With the release of my 18th-annual Accounts Payable-themed report, my team and I continue our nearly two-decade-long dialogue with Accounts Payable (AP), Procure-to-Pay (P2P), and other finance leaders. The report captures the experience, performance, perspective, and intentions of a wide range of AP departments via the response of 190 AP and finance professionals.
The report also includes benchmark statistics, analysis, and recommendations that AP, finance, and P2P teams can use to better understand the state of AP today, gain insight into best practices, benchmark their performance against the best-in-class, and ultimately improve their operations and performance. It also discusses the impact of AI on AP and provides actionable recommendations for AP professionals to take advantage of emerging technologies and pave the way for a smarter future.
Over the coming weeks, we’ll take a deeper dive into the risks, challenges, technologies, and opportunities that AP and P2P leaders and their teams face in 2023 and beyond. There’s no better time to be working in AP than right now. The potential to extend the function’s influence in the enterprise and elevate AP’s performance is at your fingertips.
Paving the Way to a Smarter Future
The story of human progress is one of constant innovation and technological advancement. From the printing press to the steam engine, electricity to the internet, history is widespread with examples of game-changing inventions that fundamentally altered the course of society and business. In each instance, those who embraced new technology and adapted quickly reaped the greatest rewards. Today, the world of accounts payable finds itself on the brink of another such breakthrough: the pervasive expansion of artificial intelligence (AI) within AP and P2P automation technologies.
In 2023, the world is very different and the importance of Big Data has reached a tipping point. The expanded usage and broad commercialization of AI tools have unlocked countless new possibilities for utilizing these potent analytical engines. While still emerging, it is clear that the growth and impact of AI tools for accounts payable over the next few years will be extraordinary. AP and finance leaders must recognize the crucial role that intelligence can and will play in shaping AP strategy and execution and go all-in on Big Data intelligence.
As with previous technological shifts, this new era of AP promises to revolutionize the way businesses operate, communicate, and transact with their trading partners. It will also change how AP teams interact, communicate, and collaborate internally. The potential benefits of intelligent automation are immense, ranging from faster and more accurate invoice processing to more strategic decision-making, improved cash flow, and greater supplier engagement. But as with any major technological transformation, the adoption of pervasive AI in AP will also bring its own set of challenges and risks — from data privacy concerns to potential job displacement. To fully realize the benefits of this new era, businesses must not only embrace new technologies, but also re-evaluate their existing processes, structures, and talent strategies.
While AI is a technology that is absolutely overhyped today, it must be taken seriously. In the near term, AI innovations will emerge as incremental improvements upon existing solutions and processes. But AI’s promise is extraordinary and the aggregate impact of these innovations will ultimately deliver game-changing and potentially industry-redefining solutions. The implementation of AI in AP processes will take time and require careful planning, investment, and training. While AP leaders need to pave the way for this smarter future, they must also continue driving their current year agendas and executing well in today’s tough and uncertain market.
AP’s Top 2023 Headline: Uncertainty
The perpetual state of uncertainty for AP and finance professionals, which began with the global pandemic three years ago, continues today. According to Ardent Partners’ 2023 research, nearly half (44%) of all business leaders are feeling a “great deal” of uncertainty about what will happen this year, and most express at least “some” level of uncertainty. Market and economic factors contribute directly to this feeling of unease, as does the continual unraveling of longstanding institutions and societal norms, opening doors for extremists, catastrophists, and bad actors to gain more attention and promote their narrow agendas.
In 2023, AP finds itself in an increasingly complex and challenging business environment. Inflation, tightening monetary policies, supply chain disruptions, and the threat of a looming recession are just a few of the recent market conditions that have created significant uncertainty and posed sizable challenges for businesses in all sectors and most geographies. In tougher financial times like these, AP has the opportunity to step up and become more critical to operations and overall results by helping finance executives (i.e., CFO, treasurer, controller, etc.) better manage their cash flow and optimize supplier payments. AP can also play a more strategic role in supporting the enterprise and the CFO, managing risk and driving efficiencies.
Value, Thy Name Is AP
For many years, executives have failed to see the larger potential of AP and generally ignored the department’s need for new resources, attention, and systems. That has changed over the past few years. Ardent Partners research has shown that a fundamental shift has occurred in how AP departments are perceived within an enterprise. This has been a welcome change, considering that perception has been a major issue holding AP groups down within the enterprise organizational hierarchy. The trend continues this year with Ardent’s 2023 survey where a robust 64% of AP leaders believe that their AP unit is viewed by other enterprise stakeholders as either “very” or “exceptionally” valuable to the enterprise. The improved view of AP has delivered benefits in the form of larger budgets and more support, but it has also created a rising set of expectations for overall performance. No longer a bit player in the enterprise’s annual “play,” AP must not only know its lines and hit its mark, but it must also be compelling and convincing in its featured role on stage.
This also means that AP teams should be developing and executing a strategy that focuses on building its impact in each ensuing year, a baseline expectation of any strategic business function. However, this will be problematic for many teams as Ardent Partners research indicates that a significant number of AP departments are operating without a strategic plan. In 2023, 65% of AP departments are operating with an annual strategic plan, which means that roughly one-third (35%) are not. A deeper analysis shows that only 43% of all AP teams have linked their operating plans to overall business/ enterprise objectives, and merely 5% of groups have AP staff and/or executive compensation linked to the overall AP plan. While the perception of AP departments is strong, the underlying practices supporting many departments is not.
While the pandemic enabled executives within finance and the business to see AP with new eyes and evaluate it based on its impact on performance and operations, there is still a long way to go in terms of fully integrating AP into the strategic business functions of the enterprise. It falls to AP’s leadership to build the necessary bridges to the executive team (and business leadership) so that it can better understand the direction of the enterprise and develop a plan that maps to those larger objectives. This will help AP become a self-sufficient function capable of supporting critical enterprise initiatives and providing reliable financial insights that can support important business decisions.
Operating more strategically will require strong leadership and a clear communication strategy that emphasizes the importance of AP’s role in the broader organizational ecosystem. It will also require AP to look and act the part by developing a multi-year strategic plan that aligns with the overall goals of the enterprise, linking staff compensation to the overall AP plan, and actively seeking budget increases and special project approvals. All of this will help AP departments demonstrate that they are worthy of new investment and help them deliver better returns when they receive it.
Our next installment will explore the evolving role of accounts payable, with AP leaders increasingly prioritizing initiatives that will help them pave the way to a smarter future. Those strategic priorities will be reviewed next.
