AP Automation Tracker: Finance Leaders Say AP Operations Can’t Sustain Growth

Almost 4 out of every 5 finance leaders in the U.S. and U.K. believe their firms’ accounts payable (AP) operations can’t sustain continued growth, with many of them blaming inefficiencies from the use of manual processes, which they say are also leading to fraud and risk exposure.

The survey of 500 finance leaders in both countries commissioned found that 43% of end-to-end AP functions, including invoicing and payments, are manual or paper-based. This leads the average finance team to take up to an hour to process a single supplier invoice, 11 days to close monthly accounts and 13 days to close quarterly accounts, the survey said.

This lag equates to manual AP processes taking more than half (53%) of finance time in an average week. The outcome is that nearly one-quarter of supplier invoices are paid late, and nearly 4 out of 5 finance leaders (78%) are concerned that staff productivity and morale are suffering from a surfeit of manual work.

On top of that, some four-fifths of finance leaders surveyed (82%) pointed to outdated AP processes and the fraud risk they create as a top challenge for their AP processes.

Almost one-third of finance leaders expect AP hurdles will halt their business growth if they continue and 4 out of 5 say finance can drive growth only when AP inefficiencies are at a minimum. More than four-fifths of those surveyed (83%) said automating AP would allow teams to focus more time on their strategic growth initiatives.

The May edition of the PYMNTS AP Automation Tracker®, a collaboration with Beanworks , examines how businesses are using AP automation to streamline invoice processing. It also explores how automating AP could pay dividends to companies in employee retention, worker productivity and cost savings down the road.

Here’s more from the May 2022 edition of the AP Automation Tracker:

A recent report based on a survey of 1,200 U.K companies, including 173 construction firms, found that almost two-thirds of contractors that have noticed a change in customer interactions since the beginning of the COVID-19 pandemic more than two years ago cited slower payments.

More than 1 in 4 companies said it takes their customers longer than 30 days to settle their outstanding invoices, with one-third of indebted customers citing cash flow pressures and late payments from their own customers as their reasons for the delays.

More than half of the responding companies were not members of the Prompt Payment Code, a voluntary 2008 framework created to establish standards for payment practices between firms. The construction industry is highlighted by volatile pricing because of fluctuating labor, lumber and energy costs. A similar report suggested that improved forecasting processes and digital capital management tools could help management teams reduce the risk of capital strains due to late payments.

Meanwhile, almost half of the executives in a recent Deloitte survey said their biggest concerns include the management of their firms’ working capital in the next year. More than one-third of the 1,700 executives said they would be keeping it a “top” priority in the year ahead, while 15% would be making it a “higher” priority.

One-third of the respondents described their organizations as being in “growth mode” because of pandemic-driven disruption, nearly triple the share that said so in July 2020.

The survey also found that 1 in 4 firms polled said treasury and finance teams should work more closely to improve working capital management and 5.8% said there is no collaboration between the two teams today.

The study’s authors say businesses should work toward improved forecasting, visibility and teamwork to better inform the decisions their executive teams make and improve cash flow and accounts receivable. One interesting note: 40% of AR teams wait until after invoices are actually due to request payment from their clients, including almost 1 in 5 (19%) who wait 10 or more days after the due date.

Download the report here.