‘Permacrisis,’ meaning an extended time of insecurity and uncertainty, has been named the word of the year by the editors of Collins English dictionary. Permacrisis is the greatest one-word summary of the situation enterprises and their key stakeholders are in, as the year 2023 begins.
The Russia-Ukraine War, the largest war in Europe since 1945, and the Great Resignation, which saw a record 4.5 million workers leave their jobs by March 2022, the skyrocketing food and energy costs, which have fueled the highest rates of inflation since the 1980s in many countries, all added to this uncertainty. There are clear signs of an impending recession and the finance functions in many enterprises have started preparing for it by re-evaluating costs.
What can Accounts Payable (AP) teams do to improve financial results, and how can AP automation help in navigating the current economic downturn? These are some of the key aspects CFOs, Finance Controllers and AP leaders should consider. Tough times call for tough measures needing enterprises to drive agility and ‘do more with less,’ as the economic downturn puts increased pressure on AP resource allocation and a greater focus on achieving efficiencies beyond the obvious ones. AI-led AP invoice automation can help enterprises achieve such strategic objectives, while freeing up human resources to focus on more-strategic and higher priority tasks/initiatives, instead of mundane, repetitive tasks associated with manual invoice processing
AP Automation for Improving Vendor Management and Tracking KPIs
Effective vendor management is a crucial area to cut unnecessary expenses. In this context, communicating your organization’s ambitions, objectives, and standards for the next 2-3 years with your vendors is a good place to start. Next, it is important to discuss the technology and procedures required to guarantee the timely submission, acceptance, and distribution of invoices.
AP teams would never miss payments or early discounts if vendors were equipped with effective systems, managed efficiently through prompt communication. Additionally, AP automation guarantees that your dashboards and reports are continuously tracking KPIs, which in turn guarantees that any potential late payments, losses from late payments, and losses from superfluous payments are tracked and avoided post haste.
Reducing manual efforts with AI-led invoice processing and AP Smart Desk
The manual work of AP teams can be reduced significantly via AI-led invoice automation solutions. Figure 1 provides insights into the level of automation across various AP functions and tasks. Invoice approvals, data capture, and invoice receipt have a ‘50% and above’ level of automation.
Figure 1: Level of automation, various AP functions and tasks
Figure 2: Automated functions/tasks by number of AP FTEs
When automated AP tasks are correlated with the number of FTEs, an interesting finding is unearthed – small organizations tend to be about as automated as large organizations, except for financial reporting, auditing and customer service.
AI-led AP automation solutions offering template-agnostic data extraction can work with multiple templates without any need to maintain templates and additional effort required to deal with new invoice layouts. Support for multiple languages and scripts ensures global applicability of an AP invoice automation solution. In terms of supplier communications (e.g., various types of emails being sent, including query and invoice processing emails), dedicated smart email processing desks (e.g., Zycus’ AP Smart Desk) can automate replies to emails. This frees up the resources otherwise occupied with email processing and reduces the number of emails that do not receive a response.
Availing early payment discounts
If an AP function can approve invoices more quickly, it would be able to take advantage of early payment savings that might have been overlooked in the past. A majority of merchants offer incentives for early payments, which are often overlooked due to the overwhelming number of incoming emails and the lengthy processing times. Early payment discounts can have a major impact on the AP function’s financial KPIs in cases where there is adequate invoice volume.
With the global economy staring at a downturn, it is important for organizations to take appropriate measures to deliver sustainable performance. AI-led AP automation can help in this regard. Enterprises can optimize financial and more specifically, AP processes and get rid of the inefficiencies by leveraging AI/ machine learning (ML). AI-led AP automation can drive significant time and costs savings, while delivering agility to help enterprises ‘do more with less’ as they navigate a recession.