Accounts Payable Should Not Be a Cost Center
In the current era of generative AI intertwined with unstable market factors, CFOs face transformation pressure. Intelligent automation, combining machine learning, natural language processing, and RPA, can optimize accounts payable processes, enhance cash flow visibility, strengthen internal controls, and improve supplier relationships. Data shows that in 2022, over 75% of AP teams saw an increase in invoice volumes, but manual processing led to inefficiencies. By using process mining to diagnose the current state and then achieving straight-through processing, costs can be significantly reduced, returns improved, and compliance risks mitigated.
Steven Cronin is Senior Vice President of Customer Excellence at ABBYY, a global technology company. The views expressed in this article are solely those of the author.
Market volatility, reports of bank failures, stakeholder unease, and the emergence of generative artificial intelligence (AI) all require modern CFOs to constantly adapt their roles. This responsibility is likely to bring greater stress and even sleepless nights.
At the heart of all these dilemmas is the need to transition to better, faster technology, where intelligent automation plays a significant role. Intelligent automation combines technologies such as machine learning, natural language processing, and robotic process automation, and applying it to areas like accounts payable is a key initiative to ensure visibility into all dimensions of financial operations. This helps improve cash flow and working capital allocation, financial forecasting, internal and external controls, and strengthens supplier relationships.
Given the surge in invoice volume driven by the gig economy and online transactions, automation is particularly important. In fact, a 2022 survey by the Institute of Financial Operations & Leadership found that over 75% of accounts payable teams reported an increase in the number of invoices processed in their most recent quarter, compared to 66% in the previous two quarters; 80% of teams reported that the increase in invoice spending led to higher transaction costs.
Finance teams still face inefficiencies in invoice processing, including manual routing, excessive escalations, and rework. Levrell Research estimates that 29% of accounts payable teams encounter discrepancies, as many as 48% lose or misplace invoices, and 20% miss out on discounts due to slow processing.
Process Mining
So, how can finance organizations transform accounts payable operations from a cost center into an area that improves operating profit?
The key first step is to discover your financial processes: think of it as a diagnosis of your current financial operations, enabling you to make data-driven decisions for process optimization. Like an X-ray, it provides transparency into process data, capturing your workflows and any variations of them.
This type of insight is called process mining, and it helps your organization gain granular visibility, allowing you to precisely visualize how financial processes behave, so you can develop appropriate transformation measures. More importantly, it shows you where processes slow down, enabling you to understand why this slowdown occurs. It also allows you to continuously monitor process performance to show whether your investments are effective or bringing improvements. Gartner found that CFOs are now investing in process mining technology as a cornerstone of financial process optimization.
The next important phase in transforming AP is achieving better straight-through processing—meaning full automation of invoice data extraction, validation, matching, exception handling, escalation, and final posting of all invoice amounts in the ERP system, all without human intervention.
AI Takes Over AP
Advanced automation tools use out-of-the-box plug-and-play document AI skills to automate and process any type of document, including purchase orders, invoices, expense reports, receipts, or pay slips. With advanced AI and machine learning, finance teams can eliminate redundant operations, reduce transaction costs, and gain better cash flow visibility. If implemented properly and with the right tools, you can expect significant reductions in invoice processing costs.
The benefits don't stop there: by fully leveraging early payment discounts, you can achieve higher returns on invested capital, which may be more valuable than you think. For example, if a supplier offers a 2% discount for payment within 10 days, and you take it, you are giving up access to funds for 20 days in exchange for a 2% discount. However, a 2% return over 20 days translates to an annualized return of up to 37%.
In terms of legal compliance, the digital transformation of accounts payable will also simplify and reduce financial audit and compliance risks. Finance and accounting teams rely on tools like spreadsheets and manual processes, with limited visibility into potential compliance risks. True automation provides real-time monitoring, allowing you to specify strict conditions and alert you when deviations from prescribed processes occur, thereby easing the burden on CFOs.
Clearly, the CFO role has become more complex, facing growing pressure to transform finance functions at zero cost and improve efficiency. Leveraging intelligent automation to increase straight-through processing rates for invoice volumes can enhance customer service levels, improve cash flow visibility, and increase returns on invested capital. This, in turn, can also help you sleep better at night.