[Editor’s Note: Ardent Partners recently published its Accounts Payable-themed report, “Accounts Payable 2024: BIG Trends and Predictions”. Over the next few weeks, this site will feature articles highlighting the key discussion points from the report.
In 2024, the fifth year of the new decade, the accounts payable (AP) landscape continues to undergo broad, sweeping changes, driven by the events of recent years marked particularly by the global pandemic, unprecedented inflation and rising interest rates, supply chain disruptions, and lingering economic uncertainty. As finance and other business leaders forge ahead into 2024, it is evident that these market events drove a major shift in perceptions regarding the accounts payable process, greatly aided by the resilience of the many AP teams who ensured stability and delivered a real financial impact. In the wake of recent events, businesses have come to a resounding realization — a robust AP operation can be a strategic powerhouse capable of delivering tangible value, enhancing bottom-line performance, and optimizing overall operations. The evolving landscape underscores the imperative for organizations to recognize and leverage the strategic potential embedded within their AP functions.
Over the next two weeks, we’ll feature the BIG trends in accounts payable followed by equally BIG predictions for 2024 that will help AP, P2P, and finance professionals understand the key issues at hand and better prepare them for the year ahead.
BIG Trend #4 – The Cost of Capital Increases Make AP More Important
To combat the high inflation rates experienced globally over the past few years, central banks around the world raised interest rates with unprecedented speed. As interest rates climb, the cost of capital rises, impacting everything from corporate bonds to revolving credit facilities. In response, smart CFOs quickly reassessed their financial strategies and tried to allocate resources more efficiently to adapt to the new economic reality that there is a very real cost to capital.
Against this backdrop, the importance of AP teams and their process takes center stage. When interest rates surge, managing cash becomes paramount and AP’s role in overseeing the cash that flows out of the organization via vendor payments has a direct and frequently sizable impact on bottom-line results. When an AP operation has visibility into its liabilities and B2B payments, it can work with finance executives to strategically manage the invoice payment process and optimize working capital. The AP process remains a linchpin in maintaining healthy supplier relationships and managing suppliers’ expectations while navigating the implications of heightened interest rates can be both an art and a science. The end result is that AP emerged as a key function to mitigate the impact of higher capital costs on the overall financial health and sustainability of the business.
BIG Trend #5 – More Global Invoicing Mandates Means More Complexity for AP
In 2024, more than 50 countries around the world have taken proactive measures to standardize and regulate B2B invoicing as a way to enhance efficiency, increase trust, curb fraud, and maximize tax revenues. And many more countries are expected to enact these invoicing mandates (as they are commonly called) over the next decade. These new regulations set requirements for electronic invoicing formats, data security standards, and standardized protocols (where, how, and to whom they are sent) for transmission.
For the AP departments managing a global supply base, the intricate web of unique regulations, standards, and compliance requirements can pose real challenges. Failure to address this complexity risks non-compliance penalties and can hamper supplier relationships. A lack of sophistication and agility with global invoicing can also hinder the business’ ability to nimbly switch suppliers and ultimately overhaul and improve its supply chain.
It is not far-fetched to believe that by 2034, most countries, including the United States, will have some type of invoicing mandate/requirements. As the number of mandates increase, so does the complexity for companies trying to manage, comply, and stay current with the myriad of requirements. As a result, more companies are turning to the eInvoicing expertise provided by their ePayables solution provider.
BIG Trend #6 – Global Tensions Continue to Challenge Global Supply Chains
“If you’re having supplier problems, I feel bad for you son, CPOs got 99 problems, the supply chain is one.” ~ Ardent’s new spin on an old rap lyric.
For two decades, the risks associated with moving supply offshore, like increased lead times and holding costs, reduced quality control, and poorer supplier communication and visibility, were mitigated by the dramatic cost savings that could be achieved by simply “lifting and shifting” production to low-cost locations. The expansion of global supply chains traded supply security, control, and assurance for lower prices. And the businesses that ignored the risks (most) were left unprepared for major disruptions.
During COVID-19, many paid the price for having key suppliers located halfway around the world. Today, businesses have come through the toughest times, but a new set of global supply chain challenges are emerging, driven by active military conflicts in the Middle East (Israel/Gaza) and Central Europe (Russia/Ukraine) and escalating global tensions between the U.S. and China. Many countries, like the U.S. are also dealing with contentious political debates and elections.
The world appears mired in uncertainty and the nuances of “globalization” are becoming more complex each year. AP’s challenge is to be prepared if and when new sources of supply are quickly contracted and to understand the regulatory and financial implications of working with new suppliers.
Comments are closed.