The business world has become increasingly unpredictable. In this context, it is significant in terms of financial processes - the lifeblood of business - to know that Accounts Payable (AP) is the outstanding balance of funds owed by a company to its suppliers, vendors, or creditors for goods or services acquired on credit.
AP represents the company's immediate financial obligations and is recorded as a current liability on the balance sheet, and when supply and demand are subject to capricious volatilities, the efficient management of accounts payable is vital for survival, by adapting to variables through optimising working capital and maintaining healthy cash flow. AP encompasses the funds that must be settled within a specified timeframe, typically ranging from 30 to 90 days, and its importance is therefore striking.
AP holds significant relevance to procurement by providing insights into financial obligations, supporting cash flow management, enabling accurate financial reporting, leveraging favourable payment terms, and streamlining processes. Effectively managing AP not only enhances procurement operations but also contributes to the overall financial health and success of organisations.
Finance leaders are witnessing a significant paradigm shift in their approach to office automation, driven by the growing recognition of APs pivotal role. A recent survey conducted by global payments company, MineralTree, revealed that AP is the top priority for investment in automation among finance leaders.
When asked to rate a range of priorities on a scale of 1 to 10, finance leaders consistently ranked AP as their highest priority, with an average score of 8, representing a notable increase from last year's survey score of 7.6. Following closely behind AP were accounts receivable, (7.2), expense management, (6.8), close management (6.5), and forecasting (6.4).
This aligns with the concerns expressed by suppliers, as 84% of respondents in the survey emphasised the importance of receiving prompt payment. Accuracy of payment ranked as the second highest concern, with 67% of respondents highlighting its significance. The report also highlighted that 44.1% of participants faced invoice-processing challenges or delays due to disruptions in the supply chain, while 39.2% encountered obstacles in receiving timely payments and reconciling accounts.
The report underscores the strategic significance of timely payments in sustaining the uninterrupted flow of essential goods and services. Finance leaders recognise that relying on paper-based, manual methods is no longer feasible in today's complex and hybrid business environment.
Over the past year, these priorities have translated into action. The survey revealed that in 2021, 67.7% of respondents had not yet automated their AP processes. However, in 2022, this proportion decreased to 48.1%, indicating a substantial increase in automation adoption. The report identified certain mindset barriers among those who have not yet upgraded their processes. The most commonly cited reason, at 42.2%, was the perception that their current processes are functioning adequately. The second most prevalent reason, at 20.2%, was the lack of resources needed to implement automation.
All the evidence points to finance leaders actively recognising the need for AP automation as a strategic imperative. The survey findings underscore the growing importance of efficient AP processes in facilitating timely payments and sustaining essential business operations. As organisations navigate an increasingly complex business environment, the shift towards automation is becoming crucial for maintaining competitiveness, streamlining operations, and optimising resource allocation - and the need to focus on automating AP in your own organisation.