The strategic plan in accounts payable sits at the top of the pyramid that drives decision-making throughout the department. As you move toward the bottom of the pyramid, specific performance targets are identified that align with larger objectives (e.g., reduce fraud, extend payment terms, improve invoice processing timeframes, etc.). Ardent Partners’ 2024 ePayables survey results show that for 49% of respondents, performance targets for the AP operation are set at the beginning of the year. Department service level agreements (SLAs) drive many performance targets — such as processing 90% of invoices within four days of receipt, increasing suppliers that send invoices electronically from 15% to 25%, and the like. Again, the results are positive at nearly 50%, but a higher percentage of AP departments should be developing and sharing performance targets early in the year.
The numbers are less encouraging when compared to performance targets for individual AP staffers. Only 25% of AP respondents know their yearly performance targets. Most of the activities around the AP strategic plan are planning elements compared to performance targets where the rubber hits the road and execution is critical. What are team members striving toward without performance targets to guide them? And how is it known when performance targets are met or exceeded — or even addressed at all? If they are not communicated or don’t exist, not only does the individual suffer but the department and enterprise do too.
AP’s Top Barriers to Success in 2024
In the world of AP, the phrase “money never sleeps” is a literal fact — and the more time it takes a department to approve invoices and payments, the more money it costs to do so. While AP’s perceived value continues to increase, it is a dirty little secret that many AP teams are dealing with classic challenges, like invoice exceptions, slow processing times, and high processing costs. While the challenges remain constant, today’s high interest rate environment makes their relative impact significantly larger.
In fact, the challenges faced by AP teams in 2024 look markedly different than in years past. For the first time in Ardent Partners’ 19 years performing this annual study, invoice exceptions (53%) sit as the top challenge in the AP industry. Invoice exceptions can slow processing to a crawl, creating large bottlenecks that reduce efficiency and effectiveness. That this pressure remains and is now atop the “major challenges” category is telling. Even as AP begins to deliver more value and tackle strategic opportunities within the greater enterprise, departments that lack a clear solution to greatly reduce exceptions hit a performance ceiling much sooner than their peers. Resolving these exceptions often requires manual intervention, consuming time and resources that could be allocated to more strategic activities.
Longer cycle times (41%) have long been a thorn in the side of AP and finance teams. Extended cycles delay payments which can impact supplier relationships, potentially leading to late fees and/or strained relationships. The obvious solution to this challenge is using ePayables (or “AP automation”) technology. Addressing this challenge will also require streamlined processes and enhanced visibility into invoice status, empowering teams to identify bottlenecks and implement proactive measures to reduce processing times.
Nearly three in ten survey respondents (29%) view fraud as a top threat to their enterprises. During the pandemic, a distracted world gave rise to a new breed of fraudsters who developed more sophisticated invoice fraud and payment schemes. The growing threat of fraud necessitates vigilance and proactive measures designed to safeguard processes, identify attacks, and minimize losses. Automation and tightly integrated systems, specifically, can serve as a powerful first step in boosting protection. AP teams can also deploy advanced technologies, such as machine learning algorithms and anomaly detection systems, to detect irregularities and patterns indicative of fraudulent activities in real time that would not be identified by manual inspection.
Fraud Squad
The entire P2P journey, from procurement to payment, is susceptible to various forms of fraudulent activities, including invoice manipulation, fictitious vendor schemes, and unauthorized access to payment channels. Investing in robust fraud prevention technology helps safeguard against financial losses while helping to maintain the integrity of the entire P2P ecosystem. Over the past few years, criminal fraudsters took advantage of critical process and technology vulnerabilities and attempted to steal money from exposed businesses. Ardent Partners research found that 34% of businesses reported a business payment fraud attack over the past year. Not all attacks were successful, but it is clear from the sheer number that the risk of payment fraud attacks will be part of AP’s “new normal,” and that strategies and tools designed to thwart them will increase. In fact, 37% of AP teams said fraud attacks increased last year, while another 36% were unable to answer with authority.
In an environment with heightened fraud activity, the adoption or increased use of ePayments make great sense because they can diminish fraud by offering more secure transactions, while enhancing control and visibility over the full B2B payment process.
Notably, ePayments have been identified in another 2024 Ardent Partners research study as a solution that met or exceeded ROI expectations by 87% of the groups that adopted them. And AI tools are beginning to add an extra layer of security against increasingly sophisticated cyber threats, identifying some risks and attempts that manual processes and current technologies miss.
