Categories: B2B Payments

The Vendor’s Role In AP Automation Adoption

Automating back-office processes has indisputable positive impacts on companies’ ability to promote efficiency and operational cost savings, and even encourage sustainability through the reduction of paper. Those factors have historically driven businesses’ accounts payable (AP) automation journeys, according to Danielle Simer, industry solution marketing manager at Hyland Software. Yet, despite a surge in AP automation technologies available to corporates, adoption remains muted.

There has been a recent shift in corporates’ AP automation strategies, however, Simer told PYMNTS in a recent interview, and this change reflects a broader strategic disruption in the accounts payable space.

“To some degree, what I think has really changed isn’t so much who is automating, or how many companies have been automating, but the change is more about why they’re automating,” she said. “We’re seeing that cash flow management and cash flow controls are a big deciding factor in choosing whether to automate.”

That means a much tighter collaboration between accounts payable departments and vendors, she noted.

Promoting Cash Flow Through Vendor Relationships

With cash flow management an increasingly important driver of AP automation solutions, Simer noted that corporate interest in early payment discount capabilities has surged. Businesses today are not only interested in AP technologies that can promote efficiency and speed (providing firms the time to capture an early payment discount), but technologies that can automate the process of negotiating and managing those discount agreements with a supplier base.

“To have that visibility and control over your cash flow, to better predict your outgoing cash needs, to better prioritize vendors and to better schedule your payments is a factor that has come up in recent conversations,” she said, “as [has] the idea of capturing early payment discounts and improving the control you have over your cash flow.”

Simer noted that she’s seen a recent increase in corporates’ interest in vendor management portals that are integrated with their accounts payable solutions, as the demand for supplier collaboration grows. Technologies like this not only enable businesses to more seamlessly accept invoices, but enable suppliers to heighten their own accounts receivable management operations by boosting visibility into invoice and payment status, for example.

While early payment discounts and vendor collaboration technologies can promote faster payments to suppliers, these automated technologies also aim to improve corporate buyers’ cash flow management by generating revenue via discounts, and promoting predictability of payments and capital outflows.

Double-Duty Technology

With accounts payable increasingly focused on suppliers and their payment acceptance needs, AP and accounts receivable have fewer silos than ever before. However, there’s another way that B2B vendors are impacting the accounts payable space.

According to Simer, technological innovation — particularly in the area of data capture, management and analytics — has encouraged businesses to explore how innovation can pull double-duty, and promote the same efficiencies in accounts receivable as in accounts payable. Elevating data integration between AP and other platforms in the back office, like enterprise resource planning (ERP) solutions, supports automation efforts, faster payments and cash flow management, she noted.

“If you’re trying to look at your accruals or do cash flow forecasting, if you don’t have confidence in that data because a significant portion of it is sitting in a stack of paper invoices somewhere and it’s not in your system yet, any predictions you’re making, any analysis you’re doing, you won’t have a complete view of what you’re looking at,” she said.

Increasingly, added Simer, businesses are finding that data automation technologies found within accounts payable can be strategically deployed in their accounts receivable operations, too. For example, intelligent-capture solutions that can automate the data aggregation of incoming invoices, and integrate that information within the ERP, can be the same technology used to process incoming sales orders, which can also benefit from direct ERP integration.

“It’s a natural progression,” Simer said, “because we’ve seen this success on the payables side, so what’s repeatable on the receivables side? The functions serve different purposes, but they’re similar, and their needs can be solved with similar capabilities.”

Progress on the AP automation front remains gradual at best, according to Hyland. The company’s own 2018 research found roadblocks to corporates’ AP automation journeys, as misconceptions about what “automation” actually means holds businesses back from taking advantage of the technology.

AP Automation has seen steady growth in adoption, an especially prevalent trend given cloud technology’s ability to make AP automation, once reserved for enterprise-level firms, now available to the upper middle market.

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The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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