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AP Automation and SMEs: A Case for Digital Transformation

Manually processing payments and invoices is a pain, creating error-prone, inefficient, and costly workflows resulting in missing statements and late payments. Accounts payable (AP) automation can help organizations do a lot more than accelerate payments; it can also be a strategic, multipronged business tool for long term use. AP digitization can help businesses to reduce operational costs and friction, heading off supply chain disruptions and improving customer retention. Recent data has shown that 59% of CFOs at organizations with annual revenues in the range of $1 billion and $1.5 billion felt that digitisation was the key to improving their balance sheets.

Despite global digitisation efforts, manual processes still continue to rule the AP space, with about 40% of all invoices coming in on paper. The world’s AP automation market is estimated to climb from $2.5 billion in 2021 to nearly $4.5 billion by 2026. Coupled with the almost $75 TRILLION dollars moving through ACH rails last year alone, these metrics suggest that automation is going to be an inevitable part of the future. Companies aiming to compete in an increasingly digital payments ecosystem will have to consider automating their payment processes or risk losing market share.

AP Automation for SMEs

Investing in the right technology is an important aspect for small businesses, especially since the pandemic highlighted the importance of eCommerce and digital payment methods. For SMEs to remain competitive, AP automation software is essential. Many of the legacy processes and software solutions that prop up large enterprises continue to falter in scalability, highlighting the need for expanded product offerings in commerce and payments. Small businesses can leverage the opportunity to expand their digital offerings, selling their products and services to a wider pool of customers. Harnessing automation can help SMEs minimize labor costs and manual errors whilst enhancing operational security.

Small businesses looking to thrive in an increasingly competitive environment need exact methods to plan, budget and predict financial outcomes related to accounts payable. More than half of the executives polled in a recent survey stated that reducing costs and manual processes were top strategic priorities. Businesses that utilized AP automation saw a larger return on their investment:

  • 89% of respondents stated labor costs were decreased as a result of automation;
  • Small businesses that incorporated AP automation into their payment processes saved an average of $35,000 annually;
  • Organizations with automated AP functions also reported 71% fewer errors than those relying on paper-based methods, and 81% reported simplified auditing procedures

In addition, companies that adopted future-ready technologies like artificial intelligence and robotic process automation recorded improvements of 5.8 percentage points in profitability and 19% in efficiency. For example, intelligent AP automation acquires invoices from all possible channels across a platform, utilizing AI to decide where the appropriate information on each invoice is located and transmit the invoice data to the appropriate endpoints in the ERP system. While the business cases for AP automation appear straightforward, adoption of new technologies continues to lag despite the growing total addressable market across industry sectors.

Automating the AP workflow takes away the tedious process of working invoices manually, freeing precious resources to concentrate on more creative and strategic tasks. CFOs should look to AP automation to increase lifetime customer value. Diversifying payment modalities and providing digital experiences dramatically improves customer engagement, increases customer loyalty, and generates greater operational efficiency long term. Digital transformation in AP has helped businesses speed up payments while creating additional revenue streams, a trend that will continue as artificial intelligence transforms payments technology and workflows.

AUTHOR

Angela Murphy, Ph.D.

Vice President, Business Development, Photon Commerce

Dr. Angela Murphy has experience in artificial intelligence, financial technology, and the global payments industry, building on her skills as a storyteller and rhetorician. She engages at the intersection of strategy and insight to drive results for her clients. In her current role at Photon Commerce, she helps run a team that uses artificial intelligence and machine learning to solve complex problems in the payments industry. Dr. Murphy received her Ph.D. from the University of Kansas, and currently resides in Kansas City with her husband, Brock, and German Shepherd rescue, Roscoe.