Four Questions for CFOs About AP and AR Automation

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We are nearly a quarter of the way through the 21st century. But many firms are still carrying around legacy payment systems and suffering from clunky B2B workflows.

This, despite the fact that — particularly within the B2B space — effectively deploying modern and digital payments technology is increasingly becoming critical to success.

Modern technology, when integrated into areas like accounts payable (AP) and accounts receivable (AR), can enable firms to automate sophisticated tasks, eliminating manual tasks in invoicing and accounting, streamlining operations and reducing processing time in payment management.

And while many decision makers may fear that heavy IT spending will put a pressure on their short-term profitability, at the end of the day, AP and AR modernization frequently translates into time and cost savings and a holistic view of financial operations, i.e., improvements in business profitability and productivity.

Still, undertaking a modernization initiative impacting back-end workflows around a firm’s existing AP and AR program is not as easy as flipping a switch. It shouldn’t be, either. Frequently, “big bang” platform overhauls end up costing more money and time then they are worth. Spending more on technology in itself does not lead to better performance, and savvy firms should take a more tailored and intentional approach to their digital investments.

That’s why, when undertaking an AP and AR transformation, it’s essential to ask several key questions to ensure the process is well-planned and executed effectively.

Read more: Payments Find a Home in ERP Systems as Back-End Processes Modernize

Legacy Payments Technology Desperately Needs Modernization

For firms looking to take the jump into digitizing their B2B workflows, it is crucial to identify the specific pain points and challenges in their current AP and AR processes. Are there inefficiencies, bottlenecks or errors that need to be addressed? Businesses should clarify objectives for the transformation, whether it’s streamlining workflows, improving accuracy, reducing costs or enhancing customer satisfaction. Understanding the underlying issues will guide the transformation efforts and help prioritize initiatives.

For example, PYMNTS Intelligence finds that nearly 3 in 4 firms (73%) say that AP automation improves their cash flow.

As Kat Battle, product manager for Complete AP at Bank of America, told PYMNTS, “More and more organizations are recognizing the need to update and modernize what has historically been a manual, paper-based process — but one that’s also very mission critical to the business function.”

It is also crucial for firms to review existing policies, procedures, and controls governing AP and AR operations. Are they aligned with best practices and regulatory requirements? Identify areas for improvement or standardization in terms of approval workflows, payment terms, credit policies, and collections strategies. Determine the necessary changes in policies and procedures to support the transformation initiatives and ensure compliance with relevant regulations.

“You don’t want to boil the ocean and try to solve for everything at once,” Corcentric CEO Matt Clark told PYMNTS. “Firms need to look at [transforming their existing processes] as a kind of crawl-walk-run mentality to get to where they need to go.”

It is also crucial to consider the impact of AP/AR transformation on various stakeholders, including employees, suppliers, customers, and business partners. How will the changes affect their roles, interactions, and expectations? Communicating the benefits and implications of the transformation throughout the process is key to addressing concerns and engaging relevant stakeholders, ensuring alignment with their needs and requirements.

After all, there are two sides — at least — to every B2B transaction.

See also: 3 Ways Legacy B2B Challenges Are Shaping Tomorrow’s Biggest Opportunities

If Success Were One-Size-Fits-All, Everyone Would Achieve It

At many firms, there can be a gap between the ambition to harness digital transformations the actual realization of value from those initiatives.

That’s why it is critical to evaluate, on a business-to-business basis, how technology can be leveraged to optimize individual AP and AR processes. Consider implementing automation, data analytics, and digital tools to streamline invoice processing, payment collections, reconciliation and reporting.

It is also important to assess the available software solutions and platforms that align with your requirements, resources, and budget.

For example, PYMNTS Intelligence finds that over one-third (36%) of small and medium-sized businesses (SMBs) say that cost and complexity are holding them back from automating their AP and AR programs.

But, by investing into AP/AR architecture as part of a coordinated modernization strategy, these friction points can be blocked and tackled.

“Having the back office in order for all companies is really critical for them to focus on what matters most, which is running and growing their business,” RJ Ancona, VP/GM, B2B product, partnerships and client management, merchant services at American Express, told PYMNTS.