Businesses are facing huge challenges as a result of the troubled economy. Inflation has reached a 41-year high of 11.1% and the Bank of England is warning of a long recession looming. As a result, businesses are increasingly automating their accounts payable process to increase efficiency going into 2023.
Surveys have revealed CEOs’ main goals are digitisation, growth and efficiency. All three are directly connected in post-pandemic Britain as businesses streamline processes to utilise limited resources most effectively.
The current economic climate, combined with businesses still dealing with the impact of Covid, has led to the adoption of digital technologies speeding up by at least three years, according to research.
Read on to find out about the top accounts payable trends for 2023 that are aimed at preparing your AP team for survival in the mid-term and success in the longer term.
1. Paperless processing
In an era where digital transformation has been rapid, businesses are set to further replace time-consuming manual activities and paper documents with electronic accounts payable processes. Around 50% of organisations surveyed are already using Optical Character Recognition technology to read documents in the processing queue.
In addition, more than half of respondents are using an electronic invoice matching system to support AP processes. Only 15% of businesses are using artificial intelligence-based cognitive automation and 36% use rules-based robotic process automation on data-related tasks.
The indications are these numbers will increase in 2023, which is good news for the 50% of organisations that are still “pen-pushing” in the accounts department.
2. Changes in productivity and costs
The significant increase in process efficiency in accounts payable suggests the general cost of operations will be driven down in 2023. However, on a more cautious note, these savings are likely to be offset by rising labour costs and a general shortage of talent.
Digital accounts payable technology has become more affordable and accessible for companies of all sizes in recent years. Studies into invoice processing efficiency between 2019 and 2022 reveal that productivity has increased by an average of 7% during the past three years.
The data shows organisations across the board have become more efficient and productive since 2019. This is “almost certainly” down to the digital transformation, according to analysts.
The impact has been greater in low and medium-performing organisations. Processing efficiency increased by 28.6% and 16.6% respectively in these performer levels. This is because typically, these organisations use fewer employees to carry out the related transactional activity.
3. Impact of the “Great Resignation”
The impact of the “Great Resignation” will continue to be felt in AP departments. It describes an economic phenomenon whereby employees are considering quitting their job.
It began early in 2021, in the immediate aftermath of the Covid-19 pandemic and lockdowns. Significant social and economic changes impacted people all over the world and thousands decided it was a good time for a career change. The main reasons included salary stagnation and the rising cost of living.
The latest figures show 40% of workers are considering resigning from their jobs. An increase in labour costs is being driven by the talent shortages and employee retention problems that have prevailed recently.
The Great Resignation has specifically impacted accounts payable costs, where salaries have increased by 20% for a senior AP clerk between 2019 and 2022 as companies strive to attract the best talent. Companies trying to get a handle on costs during the anticipated recession will be looking towards more automation to try and save money.
4. Better forward planning
Accounts Payable has already seen tremendous changes since 2019 in terms of costs, but because it is a key process for every business, it must work effectively. People tend not to notice AP when it’s working well, but if it stops working, they will certainly notice the difference and everyone will know about it.
According to research, only around 30% of digital transformations in the accounts payable department are completely successful. This is because many organisations are rushing into it without having formulated a clear idea of how it will work.
Those taking the plunge in 2023 must make sure they have the correct processes in place to make it work efficiently, saving the business money and making it more sustainable. Those who miss the mark may experience a negative impact until they get it right.
5. More businesses will be outsourcing
Research suggests there will be an increase in accounts payable outsourcing in 2023. Many successful financial organisations have started outsourcing as part of their operating model.
The Deloitte CFO Signals survey reveals 34% of finance executives have indicated they are likely to increase outsourcing over the next 12 months in their day-to-day operations.
A top outsourcing firm will do accounts payable transactions for a living. They can do more than just perform the tasks and provide the talent. They are also experts at optimising processes to ensure the highest levels of efficiency and productivity.
They are the experts in implementing digital technology, removing the risks from these initiatives. If you have outsourced your AP activities to a professional consultancy, they should guarantee the outcomes when it comes to the delivery of your expected cost savings and ROI.
When you achieve better results for your transactional activities through outsourcing, this should lower your costs and improve your operational efficiency. It will enable you to focus on the key digital transformation projects that are the core of your business.
The idea is to allocate the resources previously swallowed up in administrative tasks into other parts of the business. By working with a professional AP provider, you can also overcome challenges such as different time zones and geographic proximity, language barriers and communication challenges.
Conclusion
The Great Resignation and the digital transformation will continue to impact the world as we know it during 2023. Forward-thinking finance executives will overcome these challenges by incorporating digitisation and outsourcing into their operating model to solve talent shortages and labour costs.
Once you have improved operational performance and productivity, this will enable you to start working on the goals of growth, further digitisation and efficiency.
The role of accounts payable staff has changed significantly over the past two decades as technology has continued to play an ever-increasing part in day-to-day duties. Today, AP employees are more likely to spend their time working at a computer, rather than chasing up paper invoices.
