FINDING A BETTER WAY FORWARD

If you’re reading this, you don’t need to be reminded of just how tough the past year has been for finance functions, especially accounts payable departments. With the need for many AP departments to switch to remote work and manage manual processes in that environment, it’s little wonder 58% of finance professionals report a significant impact to their business spurred by COVID-19 and other major challenges. Fortunately, there is an opportunity available to come out of this challenging environment with improved performance and enhanced organizational value, a major boost considering just 60% of AP departments feel they are invaluable to the business at large. Let’s dive in to four deeper strategies to ensure the kind of AP operations success you can look back fondly on in 2030. In an environment where every accounts payable process seems to be facing new challenges, these strategies can turn the seemingly insurmountable into efficiency gains and lowered costs.

 

TOP 2021 AP CHALLENGES

Translating manual processes to remote work environments

Invoice processing, approval, and payment delays due to paper invoices and checks

Increased exposure to fraud with bad guys attacking new vulnerabilities

Ensure Business Continuity

Businesses don’t often—or even ever—go out of business because they process invoices and payments poorly. That doesn’t mean real damage to a business’s bottom line, supplier relationships, and reputation doesn’t occur when payments are late and mistakes are made. Those kinds of issues have come to fore in an environment where remote work is increasingly common, as it is for most organizations today. Traditional manual, paper-based AP processes are difficult to operate effectively in that environment. To get around that, a philosophical shift in the business has to happen, one that allows for:

Align with your CFO ensure liquidity. Your top financial executive should never be in the dark about where AP stands, which means providing better visibility into invoices and payments to the CFO at-a-glance so he can guide the function more effectively.

Understand any changes in business and supplier payment strategy. Your vendors likely want to be paid in more convenient, electronic formats as their own accounts receivable teams increasingly work from home and try to digitize processes. Their efficiency gains are your efficiency gains, so don’t miss the opportunity to make that shift.

Develop short-term work-arounds to fill gaps in process. No process will be perfect, especially not when new circumstances like COVID-19 arise suddenly and force a sea change in the business. If you can’t fully automate your invoice-to-pay process immediately, at least take concrete steps to streamline.

Prepare for increased requests for information. Both internal and external stakeholders may want more detail and more transparency into invoices and payments. Be prepared to give them it.

Expect remote work will likely be here to stay. Many businesses are either returning to the office or planning on it in the next six months, but there are no guarantees that will last, especially not with remote processes running smoothly at many businesses. Don’t assume you’re just riding this situation out for the short-term, because you may not be.

Build Resilience

Once you’ve taken steps to keep AP operations running smoothly, it’s time to push your AP function to a more sustainable place. Creating that lasting success chiefly involves the steps you’d expect:

Digitizing, streamlining, and prioritizing ruthlessly until you have a lean operation. Digital transformation isn’t a buzzword. It’s a term that may lead to some eye-rolling in team meetings, but taking every process from receipt of an invoice to executing a payment and making it digital saves an enormous amount of time, money, and risk of error. It’s unavoidable for businesses looking to get ahead in the world.

Accelerate automation efforts. Going beyond digital invoices and payments and into automation leads to even further opportunities to maximize the ROI the organization invests into AP. The more approvals and tactical work like licking envelopes that you can eliminate, the better off you’ll be.

Invest in an agile workforce. This doesn’t mean clear out your staff and hand a fully automated operation to Dan, even if Dan is a great guy. It does mean you should invest in a workforce that can handle the changing AP environment at your business, tackling major strategic initiatives and being able to work productively from anywhere.

Prioritize cash management strategies. Cash is the lifeline of any organization, and AP controls the outflow of cash. That simple fact means that AP is a powerful player in the business and one exposed to the greatest fraud risk. Ensuring you’re moving and retaining cash effectively is absolutely vital. Increase collaboration with procurement, vendors, and other stakeholders. Your suppliers aren’t just businesses you pay, and procurement is not just a thorn in your side.

Smart AP teams will forge great relationships with vendors to reduce inquiries and smooth operations, while working hand-in-glove with procurement and other departments to get a better sense of cash flow. Taking every process and making it digital saves an enormous amount of time, money, and risk of error.

Support the Recovery

The economy will bounce back. It may even have started to do so by the time you read this, and the business impacts and interrupted workflows of 2020 and 2021 will give way to something new. No business can just sit back and wait for that day to come, however. Supporting the recovery in this sense means AP taking an active role in navigating the problems both small and large that COVID-19 and economic rockiness have created, and having a hand in solving them and building a more resilient organization.

Close gaps with other departments. You don’t want AP caught off guard by decisions made by Treasury or other finance teams, and you don’t want to be an unpleasant surprise for them. Break down the traditional barriers between departments and communicate effectively daily to forestall those problems.

Build out data and intelligence capabilities. The days of being able to keep track of everything your AP team does in a spreadsheet are definitely over. Invest in technology and people who can break down the reams of data you’re dealing with on a daily basis and create a more intelligent reporting and analytics function that allows you to invest in tomorrow’s way forward.

Create AP business and disaster recovery plans. Chances are your team is powering through today’s crises, but what about the ones that will inevitably come on the horizon? If you weren’t ready with a business and disaster recovery plan in 2020, be ready for the next with something that’s robust, actionable, and allows AP to stay nimble and on its feet in the face of any situation.

Provide AP staff with “future of work” training. If you expect AP to be an agile function with an ever-evolving set of secure, digital workflows and processes, you need AP to truly master that and be ready to changes at any time. Invest in ongoing training and educational opportunities that ensure your department is not filled with staff who cannot keep up.

Expect the new normal to be different. Sometimes it’s as simple as knowing today isn’t tomorrow. If you’re investing in a future that’s more automated, secure, and remote work friendly, know that change may come that disrupts those currently cutting-edge changes. Without an elastic mindset, all those investments won’t serve you well in 5-10 years.

Minimize Fraud Risk

As we alluded to earlier, risk is inherent in AP processes, and that risk cannot be ignored. Fraudsters are always trying to push the envelope and are finding more success in defrauding businesses with fragmented, remote processes taking over for the processes of yesterday. That makes this last point perhaps the most critical one, as a whole lot of automation and smart optimizing of your AP team’s structure won’t matter if you end up on the list of businesses who lose $300 million monthly to business email compromises, per FinCENT. Building a truly secure AP operation means:

Streamline and secure everything. Human error creeps in and fraudsters are always lurking, so locking down every process is paramount. If payments are routed through a secure platform and credentials are protected by multi factor authentication and other roadblocks, payments will be made more quickly and both internal and external bad actors will find it harder to disrupt those payments.

Implement policies and procedures to mitigate risk. Does AP really want to be the one holding the bag on fraudulent vendor credentials? Partnering with the right fintech or bank to put that ball in someone else’s court, putting two layers of protection on every payment, and setting up smart workflows for flagging and requiring approval for suspicious invoices and payments are common sense ways to stay ahead.

Install separation of duties. You may wind up with a leaner AP team, but you should never end up with just one or two people left in charge of every step of invoice and payment processes, lest they give in to the temptation of bilking the business out of money. Separating duties effectively ensures that attempts at in-house fraud won’t go far.

Prioritize and implement electronic payments. Checks are simply more prone to fraud attempts than ACH and card payments, and converting to electronic payments affords opportunities to streamline processes while you secure them, a big plus for any business trying to find a better way forward for AP. Human error creeps in and fraudsters are always lurking, so locking down every process is paramount.

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