Over the past few months, our workplaces have changed tremendously. Offices that were once full of people are now nearly empty. Work that was once done in person is now being done at home. With so many now working remotely, COVID-19 has forced many companies to rethink the way they do business and transition from a high touch environment to a high-tech environment.
Even before COVID-19, recent technological advancements have spurred the development of solutions that address increasingly specific business-to-business, or B2B, pain points.
B2B payments, in particular, have begun to see the early benefits of this specialization in what Deloitte referred to as a “tectonic shift underway” in the landscape. With Goldman Sachs recently estimating the B2B payments market to reach $200 trillion by 2028, over five times the volume of the retail payments market, we know the potential impact of technology on the facilitation of B2B payments is significant.
Many businesses still run with manual back-office operations. According to the same Goldman report, 70% of small and medium-sized business (SMB) payment volume is still paid through paper check, and companies currently spend $2.7 trillion globally on manual, paper-based processing. While the increase in payment volume is beneficial for the broader economy, that cumulative cost will rise in correlation with the influx of payments that need processing. But it doesn’t have to. To stay competitive and poised for growth amid this external evolution, forward-thinking financial leaders are re-evaluating their internal operations for areas of inefficiency. Departments such Accounts Payable, or AP, are top of mind for many, as 64% of controllers surveyed by the Institute of Finance and Management (IOFM) identified AP as a priority for improvement. The majority of these controllers also believe AP will receive additional investment for improvements, so it’s no surprise that they rate their AP departments as being “high-value” and a “critical component of their business.”
Leading organizations are turning to innovative technology, such as AP automation software, to transform historically time-consuming, tactical processes. The resulting improvements enable AP teams to contribute to businesses’ broader goals of greater flexibility, stronger financial positions and healthier bottom lines by providing cost savings, increased visibility and greater control.
Organizations that have chosen to automate their AP processes have seen results. Reduction in paper invoice volume and invoice approval timelines are the two most commonly stated improvements since implementing an AP management solution. In addition, these companies reported seeing strategic benefits after automating their AP process. These include research and visibility into historical invoices, improved visibility into unpaid invoices and increased employee productivity. These benefits contribute to increased business control, lower financial risk and greater accuracy in financial forecasting. Not only does automation help teams eliminate their identified inefficiencies, it affords the AP staff the opportunity to proactively provide additional value to the company.
While the initial focus of many financial leaders looking to automate is the procedural, office based pain of paper-based processes, there are economic benefits to consider as well. First, there are hard costs associated with processing paper payments — including the costs of checks, envelopes and postage — that add up when processing hundreds, if not thousands, of payments on a monthly basis. Then there are soft cost considerations. Time is money, and companies are paying for hours of employee time dedicated to manual data entry and approval workflows that could be spent on more impactful work. By implementing a more efficient solution, companies can eliminate tens of thousands of dollars in processing costs and reallocate those funds more effectively for sustained growth.
After an improvement in procedural efficiency and cost reduction comes the final phase of strategic transformation as a result of automation: greater goal setting. Organizations that automate and successfully transform their AP departments enjoy the opportunity to set holistic goals that are both tactical and strategic. For example, organizations that have embraced technology report their primary goal over the next year is to increase the productivity of their AP staff, which reflects a more forward-thinking focus on increasing the value of internal resources. Another innovative goal among AP leaders is to improve cash flow management and working capital optimization. Typically, organizations struggling under a manual process only have the bandwidth to focus on tactical improvement goals like reducing paper invoices or manual data entry. In contrast, automated organizations can use more of their time and resources in an analytical capacity to help the company understand ways it can improve its financial position and bottom line.
Now, more than ever, AP departments can grow beyond tactical execution centers into strategic contributors, thanks in large part to technology like automation. To help their teams reach their full potential, financial leaders must recognize the symbiotic relationship between tactical enhancement and strategic development. Companies that identify and prioritize this opportunity to evaluate and enhance their current processes with an eye on the future will have a significant advantage in a business payments landscape that is consistently reinventing itself.
Phil Muscato is market president with KeyBank in Rochester, New York.