The State of Business Execution in Accounts Payable 2021

Accounts Payable (A/P) has had a rough time of late. On one side they’re facing pressure to free up working capital in the wake of the pandemic. And on the other, they’re fighting to maintain strong supplier relationships, and make sure key suppliers stay in business.

So, when we recently surveyed more than 2,000 business leaders to find out what’s going on in their departments, it’s no surprise that we found a few areas of tension in A/P — and a lot of opportunities to increase execution capacity.

Here are some of the biggest trends impacting Accounts Payable in 2021, and a look at how organizations are responding and adapting to them.

Balancing working capital and supplier relationships is getting harder

A/P teams have fought tooth and nail over the past year to boost cash reserves — with many playing a key role in helping their organizations survive the pandemic-driven economic downturn.

That’s not going to stop any time soon either. In fact, we predict that a greater focus on working capital will continue way beyond 2021.

The lessons learned in the wake of the 2008 global recession from businesses like Alcoa show just how much working capital can be gained when you put the right strategy in place (a whopping $1.4 billion in Alcoa’s case). But that shouldn’t come at the expense of supplier relationships.

Improving working capital doesn’t have to mean extending payment terms and putting critical suppliers in jeopardy. Newer strategies like automating elements of A/P and A/R for example can help improve cash control and working capital without negatively impacting anyone in your supply chain.

A/P teams that look inwards and make changes in their own department first stand to gain the most in the long term. Through the right A/P transformation strategy, they can improve working capital today, while ensuring that critical suppliers can weather the storm alongside them.

Reducing costs without impacting KPIs: A/P’s endless paradox

Like many other back office functions, automation is increasingly popular in A/P — often being viewed as a ‘silver bullet’ to many of the function’s challenges. But, while undeniably valuable in a lot of ways, many A/P teams are now realizing that if it’s not implemented strategically, automation can have unintended impacts on their KPIs.

Take touchless invoicing for example. Automating invoice processing frees up a huge amount of time in A/P professionals’ days, and ensures that invoices are processed and paid without any manual intervention - but usually doesn't optimize for optimal payment time, meaning many invoices end up paid too early.

When early payments occur, working capital suffers. And, with 65% of teams still prioritizing invoices by first in, first out, or by due date, rather than by the potential impact each invoice could have on target KPIs, automating this process simply speeds up inefficiency instead of helping to improve the department’s KPIs. You want invoices to be touchless, but also want to ensure they get paid at exactly the right time.

The key to success? A well-considered, strategic approach to A/P automation that carefully considers which processes and areas automation could have the greatest positive impact on.

Execution gaps abound, but few understand where

Our report identified a significant number of execution gaps in Accounts Payable. According to respondents, the biggest obstacles impacting their performance are rigid systems and technologies (41%), broken or inefficient processes (39%), and organizational silos (37%).

Across the function, there’s a clear understanding that things need to change. Yet, perhaps most alarming of all, many respondents don’t seem to have a clear idea of exactly what needs to change to improve the department’s KPIs.

According to our survey, nearly four-fifths of A/P teams aren’t using process mining to identify the root causes of operational issues and uncover where new technologies like automation could best be applied to support their department. Without that insight, many will remain limited to best-guess approaches.

Understand the state of execution in A/P (and how to challenge the status quo)

Tasked with maximizing working capital at a time when everyone is feeling the pinch, Accounts Payable teams have a tough job on their hands. But the good news is, every execution gap we’ve identified in the department represents a huge opportunity to boost efficiency, improve process quality, and maximize execution capacity in A/P.

To get the full picture—including in-depth analysis of KPI performance across hundreds of organizations just like yours — read the 2021 State of Business Execution Benchmark Report in full.

And if you’d like to see how Celonis can help you maximize your own execution capacity, check out our Accounts Payable Execution App.

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Celonis helps you drive process improvement. Across your entire business. At speed. Companies all over the world use Celonis to optimize their processes, boost their business performance, and lighten the load on mother earth.