To say that many companies struggled to maintain ‘business as usual’ in 2020 is a bit of an understatement. Even amongst those that adapted quickly or were fortunate enough to work in relatively sheltered industries, very few escaped the year without seeing some impact on their balance sheet.
For Accounts Payable (A/P), it’s been a particularly tough time. In the rush to safeguard cash reserves when COVID-19 first hit, many organizations naturally started lengthening payment periods wherever possible.
Unfortunately, this inevitably had an impact on supply chain partners who were similarly trying to survive — forcing A/P teams to strike an extremely delicate balance between protecting themselves, and protecting the suppliers their organization depends on.
One positive from the year though is that this widespread refocusing on working capital has renewed many organizations’ appreciation for the strategic business value of the A/P team — paving the way for exciting, positive changes.
With 2021 set to be one of the most critical years in decades for Accounts Payable, here are our top four predictions for how attitudes, technologies, and processes will likely change over the coming 12 months.
If you think you’ve heard this one before, it’s because you almost certainly have. After every major global crisis, we’re all told that companies are going to refocus on working capital, and take serious steps to maintain higher cash reserves and protect themselves against the disruption of the next inevitable crisis. In practice though, very few seem to actually do anything about it — long-term at least.
This time though, a few things are different. Firstly, the speed, scale and severity of the COVID crisis have proven just how disruptive ‘disruption’ can be. There will be very few organizations that can move forward in good conscience without making meaningful changes to how they manage and maintain their cash.
Secondly, we’ve now got more than enough evidence that refocusing on working capital works. Done right, it’s not a burden — it can be a huge source of value.
After the 2008 global recession, McKinsey carried out a study into how a renewed focus on working capital could improve cash flows across a wide range of industries. In its report, it cited how Alcoa — a major aluminum producer — managed to reduce its working capital cycle following the crash, and unlock $1.4 billion in the process.
Both the need for, and value of refocusing on working capital are clear, which should see 2021 finally become the year of cash that we’ve been promised for decades.
The tricky part for businesses and AP teams in 2021 will be how they optimize their working capital, while also maintaining good relationships with their supply chain partners. That might be a particularly tough ask for teams that didn’t manage to successfully find the right balance to ensure mutual survival in 2020.
Despite heroic efforts to maintain cash levels and keep their businesses operational last year, countless organizations struggled to make any significant efficiency gains in their A/P functions.
It’s no surprise though. A/P processes can be complex, time-consuming, and highly sensitive to human error. One bad address entry or overlooked document is all that separates a zero-touch invoice from becoming another A/P bottleneck.
Fortunately, once you can identify where your A/P execution gaps are, filling them can be quite straightforward. That’s where we expect to see automation play a bigger role this year.
By automating time-consuming, labor-intensive processes — things like invoice processing, categorization, routing and approval, data capture and validation, and even general ledger coding — A/P can become a far more cost-efficient function.
With businesses refocusing on improving their working capital, automation will play a key role in identifying areas of invoice processing which can be optimized. Even if an automation only cuts a few seconds off the time it takes to process an invoice, multiply that by the huge volume of invoices a business processes every month and the benefits are clear.
The benefits of Accounts Payable automation also mean that A/P experts are freed and empowered to focus on the challenging, value-adding tasks they’re best suited to.
As a result of working from home, 2020 was the year many of us lost a certain amount of visibility and control over our organizations’ processes — leading to less effective, more time-consuming decision making, and widening existing execution gaps.
And unfortunately, Accounts Payable is often considered to be “just a cost center” — a function that should pay invoices as quickly and cheaply as possible.
It means that in the pursuit of cost savings and freeing resources for more strategic work, the function is often outsourced to business process outsourcing (BPO) providers.
But the truth is, Accounts Payable is strategic work. And with much of the global workforce working away from the office, there has never been a greater need for more oversight, done in a way that helps control costs.
Now, A/P (just like many other functions) wants to get back in control of operations — both remote, and traditional.
One great way to do this is by bringing A/P back in-house. After all, why would you pay a BPO to carry out work you can easily and more precisely optimize yourself?
As teams work to gain greater control of dispersed and overly complex processes and operations, we anticipate a significant number of companies bringing AP back in-house, and looking for the right technologies to improve their efficiency, productivity, and operational oversight.
Paper invoicing has been on its way out for a while. Yet somehow, it’s still got a foot wedged in the door. For now.
Decentralization of workforces due to the COVID pandemic has been a huge push towards digitization right across the business — and A/P is no exception. More people than ever are not only comfortable working with digital invoices, but are now actively demanding them, for ease of remote processing.
What’s more, because paper invoice processing is a time-consuming task, it’s also a prime candidate for automation. With touchless invoice processing, you can not only do away with physical invoices, but you can also free up people to focus on higher value tasks that require the kinds of human skills basic bots simply cannot replicate.
For A/P teams that are using (or interested in picking up) AI and machine learning in their operations, digital invoices are even indispensable. They mean more reliable data to fuel them — and in turn, better insights and outputs.
We’ve been ready to see the back of paper invoices for a long time. In 2021, the list of reasons for saying goodbye to them has reached critical mass. This year should see more teams say goodbye to them for good. We hope.
2020 wasn’t great, but it’s behind us now. With a fresh year ahead, it’s time to plan positive changes that will lead to long-term performance, efficiency, and working capital improvements.
To find out how Celonis can help you unlock new opportunities and maximize the execution capacity of your Accounts Payable processes, check out the Celonis Execution App for Accounts Payable.