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Accounts payable pain points have remained virtually the same for decades. Cumbersome invoice data entry, slow processing times, limited visibility, inaccurate data—the list goes on.
However, what has changed is technology. There are tools now available to automate entire processes, saving time and money. You would think this is a no-brainer.
But somehow, there still seems to be a lot of resistance and a lack of executive buy-in when it comes to AP automation. In fact, getting upper management to see the light is one of the top reasons companies pass on AP overhauls and automation software.
In this article, we’ll look at the top AP pain points for 2023, how CFOs are navigating these changes, and the best way to build a business case for AP automation you can present today.
Biggest Accounts Payable Pain Points in 2023
Although technology continues to change, adoption remains slow, and as long as that happens, CFO pain points will remain similar to years ago.
In order to gain greater insight, Tipalti recently teamed up with IFOL to survey members on the current state of automation in accounts payable teams worldwide. The statistics below were a result of this survey. The following are some of the biggest accounts payable pain points a CFO faces in 2023:
Slow Processing Times
The time spent processing invoices and supplier payments remains very high, with a large number of teams spending over 5 days each month doing it.
In fact, 56% of respondents in Tipalti’s survey spend more than 10 hours per week processing invoices and administering supplier payments. Manual processing and paper invoices are key themes here, as CFOs are still facing challenges with poor processes.
Our survey uncovered an acute awareness among respondents of how different their roles would be if business processes were improved. Only 5% of respondents spend less than 1 hour each week.
Issues with Scalability
Although there has been an increase in the number of teams that are fully automated, the majority still remain only partially automated. This has highlighted a hidden issue AP teams face with technology that scales with their growth.
Companies are not scaling with AP automation properly, and teams admit they would not cope well with a sudden increase in the number of invoices or purchase orders.
Even with AP automation, inaccurate data can become a common pain point for CFOs, especially when it comes to important decision-making. After all, humans are still running these systems. Errors in data entry and inconsistencies in vendor data across different systems can lead to mistakes and duplicate payments. Inaccurate data also leads to delays in payment processing which can strain vendor relationships.
The further spread out accounts payable processes are across multiple departments and systems, the less visibility. It can be difficult for CFOs to gain a clear picture of payment obligations and outstanding invoices.
This makes it hard to forecast cash flow, prioritize payments, and effectively manage supplier relationships.
Inefficient communication between AP and vendors can erode the relationship, leading to misunderstandings and delayed payments. This can be especially apparent when dealing with international suppliers and those with language barriers.
Risk of Fraud
Payment scams and fraudulent invoices continue to be a risk for organizations, especially those with a high number of manual processes and limited visibility. This clunky AP workflow is what makes it easy for scammers to slip through the cracks.
Despite these ongoing challenges, some decision-makers are still stalling on change. Moving to fully automate manual tasks and AP processes takes an investment of time, but there are plenty of resources, guidance, and support for businesses eager to take that step.
How CFOs are Navigating Change
For CFOS and key stakeholders, the name of the game is future-proofing the finance function. This should be an important focus for CFOs and requires a strong commitment to improving processes and addressing pain points for their teams. This is especially important in today’s challenging talent pool, where skilled work is hard to find, and even harder to keep.
Employees must remain satisfied, and part of the responsibility of the modern CFO is to ensure they have the best automation solutions to do their jobs efficiently. Here are a few ways in which CFOs are navigating change:
CFOs know their roles are shifting, and in Tipalti’s recent survey:
- 57% now say they are “enterprise value creators”
- 43% say they are finance and accounting stewards.
Partnership with the CEO and other C-suite leaders is now part of the role, evidenced by the CFO’s growing need to deliver business insights.
In fact, more than four out of five CFOs (84%) say that CFOs and finance functions in their businesses are very frequently or frequently asked to deliver real-time information to inform key business decisions and drive enterprise value.
The delivery of this enterprise value can take several different forms, including:
- Adopting new technologies and digital transformation (47%)
- Cost analysis and reduction (45%)
- Managing cash flow (45%)
This data demonstrates that the perception of the modern-day CFO has shifted from an accounting steward to an enterprise value creator. It also shows that the activities a CFO is responsible for are far more strategic than we realize. This makes scalability and efficiency critical to long-term success.
As companies continue to adopt advanced technologies, CFO must adapt to new solutions and sources of information. Digital transformation and changing business operations have a cascading effect on how teams manage cash and conduct analyses.
More than two out of five CFOs say that the three ways the finance function has transitioned to become more modern, efficient, and ‘future-proof’ have been:
- Digitizing payments (46%)
- Improving reporting and real-time data (45%)
- Automating manual workflows/processes (42%)
Digital transformation within the finance function frees up additional resources for more strategic initiatives. This creates more time for finance teams to focus on supporting the CEO with insights or navigating important cash flow decisions.
Digital transformation will always remain a priority for CFOs because companies cannot afford to fall behind on strategic initiatives as they grapple with new changes in a fast-changing economic environment.
Choosing the Right Solutions
So, what is accounts payable without modern solutions? CFOS must take digital transformation one step further by equipping their teams with the right AP automation solution.
With fast-changing economics and a tight labor market, more than seven out of ten CFOs (72%) say their finance functions experienced higher than typical rates of turnover at times during the last 1-2 years.
One issue that may influence this is the use of outdated manual processes and old technology. This is why it’s so important for CFOs to evaluate how well the automated AP solution supports the people.
