From good to great: Strategies for AP success

For accounts payable (AP) to take its place at the head of the strategic value-add table, best-in-class results show just how critical it is to digitally transform by investing in smart technology. As part two of this three-part blog series detailed, what separates Best-in-Class AP organizations from all others is a deep and wide-ranging commitment to AP automation, paperless processes, and embracing the primacy of data.

As Ardent Partners’ The State of ePayables 2023: Paving the Way for a Smarter Future makes abundantly clear, the path to a smarter future (or the bottom line) is most definitely not a paper trail. In terms of invoice processing, purchase order matching, payment processing and eliminating late payments, etc., the “best vs. others” charts in Chapter Three bear this out in terms of cost savings, efficiency, stakeholder satisfaction, and business impact. Unfortunately, as the report shows, going from manual processes to a point of AP digitization can be a long and arduous journey, regardless of the potential dividends to the business. A large part of that can be chalked up to outdated attitudes about departmental strategic roles.

“For most enterprises, the opportunity to transform and modernize the AP organization is both significant and achievable and should be undertaken sooner rather than later.”

As the previous blog mentioned, the back office shouldn’t take a backseat (Chapter Four suggests some tactics for that). Considering the stakes, it’s worth exploring how and why a more holistic technology strategy for AP and ePayables needs to become a reality.

AP success is an investment in planning, people, process, and technology

As the saying goes, success is not an accident — which is as true for AP as anything else. True mastery, as defined by Ardent Partners, lies not only in perfecting a craft but also in delivering consistently high value that delivers a competitive edge. This is what best-in-class organizations strive for, and the practices they employ are adoptable, adaptable, and repeatable by almost every AP department.

While a good part of The State of ePayables 2023 report talks about technology, there are a number of elements that accompany it. Automation is the low-hanging fruit and absolutely necessary starting point of AP efficiency, but it is only the start. There has to be a broad-based strategy that looks at technology like AI and predictive analytics within the context of the larger organization, and that strategy has to begin with a solid business case and focus on people and proficiency.

Since the COVID-19 pandemic, there has been more focus and investment in AP, and the following components in the “strategies for success” are just a few of those that will help CFOs and AP teams convert AP transformation into business impact. Speaking of, accounts payable departments should find a “sponsor” at the executive level, or a stakeholder in another department such as procurement, to help champion their effort to secure accounts payable automation and resource investments.

1. The path to AP success starts with a plan

According to Ardent Partners, only 50% of surveyed AP functions have a multi-year business plan. You need goals for the short- and long-term, a basis of KPIs to measure against, a large measure of agility for the inevitable course corrections that will take place, and the will to consistently review where AP is and where it’s going. And, critically, all of that must be reportable – no executive leadership team is going to commit resources and investments unless there is a clear set of dividends, or a way to get them. Not coincidentally, AP departments with a plan are six times more likely to achieve best in class.

2. AP also stands for “About People”

People play a crucial role in the accounts payable (AP) function, and their significance has been steadily expanding. Traditionally seen as a transactional role, the modern AP function demands individuals with broader knowledge and skills. As automation software and technology continue to reshape processes and reduce bottlenecks, the role of AP professionals has evolved beyond manual data entry. They are now required to understand and manage sophisticated software, analyze data, and interpret insights to optimize financial operations.

With the increasing complexity of regulations and compliance standards, AP personnel must stay well-versed in the latest legal and financial practices. The need for adaptability and problem-solving skills has also grown, as they often collaborate with various departments to address discrepancies and enhance overall financial efficiency. In today’s dynamic business landscape, AP professionals are instrumental in ensuring smooth cash flow management, fostering vendor relationships, and providing valuable financial insights to support strategic decision-making. Their expanded role in the AP function is vital for organizations to thrive amidst evolving challenges and opportunities. Keeping them current and highly trained becomes more complex now that so many teams are working in a hybrid situation — a situation that will need constant monitoring to ensure high productivity and low risk.

“The capabilities of generative AI vastly expand the pool of work activities with the potential for technical automation. That in turn has sped up the pace at which automation may be deployed.”¹

3. Unleashing the power of technology in AP

In the relentlessly fast and shifting world of global business, staying ahead of the curve is not just a competitive advantage; it’s the key to survival. The realm of accounts payable (AP) is no exception. The State of ePayables 2023: Paving the Way for a Smarter Future details the transformative potential of technology — especially innovative smart technology — in revolutionizing AP processes. By harnessing the prowess of Artificial Intelligence (AI) and predictive analytics, businesses can unlock new efficiencies, streamline operations, and empower their teams to focus on strategic value addition. Here’s a look at where you can leverage technology to make a bigger, more lasting impact:

Embrace AI-powered data capture and extraction. The foundation of smarter AP lies in accurate and swift data capture. Leveraging AI-powered data capture and extraction solutions can eliminate manual data entry errors, reduce processing times, and enhance data accuracy, saving valuable time and resources.

Enable straight-through processing (STP) with AI. Incorporating AI into AP workflows enables straight-through processing, a game-changing concept that automates invoice approval for routine transactions, expediting the process and freeing up AP teams to focus on more complex tasks that require human expertise.

Leverage predictive analytics for cash flow optimization. By harnessing the capabilities of predictive analytics, businesses can gain insights into supplier payment behaviors and optimize cash flow management, ensuring a healthy and robust financial position.

Implement touchless invoice management. One of the cornerstones of a smarter AP future is touchless invoice management, which involves minimal manual intervention. AI-driven invoice management systems can automatically validate, route, and process invoices, leading to unparalleled efficiency gains.

Integrate supplier collaboration platforms. Fostering a collaborative environment with suppliers is vital. Implementing supplier collaboration platforms powered by AI and predictive analytics can strengthen relationships, streamline communications, and resolve issues in real-time.

Enhance compliance and risk management. AI can serve as a vigilant gatekeeper by continuously monitoring transactions for discrepancies and red flags, reducing compliance risks, and safeguarding the organization’s reputation.

Opt for dynamic discounting. By analyzing supplier data and payment histories through AI-powered tools, businesses can offer dynamic discounting options, encouraging early payment and strengthening supplier relationships.

Enable intelligent cash application. AI-driven cash application solutions can automatically match incoming payments with corresponding invoices, simplifying the often-complex reconciliation process and reducing manual efforts.

Embrace mobility and cloud solutions. The future of AP is not confined to office walls. Adopting mobile and cloud-based solutions enhances accessibility, enables remote work, and streamlines approvals, contributing to greater agility and responsiveness. As mentioned, this is particularly vital for a growing hybrid work model.

Continuously monitor and optimize. The journey towards a smarter AP future is an ongoing process. Regularly monitoring the performance of AI-driven solutions and refining them based on insights is crucial for unlocking their full potential.

AP success is a mapped-out journey, not just a destination

Accounts payable is undergoing a remarkable transformation, and the journey towards a smarter future is well underway. It will always remain a journey as business, economies, technologies, and possibilities continuously change. But, by investing in people, process, and technology, businesses can unlock unprecedented levels of efficiency, accuracy, and strategic prowess. The critical steps outlined in this report from Ardent Partners offer a blueprint to harness the power of technologies like AI and predictive analytics, ensuring a brighter future for AP departments and the organizations they serve.

1. 1. The economic potential of generative AI: The next productivity frontier, McKinsey & Co, June 2023