Anderson emphasized the importance of CFOs choosing FinTechs that enable corporates to retain their longstanding banking relationships.

Organizations with millions of dollars in payables and multiple, longstanding banking relationships will find a path of least resistance to AP automation if a FinTech partner can work with their financial institution to move funds.

Finding The Right Fit

Maintaining the same banking relationships is key to minimizing the pain of disruption that comes when internal processes are forced to change. But according to Anderson, there are other ways corporates can further mitigate the friction of modernizing accounts payable.

Exploring collaborations with FinTechs that are able to seamlessly integrate into businesses’ existing back-office infrastructures, including enterprise resource planning (ERP) and accounting platforms, is another critical component of a smooth transition. Solution providers with proper fraud controls are also key, he said, particularly as businesses increasingly recognize the importance of fostering strong vendor relationships.

At the heart of the factors to consider is data. FinTechs that are able to automatically obtain transaction data from an ACH or virtual card transaction can reduce the reconciliation pain of migrating away from paper checks, while looping into supplier portals can support a frictionless, self-service process for vendors to be paid electronically and securely.

“One of the most critical factors in any decision is how secure a system is,” said Anderson. “What’s really key is being able to provide full visibility into the entire process, from who’s getting paid to what dollar amounts are getting paid to how that vendor is getting paid. If a vendor makes a change and wants to be paid to a different bank account, having visibility into that and change and being able to confirm it is key.”

Minimizing The Disruption Of Change

It may be inevitable that there will be disruption to workflows in the modernization process, whether an organization is migrating to automated AP or digitizing another area of the enterprise. But through a diligent exploration of the options, businesses can find FinTech solutions that limit the number of changes an organization needs to make to reach its goal.

In the case of accounts payable, said Anderson, working with FinTechs that preserve banking relationships and integrate into ERP systems is important. But it’s also essential for firms to realize that change does not have to be drastic to be effective.

The migration away from the paper check, for example, doesn’t necessarily mean a business must jump through hoops to collect transaction data and settle invoices. Instead, CFOs can work with their existing payment files and store that information digitally for seamless uploading to an AP automation portal.

AP teams can start small, noted Anderson, and through strategic FinTech collaboration, can make a meaningful impact in their accounts payable digitization journeys.

“We’re trying to change the way business has been done for the last 70-plus years,” he said. “Change is always a challenge. But if you can work within your existing environment and offer a solution that can enable an accounts payable manager to process payments from his or her kitchen table, and have the CFO approve a transaction from their smartphone, it’s a much better process.”

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