Truly future-proofing the finance function means ensuring teams are well-equipped with the right types of technologies, which reduce manual processes and support modern ways of working.
Unfortunately, many companies have quite a ways to go before they can call themselves a “Connected Finance” organization. This is the ultimate operation in which data flows, workflows, fund flows, and communication flows are all aligned in a way that enables finance teams to do the best job they can.
What are the full possibilities of AP automation?
There are many transformative benefits of holistic AP!
How to Build an AP Automation Business Case
There are many reasons why companies choose not to invest in AP automation. Among the top three reasons include lack of budget, fear the process is too complex, and assumption that the current processes are working just fine. However, buy-in from key stakeholders is not something that can be put on the back burner. Lack of executive support is also a prime reason AP automation projects never take off.
That’s why making a case for AP automation is crucial to the success of the program. An AP automation business case should include the following points:
Calculate Time Saved from Manual to Automated Tasks
You should be eager to demonstrate the impact of AP automation on current invoice processing. This has a major impact on the overall productivity, efficiency, and cash flow of a business.
Manual invoice processing (think scanning, sorting, data entry, etc.) is time-consuming, leads to mistakes, and lacks value for employees. Every human error leads to further delays and, in some cases, duplicate payments.
Thus, it’s important to calculate the time saved when moving from manual to automated tasks, How long does it take the team to process an invoice? How many invoices a day can be processed manually vs. automatically?
Investing in top accounts payable software reduces the invoice lifecycle while improving cash flow. Additionally, companies are able to make every payment on time, realizing the benefits of early payment discounts.
By keeping all invoices, POs, and approval routes in a central repository, employees gain greater visibility over the process. An automated invoice approval process will shorten the procure-to-pay process and remove the need for manual data entry.
Compare Current Costs to Automated Costs
Much like calculating the time it takes to process invoices, you should also present in the AP automation business case how much the company should expect to save on costs.
Tools like an invoice processing calculator can help you determine these metrics quickly. Here is a quick step-by-step process:
#1) Existing Costs
Lay out all existing expenses attached to your current manual AP process. This can include costs like:
- Employee salaries and benefits
- Outstanding costs
- Material expenses (like paper and postage)
- Equipment maintenance
#2) Include Hidden Costs
Consider less obvious costs associated with your current manual process, like:
- Losses resulting from errors
- Invoice processing costs
- Cost of the current invoice lifecycle time
- If applicable, the cost of late payments and missed discounts
#3) Audit the Team
Check with each individual to determine how they process invoices and make payments on a daily basis. The objective here is to assess the total time it takes to manage these manual AP tasks
#4) Present Potential Savings
Once you have gathered all the necessary data, you can look at potential cost savings, which can include:
- Optimized labor costs by removing manual, low-value tasks
- Reduction of headcount and reallocation to more strategic roles
- Costs of equipment and maintenance for manual processes
Show the Timeline to Recoup the Costs of Automation
Although onboarding an accounts payable automation solution will yield many benefits and cost savings, they won’t be immediate. It will take some time before the business sees any ROI.
This is often one of the biggest blockers to securing investment in the process. It’s critical, that when making a case for AP automation, you outline the specific timeframe of when they’ll see a return on investment.
Consider some of these costs to factor in:
- Initial implementation costs
- Costs associated with system downtimes
- Time in which the current system is offline
During this time, can employees be reassigned to more strategic roles where they can add value? Show that investment in AP automation software will eventually add to working capital and decrease costs.
Highlight Other Areas/Resources to Invest Extra Time and Money
It’s also important to highlight where executives will save money in other areas of the business. There are often phantom costs associated with relying on outdated processes.
This includes things like time management, the strain on vendor relationships, and employee morale. All of this equates to real money. Just take these AP automation case studies, for example.
When stating a business case for AP automation, point out the security risks involved with sticking to the manual process. This threat can extend to confidential payment details, which can harm vendor relationships.
You should also point out that choosing a more strategic approach to AP (instead of a reactive one) can help to prioritize vendor relationships and optimize cash flow. Since the AP process will be running smoothly, teams can focus on other aspects of the business that save money.
Review the Benefits of AP Automation
One of the strongest components to making a business case for AP automation is reviewing all of the benefits account payable automation brings. Consider some of these points:
- Automating AP saves time and money for invoice processing
- Invoice approvers no longer have to worry about manual invoice approval
- Savings from early payment discounts quickly adds up for the AP department
- AI and automation detects exceptions and fraud better than humans
Summing It Up
To address the various challenges current CFOs face, their roles are evolving. Like mining gold, they are expected to draw value from deep within the company’s financial infrastructure.
It can be done. Modern CFOs have adopted digital transformation and understand that, during a labor shortage, choosing the right tools is critical to keeping the best people on board.
Companies are quickly turning to automation and technology solutions like accounts payable automation, e-invoicing, and payment portals. AP automation will streamline processes, reduce errors, and provide greater visibility into accounts payable operations.
This type of technology also improves communication and collaboration with vendors, ensuring that invoices are accurate and payments are always made on time. Overall, it’s a win-win for all parties involved!
Ready to see how top peers are doing it? Check out our latest eBook: Leading Companies Power Accounts Payable with Automation, to see how today’s modern companies are eliminating 80% of their accounts payable workload by automating the entire supplier payments operation.