AP automation gets its accounting industry stress test

Seth Fineberg has covered the B2B space for almost his entire 30-year career and spent the last two decades focused on the accounting profession. As the editorial manager of AccountingWeb.com he says he’s passionate about “what makes businesses tick.” In his coverage of the business that passion translates into business technology, information technology and back-office function. AccountingWeb just wrapped its first ever conference and Fineberg shared some of his insights from that event as they relate to AR and AP automation.

Bottomline: Seth, you’ve covered the manual side in AccountingWeb and now you have a front row seat to the development of back-office automation. Was this a hot topic at AccountingWeb Live?

Fineberg: It wasn’t on the agenda but I was very surprised at how often the topic came up at some of the parties and just conversations I had with attendees. In some ways the space reminds me of the early days of the Internet because it’s so crowded, but here’s what I know to be a fact. AP and AR automation solve a critical pain point: accuracy. Especially for smaller businesses, the accounting function is the steward of the business. AP and AR simply cannot afford errors. Sooner or later they will haunt you.

Bottomline: So a blunt question. Why then doesn’t automation have a 100 percent adoption rate? What are some of the obstacles you heard at your event?

Fineberg: In this business there is still a segment that says that if you're a good bookkeeper, you're doing your job, you shouldn't have a need for that. If you have good accounting software, and somebody who knows what they're doing, why spend money on automation? Now personally I think that there's a lot more to it than that, and it could be a problematic attitude especially for a growing business. You have multiple vendors to pay, and if you’re growing that increases with time. Nobody wants a late payment. And saying “hey, I’m sorry somebody wasn’t keeping track” isn’t going to work. In addition to accuracy, this is one of the most relevant use cases for automation, in my opinion.

Bottomline: Are there specific verticals that are best suited to AP and AR automation right now?

Fineberg: Restaurants. At our event we heard a lot about the need for tax services and AP automation for the restaurant business, first because they’ve such an up-and-down ride since the pandemic. And second, that business is just such a good fit because you have to pay so many vendors and if you don’t, well they might not deliver essential materials. But a lot of this discussion really started with the pandemic. You have a downturn in business, you have suppliers who need to get paid and you’re short-staffed. If manual processes don’t work, you will have a serious problem at a time when you can least afford it.

Bottomline: You’ve written about the lack of interaction in this space between automation providers and automation end users. That’s a pretty bold stance. Could you unpack that for us?

Fineberg: Sure. Developers tend to develop products in a bubble. Some of them think some hotshot developers who can develop coding wizardry will give their products speed and accuracy and they’re done. But it’s just not the case. Problems develop, even with automation platforms. And they’re far more likely to develop when you're not really consulting with the industry that you're serving. Who’s touching the solution the most? It’s not the CEO or the business owner. It's the folks on the back end, who have to deal with the invoicing and getting folks paid. This continues to be a problem with a lot of software development, whether it’s AP automation or any kind of core back-office work.

Bottomline: How would you fix it?

Fineberg: Create a forum. Have one on your company website, or have some kind of consistent outreach to connect with the core user. You know, years ago, you used to have something called a Usenet. It was an FTP site for the developers and end users to face off and improve products.  A provider should have that capability from the jump. Too often companies fall for the first to market at all costs strategy. Look, I get it. But if you want to win in the automation space, and you want to be first, you want to be the best.

Bottomline: How much concern did you sense at the event with invoice fraud, or other kinds of AP or AR-based fraud?

Fineberg: Oh, tremendous concern. Let’s take one that may not be at the top of the list, which is expense fraud. We had one session where companies were describing extreme expense fraud during the pandemic where employees were trying to expense vacation homes and other outrageous things that a CFO could never sign off on. Again, it all comes back to AP automation and the ability to red flag something like that.

Bottomline: Last question. Get out the crystal ball and tell us where automation and the back office intersect in the future.

Fineberg: It’s a crowded market and I don’t think there’s any question that the technology is solid or that the category will grow. My concern would be about consolidation. Successful companies will need to differentiate themselves.