Transforming back-office functions can often serve as a way to move business growth forward.
And the accounts payable (AP) function, which plays a crucial role in maintaining the financial health of an organization, is more and more being recognized for its potential to become a growth engine for businesses.
"The procure-to-pay process has traditionally been super manual and heavily reliant on things like paper ... Anyone who has ever sat in an accounts payable seat will tell you that the data entry is probably the biggest burden," Melissa Johnson, head of operations at Ottimate, told PYMNTS, noting that many companies still manage using outdated and fragmented systems.
The prevalence of paper-based processes and fragmented systems can lead to inefficiencies, increased risk of errors, and fraud across workflows from purchase order creation to invoice processing and payment distribution.
"First and foremost, eliminating that manual data entry is key. It's expensive, probably more expensive than companies realize, as well as being error prone, inefficient, and having a high risk of fraud," Johnson said.
But while many big companies have not streamlined their AP cycles and rely on too many tools, an ongoing shift is happening across the back office, one being driven by the adoption of advanced technologies like automation and artificial intelligence (AI), which streamline processes, reduce costs and enhance strategic capabilities.
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The goal of undertaking an AP modernization should be to reduce redundancy and improve efficiency, ultimately leading to faster processing and fewer errors.
"A lot of finance leaders are unfamiliar with the latest AP automation technologies," Johnson said. "They might have looked at the technology a few years ago and found it not quite ready. But the landscape has changed dramatically, and those who adopt automation often don't look back."
At the same time, embracing a "less is more" philosophy can help firms move closer to unlocking growth via their AP functions. PYMNTS Intelligence data shows that nearly 60% of large firms are using at least five different AP systems, a setup that is far from ideal.
Johnson emphasized that a streamlined approach, typically involving two to three systems, is preferable. This setup often includes a robust enterprise resource planning (ERP) system complemented by a highly automated procure-to-pay system. Firms that streamline their AP processes, she noted, can reduce their days payable outstanding (DPO), freeing up working capital.
Additionally, Johnson flagged the use of virtual cards as a way to not only speed up payments but also generate rebates, providing a new revenue stream for finance departments.
See also: Can AI Find Its Way Into Accounts Payable?
And one of the most significant recent advancements in accounts payable is the use of AI to automate data entry and other repetitive tasks. AI systems, like Ottimate's, do more than just automate processes; they learn and adapt, providing real-time recommendations for invoice coding and routing.
"The key here is to ditch that manual process and use an AI-powered tool to improve your efficiency, security, as well as to control and centralize the AP function," said Johnson, stressing the importance for businesses of embracing digital payments and "getting away" from the use of physical checks.
Digital payments "are at least 14 times more cost-effective than paper checks," she said, pointing to the efficiency and security advantages of electronic transactions.
Beyond the financial benefits, automating AP processes can improve employee morale by eliminating tedious tasks and allowing teams to focus on more strategic initiatives. "Automation and AI are human enablers, not replacements," Johnson said. "They help create more efficiency and allow AP teams to engage in higher-value activities."
At the same time, despite the clear and growing benefits, only 17% of enterprises have largely automated their source-to-pay cycle, leaving the majority still reliant on manual processes.
Johnson acknowledged that convincing the remaining firms to adopt automation could be challenging, but emphasized the transformative potential of the technology. For companies ready to take the leap, she offered practical advice. The integration process, she said, is less daunting than it seems, provided businesses choose the right partner. She stressed the importance of selecting a vendor that offers not only a robust product but also excellent customer support and vendor management.
"Explore the possibilities. The future of AP is not just about managing costs -- it's about driving value and innovation," Johnson said.
Ultimately, as businesses seek ways to enhance efficiency and drive growth, the automation of accounts payable stands out as a strategic priority. By adopting advanced technologies, companies can transform a traditional back-office function into a critical component of their growth strategy, delivering significant financial and operational benefits.