As more aspects of AP processes are taken over by technology, the question is, what is the future of accounts payable? What role will accountants and AP employees play in the next ten to 20 years? Will the processes become completely automated?
Read on to find out how the future of AP may play out, and how to prepare for it.
Artificial intelligence
Machine learning technology and artificial intelligence are assisting people and managing processes in almost every aspect of the corporate world, including AP. In fact, the growth of technology in the business world is having the most significant influence on the future of AP.
In the financial sector, professionals are growing accustomed to the fact that accounts payable automation isn’t a luxury reserved for larger companies with equally large budgets.
With cost-effective tools available, even small to medium-sized businesses can access the same features. Automatic approval reminders, invoice capture and code are some of the services that automation tools can provide for enterprises.
Making the move to AP automation has the opportunity to reduce costs and improve the department’s efficiency. This can potentially make the accounts payable team a more strategic and data-driven body.
Challenging security threats
As digital storage continues to gain ground, many experts predict security threats will reduce significantly. Limiting access to critical files and using cloud storage can minimise the risks of fraud and other security threats, as long as the correct controls are put in place.
Accounts payable will need to keep on top of the ever-changing environment and keep up to speed with new security threats. Best practices should include performing daily bank reconciliations, so any unusual activities can be spotted as soon as possible.
The communications medium will minimise the risk of sensitive information falling into the wrong hands by establishing more secure communication channels with the vendor supplier.
Because the AP team will have access to more data in real-time, it is likely to be the first to notice if something is wrong. This will give the accounting department the chance to assist businesses and the IT team in navigating the digital financial landscape and supporting improved security efforts.
Advisory role
The advances in AP automation will provide businesses with greater access to performance indicators, such as the processing time of invoices. In addition, accounts payable will gain access to real-time indicators of business performance, including account reconciliation, the history of payments, and cash flow.
If the reports are automated, or almost fully automated, accounts payable professionals won’t need to spend hours developing reports. Their role will change into a more advisory one. They will be responsible for explaining to business stakeholders what the reports mean and making recommendations about improving business health and cash flow.
It is predicted that AP automation can help businesses manage cash better, optimise performance, control spending, and mitigate risks in ways that weren’t possible in the past. The next question is what the AP department might look like, ten years from now.
Less manual data entry
As technology advances, data will flow automatically from systems and clients into AP automation software. It could even flow into real-time reports. This means there will be a reduction in manual data entry. Considering manual entry is more prone to errors, this is likely to become a thing of the past.
Accounts payable professionals will be able to focus more on strategic tasks, rather than spending time on tedious tasks and businesses will have access to more insights, enabling them to grow without taking on additional AP staff.
Some aspects of the AP team’s work are already managed digitally. For example, the query management system is in the form of an online database to register customers’ queries and complaints.
In the future, most AP tasks, such as calculating and distributing internal reimbursement payments and sales tax exemption certificates, could all be managed by an automated system. This would further reduce AP employees’ manual workload.
Automatic alerts
Accounts payable automation offers a wide range of alerts and notifications, including reminding decision-makers to approve an invoice for example. In the future, accountants are likely to have real-time access to a much wider range of data, including financial information about their own company, or about their clients.
On receiving these alerts, AP employees will be able to flag up issues, including invoice fraud, earlier in the process. They will also be able to gain a more accurate picture of the business’s overall health.
Proactive vs reactive
Having real-time reports as part of an automated system will permit AP teams to become proactive rather than reactive when it comes to problem-solving. Employees will no longer be waiting for paper invoices to fall onto their desks. Instead, they will be able to log into the digital system to find out what’s holding up a payment.
Problem solving will also be proactive rather than reactive, thanks to employees being able to see potential issues in real-time, preventing them from becoming significant problems. For example, if a dip in cash flow is projected, AP employees can make a proactive decision on freeing up cash for necessities, such as investing in new equipment.
More strategic role
Accounts payable is likely to play a more strategic role in the future, as the department becomes more streamlined and digital, involving less physical paperwork.
It will be unlikely to lead to the complete automation of AP. Instead, the department’s employees will have more time to analyse data, ensure the appropriate controls are in place, and look for growth opportunities.
Preparing AP for the future
There’s no magical formula to prepare your AP department for the future. However, there are some steps you can take to ease into new methods of working. Diversify employees’ skills as the work becomes more digital and less based on paperwork.
Future training areas for AP managers and employees could include data and business analytics, cloud storage and other technology, data security, online security, and handling payment-related inquiries.
With invoices uploaded automatically into the AP system and sent to the relevant person for approval, AP employees will have direct access digitally to the invoice management information they require. They will be able to focus more on building relationships with business stakeholders.
AP professionals should be willing to learn new technology skills to prepare them to become strategic partners. The Accounts Payable Association is here to help your business take the leap into AP automation. Subscribe for all the latest industry news and information.