Why the middle-market is turning to AP automation

As the economy stays on shaky ground, middle-market organizations are increasingly opening up the company purse and making smart investments in technologies to become more efficient and more productive. 

Facing profound economic pressures, such as rising interest rates, continuing inflation and uncertainty in the banking industry, these organizations understand that they need to figure out how to bake more resiliency into their operations and do more with less to survive for the foreseeable future.

One key way middle-market companies are fighting off economic uncertainty is by investing in accounts payable automation technology. To date, these solutions have primarily been found at large enterprises, and that makes perfect sense. Enterprises have the biggest problems that cost the most money, so they have the most to gain by being early adopters. At the same time, they also have the most resources and are better positioned to be able to implement and manage fledgling technology.

Over the last several years, however, AP automation tools have matured considerably. As a result, midsized businesses can now deploy automation solutions that are intuitive by design, easy to use and — thanks to their cloud-based nature — quick to implement. Plus, with the emergence of artificial intelligence and machine learning technologies, leading AP automation platforms can do considerably more than they used to, enabling middle-market companies to get a bigger bang for their buck.

Organizations that are still managing invoices the old-fashioned way are overdue for an upgrade. 

What are the challenges of doing AP manually?

As every accounting professional knows, invoice exceptions are the most frustrating part of the job. When an invoice comes in with incorrect or incomplete information, AP teams relying on manual processes need to spend a lot of time figuring out what went wrong. At a time when you can order a car to pick you up in a few minutes or watch your favorite show whenever you feel like it, this clunky, time-consuming experience is a major source of frustration. And in a difficult labor market, the last thing any smart company wants is frustrated employees.

Whenever humans are in the loop with any process, there’s a higher chance mistakes will occur. Maybe someone on the AP team adds an extra zero to a payment by accident, or maybe they pay an invoice twice by mistake. Without deep insights into invoices and payment outflows, these types of problems can remain undiscovered for weeks or even months, which makes managing cash flow even more difficult in what’s already an exceptionally hard environment.

Enter AP automation?

To overcome these challenges, smart middle-market companies are investing in tools that automate the AP function. With the right automation platform in place, it’s possible to transform the AP department entirely. 

AP automation platforms give accounting teams visibility into invoices and payments. There’s visibility at each step of the process, and every action is traceable. As a result, accounting teams can keep their fingers on the pulse of their financial situation and get more control over their cash flow. 

Additionally, automation solutions can enable organizations to automatically take advantage of every early payment discount available to them. Payment for all other invoices can be automatically withheld until the due date, enabling companies to stretch out their dollars as long as possible without incurring late payment penalties. 

Improved AP productivity

A recent study from Ardent Partners found that invoice exceptions are the primary cause of inefficient workflows for 62% of AP professionals. Whenever an invoice comes in with the wrong information, teams without the right tools have to spend a lot of time searching for correct data or fixing data-entry or optical character recognition errors.

By automatically facilitating two- and three-way matching, AP automation can help organizations eliminate invoice exceptions, achieving 100% straight-through processing as a result. 

What’s more, by giving suppliers complete visibility into the status of their invoices and when they’ll be paid, they won’t have to pick up the phone to figure out when they should expect to see funds hit their bank account. Because they’ll be able to self-serve this information on their own, the AP team won’t have to deal with nearly as many phone calls, giving them more time to focus on more pressing matters.

Better relationships with suppliers

AP automation helps middle-market organizations build better relationships with suppliers by providing more predictability about payments. Whenever they’re curious, suppliers can check the status of their invoices via a supplier portal in just a few clicks. In a period where cash flow matters most for every business, this visibility gives suppliers peace of mind that they’ve got the funds they need to keep operations humming along.

Faced with the choice of continuing to work with a partner that is timely in paying its bills and one that doesn’t, the answer is an easy one for any company.

On top of this, AP automation solutions enable suppliers to pick how they get paid. Instead of forcing suppliers to accommodate the way you work, they can choose the payment method that works best for them. This freedom is another simple way to strengthen the supplier experience.

Transform the accounting function

With all this in mind, it’s not too surprising that middle-market organizations are deciding to make smart investments to become more efficient while improving margins and strengthening supplier experiences. By making moves today, businesses can become much more resilient to economic pressure, and they’ll be better situated to thrive when the economic storm has come and gone.

Simply put, AP automation has the power to transform an organization’s accounting function, with benefits that extend beyond that department, such as having more controls over vendor approvals, ensuring that only legitimate invoices are paid and controlling the payment approval process to reduce the risk of external or internal fraud.

In our difficult economic environment, one thing’s for sure: Accounting departments that are still operating like they did 20 or even 10 years ago are incapable of operating as cost-effectively as possible. By investing in AP automation platforms, forward-thinking midsized companies can leapfrog their competitors by strengthening margins and freeing talent to focus on what’s most important.