The accounts payable (“AP”) department has experienced a number of changes over the past 15 years. At first little more than a back-office function that processed invoices and supplier payments, AP has garnered new attention from executives looking to drive value from all corners of the enterprise.
Enterprises have also begun to recognize the emerging business value inherent in AP, which new technologies, solutions, and capabilities have brought to the forefront. This has altered the standing of AP within the enterprise, and focused heightened attention on the function as a whole as AP leaders seek to increase their strategic standing in the organization. As a result of this shift, and the start of a new year, the Ardent Partners team has collected its top four predictions for the future of accounts payable in 2016.
Prediction Number 1: A More Automated Accounts Payable Process
There was a time when, like many business processes, automating AP required installing expensive on-premise software. This placed the cost of automation well out of the reach of AP teams at small and midsize businesses (“SMBs”), which likely did not have the budget for a lengthy implementation process. However, the rise of cloud-based solutions—and new technologies that are more in line with how enterprises use software—have removed this traditional barrier.
Moreover, in the face of increasing executive goals to reduce costs across the board, more AP teams find that they must automate most or all of the tactical processes within the function in order to achieve department-level goals (and contribute to greater enterprise objectives). Automating at least the front end of the process, invoice receipt and approval, can significantly reduce per-invoice processing costs and invoice approval time; this can result in enormous cost and process savings that can create more opportunity for AP to become strategically valuable to the greater organization. As a result of the rise of cloud solutions, as well as the push to more cost effective, Ardent Partners predicts that AP will become more automated in 2016.
Prediction Number Two: Increased Involvement in Cash Management
At its core, AP’s role is to distribute enterprise cash to suppliers, which, in many organizations, frequently makes AP the single largest source of cash outflow. AP’s role as a cash-distribution vehicle makes it a natural partner for the treasury function, especially in the arena of cash forecasts and greater financial planning. More to the point, however, is the cost savings that AP can drive. An efficiently-managed AP process, which includes visibility into upcoming supplier payments, can help with deciding which early payment discounts to pursue as well as provide more data points to create richer financial forecasts. This can be tremendously valuable to the enterprise in the long term, and it is because of this impact on enterprise cash that Ardent predicts AP’s involvement in cash management will increase in 2016.
Prediction Number Three: AP Will Become More Strategic
As more pieces of the invoicing process become automated, AP can move away from focusing on tactical activities and start to provide intelligence around the invoice and payment data that it already collects. This is powerful intelligence that partners such as treasury and procurement can use to inform other activities such as working capital optimization and supplier performance management.
The accounts payable team that focuses on providing intelligence can also work more closely with its functional partners on activities that can drive greater efficiencies enterprise-wide. An AP team with the ability to perform more strategic activities can, for example, work with treasury to develop a supplier payment strategy that is closely aligned to other cash management activities. Involvement like this could show that AP is providing value to the enterprise at large, which leads to Ardent predicting that AP will become more strategically valuable in the year ahead.
Prediction Number Four: Greater Collaboration with Procurement
There was a time where internal departments operated as small islands afloat in the sea of the wider enterprise—rarely speaking with each other and yet still functioning according to specific objectives and traditional processes. This is no longer the case, as it is has become more and more apparent that only through collaboration can internal departments align their goals with those of the enterprise at large.
As a result of this recognition, Ardent Partners predicts an increased level of collaboration between AP and procurement in the year ahead. More enterprises have begun to look holistically at the procure-to-pay (“P2P”) process that AP and procurement occupy both sides of, which is a major contributing factor in a more collaborative 2016. Also, financial and operational data that AP collects will become more accessible as the function automates its innerworkings, and procurement can use this data to support supplier relationship management initiatives. And, lastly, there is a greater recognition on both sides that collaboration is necessary to achieve departmental goals that are more strategic than simple cost reductions or time efficiencies
Final Thoughts
In many ways, AP occupies a unique position in the enterprise. Any purchase that produces an invoice—and even some that do not—flow through the AP process at some point. As a result, the function is in a unique position to become a “hub” of financial and operational data. In 2016, AP will continue to evolve, and the enterprises that will succeed in the future are the ones willing to take the first step and address the shifts in the function.
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