It’s almost four years since COVID first appeared, and AP teams are still pressured to get more done despite fewer resources and persistent challenges. The pandemic dramatically exposed the inefficiencies of manual, paper-based processes and the difficulties of managing remote team members, invoice approvers, and payment authorizers. Yet, it also underscored the critical role that AP plays in enabling prompt vendor payments and strengthening relationships to keep goods and services flowing during supply chain volatility.
MineralTree recently surveyed more than 800 finance professionals and over 200 of their vendors for the State of AP Report. The focus was on assessing the current digital payments landscape and end-to-end AP automation to better understand key trends, challenges, and priorities for AP teams. The survey sheds light on the pivotal role that AP automation plays in driving efficiency, which we’ll take a deeper dive into in this blog.
Key takeaways
- Accounts payable teams continue to face challenges with fewer resources, despite it being nearly four years since the onset of the COVID pandemic.
- Teams leveraging AP automation report significant efficiency gains (85%) and faster, more timely payments (63%).
- End-to-end automation enables companies to do more with less, achieve faster payments, gain better visibility, reduce costs, and streamline reconciliation.
Navigating persistent AP challenges in a cost-conscious era
Many of the issues that plagued AP during the pandemic have persisted. Remote work is here to stay, with 68% of AP teams still working in remote or hybrid environments, according to MineralTree’s 8th Annual State of AP Report. It is time-consuming and difficult for these teams to process invoices and check payments manually, and physically route them for approvals and authorizations. Adding staff to address the problem isn’t a simple solution – finance leaders reported that finding qualified accounting candidates is challenging, and recent news suggests fewer grads are entering the accounting profession. Almost half (45%) of those surveyed expect to encounter challenges and delays. It’s also not the best solution–adding headcount to an inefficient process won’t improve efficiency or lower long-term costs.
But, even if finance leaders could find qualified AP professionals, they are being asked to cut costs. As the economic fallout from the pandemic continues – compounded by the war in Ukraine, inflation, and high interest rates – companies are focusing on “cost reduction” instead of growth. Our survey found that in this economic climate, the top issue facing finance leaders is getting more done with less by avoiding new hires and reducing headcount (59%), followed by the goal of reducing AP processing costs (49%). Despite the desire to cut costs, these finance leaders also want to improve AP processes, which includes improving cash flow by extending days payables outstanding (DPO, 43%); and gaining better visibility into their current cash position (42%). In essence, they want AP to do more work with less.
While this might seem contradictory, it doesn’t have to be. Savvy business leaders recognize technology’s role in providing the best of both worlds – cutting costs, while increasing productivity in the finance department, among other benefits.
AP automation delivers critical efficiencies, reduces costs
Given the tall task of getting more done with fewer resources, it’s no wonder that AP has topped the digitization priorities of finance leaders for the third year running.
Teams that automate AP processes are likelier to achieve the productivity gains they seek. They can process more invoices and payments with leaner staff. In the State of AP report, 85% of teams with automation technology reported improved efficiency, and 63% made faster, more timely payments. Thanks to automation, the majority of finance leaders (58%) can process a growing volume of invoices and payments with their existing teams and avoid staff expansion. Additionally, nearly a quarter of them (24%) have chosen to free up staff time to focus on other priorities, while 17% are processing the same quantity of invoices with smaller teams.
In addition to these productivity gains, AP teams have also reduced costs through automation. Nearly half (47%) of finance leaders surveyed have touted cost savings as a top benefit of digitization, following efficiencies and faster payments.
Digitized payments are on the rise
The benefits that AP teams can receive from payment automation are as critical as those from invoice automation. The time needed to prepare and mail checks often results in late payments, missed discounts, and potential late fees, making it difficult for buyers and vendors to track cash flow accurately. Recognizing the advantages of faster, more timely payments and increased efficiencies, finance leaders and vendors alike favor digital payments. The State of AP report found that 70% percent of AP teams want to increase their digital payments, and 79% of vendors want to receive more digital payments.
