Businesses continue to make tough decisions to cope with volatility fueled by the coronavirus pandemic.
Employee furloughs are an all-too-common reality, while expansion plans have been put on hold, and supplier payments are facing delays.
But organizations are affected by today’s market climate in different ways, and while many of the choices that organizations are making can be painful, some opportunities have also emerged. Increasingly, the coronavirus pandemic has become a catalyst for lightning-fast digitization of the enterprise.
Supply chain challenges that have forced businesses to cancel vendor orders or extend payment terms are sometimes unavoidable. However, Tipalti Co-founder and CEO Chen Amit said he’s noticed more businesses taking the leap into accounts payable (AP) automation to mitigate the friction that comes with a remote workforce and cash flow pressures.
“We’ve been experiencing firsthand how some of the legacy ways of doing business just fall apart in this environment,” Amit told Karen Webster in a recent interview.
The shift to electronic supplier payments is just one example of the demands finance teams are facing to endure difficult times. But as Amit explained, the decisions organizations make today out of necessity will often have long-term impacts, and in many cases can guide businesses toward a brighter future.
Automate What You Can
The AP department is one area of business operations that has experienced a significant effect of the pandemic, particularly for businesses that had yet to modernize their invoice payment processes.
The firms that still rely on paper checks have been most exposed to market disruption.
Take one Tipalti client, which, Amit recalled, was forced to overhaul supplier payment practices after using checks for so long. With personnel working from home, this company could no longer cut and send checks to pay suppliers because AP staff couldn’t access the checks stuck in a lockbox in the office. The firm made the urgent decision to have Tipalti onboard several hundred suppliers to electronically settle their invoices and keep cash flowing through their supply chain.
In another instance, Amit pointed to another client, a guild, that had recently secured funding. While it wanted to provide financial support to guild members, the client similarly found itself stuck because of its historical reliance on physical checks to issue payments. Turning to Tipalti, the company suddenly digitized tens of thousands of payments to its team members.
These companies are only a fraction of the organizations large and small that have been forced to accelerate their digitization efforts, with AP a top priority for many businesses seeking to automate and ensure processes can still be managed in a work-from-home environment.
Particularly for small businesses with limited resources and heavily strained cash flows, the steadiness of enquiries coming into Tipalti about automating AP departments exemplifies how modernizing supplier payments has become a priority for many firms, said Amit.
And with good reason, he noted. Organizations today should view automation as an essential component of navigating today’s market of furloughs, hiring freezes and remote operations.
“One of the key steps is to automate whatever you can because you won’t be able to employ as many people as you did before,” he said. “Automation is part of the answer to that.”
A Long-Lasting Impact
Adjustments to corporate roadmaps will be an inevitability for many firms, Tipalti included. According to Amit, the company has decided to halt a previously planned hiring spree and delay investments, although he said he’s confident the company is in a position of long-term stability — and remains focused on prioritizing customer success.
Cutting down expenses will also be a key strategy for organizations, although Amit warned businesses to be strategic about these measures.
“It’s smart to cut expenses where you need to, but every time you cut something, think about the negative impact this will create for you,” he advised.
Indeed, many of the decisions that businesses make today will have long-lasting impacts well into the future. Decisions to delay vendor payments could negatively affect strategic business partnerships moving forward, for instance.
But not all of those decisions have to be negative. Businesses that had historically relied on paper checks and make the decision to jump to digital payments will not only gain the ability to handle the temporary pressures of a remote workforce and market downturn, but can also bolster efficiencies long after the market recovers.
Some firms, like those in the travel and hospitality market, remain in a particularly tough situation. Others, like home entertainment, are enjoying a revenue boost. But a large group of businesses will move with the broader economic flow, said Amit, and must act quickly to adjust their roadmaps to endure a decline. Many of those firms have an opportunity to extract long-term value out of the decisions they make today, but only if they act quickly — and with conviction.
“If you are at any moment too comfortable, too confident that you’re safe, then you’re doing something wrong,” he said, emphasizing the importance of taking on the entrepreneurial spirit to make quick, and often difficult, decisions. “You need to move faster. You need to be more aggressive. Take opportunities and be optimistic that there will be a light at the end of this tunnel.”