Today’s guest contribution was provided by the team at Corcentric.
After the challenges of the past two years—and amid present economic uncertainties—chief financial officers can claim a major victory. Accounts payable teams are viewed as vital business partners at a rate twice as high compared to six years ago, with 66% of businesses saying AP is very or exceptionally valuable to the enterprise, according to Ardent Partners’ “The State of ePayables 2022: Mastering a Key Function at a Critical Time.”
While a positive trend, there are ongoing roadblocks impeding further advancement that CFOs must address to ride this momentum. Findings from the report show finance teams can continue to help their businesses thrive by automating manual processes, particularly in invoicing.
Reasons finance teams are growing in value
CFOs can attribute two factors to the increased perception of value among business partners.
The first is how AP teams implemented financial digitization ahead of and in response to pandemic conditions. Joe Payne, senior vice president of Source to Pay at Corcentric, notes that many AP teams were ahead of the game, having already digitized invoicing, AP workflow, and payment process ahead of March 2020. A rapid redeployment of resources from corporate facilities to home offices was therefore a seamless transaction.
Payne adds that some organizations had catching up to do, as the shift to remote work forced AP teams to rethink how they conducted business. Many companies digitized AP, and some moved upstream to reach into procurement. This enabled straight-through invoice processing using comprehensive procure-to-pay digitization. This proved successful, and AP and finance leaders led the charge helping their businesses emerge from the pandemic stronger.
The success of financial process automation stems from the evolution of the technologies themselves, according to William Dorn, senior vice president of Product Operations at Corcentric. Not too long ago, this information was not readily available, and only certain employees could run complicated manual reports and knew what was going on in AP. Innovations have generated greater visibility into AP, making the information more accessible to more people.
In addition, AP’s strategic focus on working capital management plays a vital role in helping companies manage terms or payment modalities with suppliers, according to Robert Johnson, senior vice president of Corcentric Payments. Dorn adds that automation frees up time for more strategic tasks. For example, it is easier to model “What if?” scenarios, such as “What if I increased my payment terms 30 days?” or “What if I took an early pay discount?”
Ensuring finance teams remain valuable business partners
To avoid resting on their laurels and losing traction, finance teams should consider actions to help further their value to the business.
Even if AP or P2P digitization already has occurred at the company, there is still work to optimize the process. Payne notes that full automation leads to better visibility into payment terms, methods, and frequencies. It also brings to light things like missed payment dates and supplier billing errors, creating real-time access to the budget for actual comparisons.
In optimizing their processes, companies should build out reporting capabilities and establish new KPIs, especially in areas they once never considered. For example, Payne notes that with clean, aggregated, real-time data, it is feasible and advantageous to optimize cashflow and days payable outstanding extension strategies.
Another consideration is outsourcing companies that provide outcomes, not just software. According to Dorn, buying software can be complex, taking valuable time and finances to implement. Aligning with companies that offer automation attaching to existing processes will enable outcome-based results fostering growth at a faster rate and with less friction.
Johnson adds that accounting teams are looking for third-party providers for tactical tasks such as managing supplier onboarding and fostering that relationship. They are looking to outsource the handling of term changes, payment modality changes, and other post-invoice, post-payment questions to focus on more strategic working capital strategies.
Identifying and overcoming roadblocks to success
Roadblocks to success for AP teams center on invoicing—they take too long, there are too many exceptions, and processing costs are too high.
Companies’ AP functions operate within only partially automated or entirely manual invoicing, according to Ardent Partners. This includes invoice approvals (59%), invoice receipt processes (72%), and invoice processing (73%). Currently, 43% of companies do not use electronic invoices, but 31% of companies say they plan to implement them in the next 1 to 2 years.
One area of improvement is found within the invoice and payment experience. Dorn notes that suppliers and customers have unique billing preferences that rarely coincide. Also, the onboarding process can be lengthy, especially in generating and updating vendor master data. More complications are introduced because many AP teams are understaffed, according to Johnson, and not prepared for the multiple ways they receive invoices.
Highly manual processes are prone to human error and require much time for completing tasks, notes Payne. These inefficient processes are still the primary method of invoice data ingestion for many mid-market and even large organizations.
He recommends companies require every invoice have a purchase order, leveraging AP workflow or P2P technology to simplify buying and paying, as well as digitizing the payments process. Johnson adds that a third-party provider can centralize invoice receipt, normalize the data, and streamline processes for AP as the number of invoice formats and delivery increases.
To advance, organizations must focus on eInvoicing, which helps map invoices and allows for greater speed and reduction of errors. Dorn recommends incorporating AI so finance teams can ingest any invoice in any format and match it to system data with a very high confidence.
Ardent Partners finds that AP teams that embrace this technology can lower the cost to process an invoice by 76%, doing so 81% quicker and with a 60% lower exception rate. Yet, there are many other benefits in adopting financial digitization.
According to Dorn, financial technology frees staff up to be strategic, with less time spent on training. Payne adds that automation creates visibility, improves the P2P process, and allows companies to better control cash flow and optimize working capital. Johnson notes that digitization allows companies to maximize their DPO and take advantage of yield opportunities from early pay discounts.
Moving finance teams forward to continue bringing value
With many economic challenges ongoing, there are many factors outside of CFOs’ purview. By leveraging financial technology to enhance and modernize processes and transform working capital strategy, CFOs can make a solid business impact and set up their finance teams to deliver even more value to the business.