Through automated payments, AP teams can time the withdrawal of funds within 24-48 hours (depending on the payment method used) and retain funds in their account until vendors initiate a deposit if their automation partner allows it. At the same time, vendors can enjoy prompt payment and more predictable cash flow. Additionally, finance leaders are interested in payment automation for cost savings, while vendors want to benefit from the improved remittances. Both groups are interested in increased security and fraud protection with digital payments.
End-to-end automation multiplies the gains
Companies can receive the greatest value when automating the entire invoice-to-pay process. When AP automates invoice processing, it becomes easier to adopt digital payments. Even more importantly, the synergies they achieve across the entire invoice-to-pay process multiply their benefits. That could be why 1 in 3 respondents with automation technology indicated they had plans for additional investments in AP automation over the next year.
The survey results revealed that 89% of finance leaders said that the increased efficiencies they receive through end-to-end automation enable them to do more with less. Additionally:
- 67% of respondents said it facilitated faster, more timely payments, which helps keep vendors happy and supply chains running smoothly
- 47% reported greater visibility and control to manage cash flow more effectively 44% were able to reduce costs
- 36% benefited from streamlined reconciliation
An American Express executive in a recent PYMNTS article underscored the significance of AP automation, citing research that shows an average time savings of 9.9 hours weekly, or over 500 hours annually, providing key efficiency gains.
While the pressure to do more with less doesn’t look like it will ease up soon, the good news is that AP automation enables teams to accomplish just that. While reaping productivity gains and cost savings, they also gain greater visibility, control, and security to run their departments smarter, faster, and better than ever. At the same time, by delivering timely payments, they are strengthening critical vendor relationships and supply chains.
Case Study: Simple Mills increases productivity, not headcount
Simple Mills, a pioneer in the clean-food snacking space, is an example of a company that has gained critical efficiencies through automation. Its AP department consisted of a single person responsible for processing more than 1,000 invoices every month, with the support of a limited AP system. As the volume of invoices increased and overwhelmed AP resources, a new approach was needed. The company quickly realized that adding headcount and processing workarounds to handle the growing invoice volume would not be an effective solution. Instead, Simple Mills decided to implement an advanced automated solution that supports both invoice and payment processing. As a result, Simple Mills is able to handle a 50% increase in invoice volume without adding AP headcount and can ensure that vendors are paid on time.
The benefits of AP automation go beyond efficiency and cost savings, supporting many of the other goals of finance leaders today. According to 40% of finance leaders, digitization provides greater visibility and control over cash flow, which is important for managing working capital and maintaining financial stability. It also allows finance leaders to manage payment timing to improve cash flow or take advantage of early payment discounts. Additionally, 38% of financial leaders reported increased security and fraud protection.
Final thoughts
Facing mounting pressure to get more done with less, finance professionals must harness the potential of digital transformation to streamline back-office processes and cut costs. As one of these critical functions, AP holds immense potential for improving efficiency and productivity while improving the bottom line.
By embracing key productivity tips and partnering with a global payments company like MineralTree, your finance team can deliver real value, reduce costs, and achieve newfound heights of efficiency. MineralTree offers:
Expertise
With over two decades of expertise in the AP field, MineralTree has extensive experience and knowledge of the key challenges businesses face today. These deep roots have allowed us to hone our solutions to the needs of AP practitioners, while helping companies execute an effective roadmap for AP digital transformation.
Technology
MineralTree offers a suite of cloud-based AP automation and payments solutions to help businesses save time, reduce costs, and improve efficiency. With unlimited user access, you can scale AP processes without additional headcount.
Support
MineralTree has a dedicated team of experts available to help businesses implement and use their AP automation solutions. Our team can also collaborate directly with your suppliers on digital payments transformation.
To learn more about payment trends and why now is the time to digitize AP processes, download the State of AP Report.
