The State of Accounts Payable Today

Since March 2020, most sectors have been severely disrupted by the COVID-19 pandemic. Accounts payable (AP) teams have been hit by these changes just as much as any other industry or individual department. It seemed like the ideal time to take a snapshot of the industry to find out how the pandemic has affected finance teams, what the pain points and issues are and what the priorities for AP departments are in 2021.

We surveyed 600 employees working in AP in the US. Everyone who responded works full-time and is employed by a company that has more than 100 staff but fewer than 5,000. Of those who answered the survey, 61% were male and 39% female, and they had an average age of 38. Our respondents were taken from accounts payable departments, leadership teams or accounting.

The State of AP survey has produced some interesting results for anyone trying to understand what is next for finance functions. The pandemic had a big impact on AP, with many employees working longer hours. A series of pain points became more acute under these circumstances. However, those who had automated their AP processes have reported reaping the benefits and riding out the transition to remote work more successfully. Those included increased productivity, savings, and growth. As we shall see in this ebook, automation not only made day-to-day tasks simpler, but 81% of those surveyed reported that automation had made the auditing process easier. It played a significant role in successfully adapting to the new normal during the pandemic according to those we spoke to.

Nevertheless, some have been hesitant to make the switch so far despite all the things they have to gain. As the survey showed, a large proportion of employees are concerned about the long-term implications of waiting too long to automate, and it is a high priority for many organisations in 2021 and beyond. The respondents explained how their businesses plan to invest in the future and what their priorities are. As the reality of remote working looks set to continue long after the pandemic, many professionals we surveyed focused on tools that will facilitate this. Let’s look at what they had to say in more detail.

AP in COVID-19 Times 

The way we work was one of the biggest changes wrought by the pandemic. Of those we surveyed, 44% said their department went partially remote once
COVID-19 hit, and 36% said their team worked fully remotely. For those that did, automation was a huge factor in how successful that transition was. Eight in 10 reported that AP automation helped them to work effectively while not in the office, while 79% said a lack of AP automation had hindered them in some way. Overall, 78% said they believed that AP automation was the key to better remote working.

Those finance employees that had problems were generally those that were still relying on manual processes. Sixty-three percent of those surveyed had to go back into the office for some reason during this time. They needed to be there physically for tasks such as pulling files or obtaining checks – and 62% of our respondents said they were still in that situation now. More worryingly, 62% experienced delays in invoice processing, vendor payments or expense reimbursements due to remote work.

“Companies that had automated their AP were 929% more likely to go fully remote.”

And working from home is not going to go away any time soon. Forty-six percent of those we asked said their organisation plans to adopt a hybrid model, with employees working from home for some of the week and the rest of the time in the office. Only slightly fewer, at 45%, will be fully remote. Interestingly, those who had automated their AP were 929% more likely to say this than those who have not. When asked what their preferences were, 62% of respondents prefer remote work at least some of the time. And those who have begun automating their AP function are 59% more likely to prefer working fully remote than those who have not yet done so. 

There is work to be done for the majority. Of those finance professionals whose companies have no automation plans, 44% believe that it will harm the business in the long-term. Of the 53% of respondents who say they have no plans to automate their AP, 38% said they do not want to interrupt the status quo. Security fears were the reason for 38%, while the perception from leadership that the company is too small to automate its AP was the reason given by a further 31%. 

Desktop accounting is still the norm for the time being, with three out of four of our respondents saying they still use a desk-based system. However, moving to the cloud is on the horizon for many, with 36% saying their department plans to switch in the next six months, and a further 39% saying that transition is planned for the next year. The advantages are pretty clear for the vast majority of respondents. Ninety-seven percent say a cloud-based system will increase visibility for all parties involved in the accounts payable process.

Payments are still being made by check for half of those surveyed, while 72% said their department has used paper checks in the last year and exclusively uses this method to pay vendors. However, others are moving towards electronic methods. Credit cards are the preferred method of payment for 69%, while 59% opt for automatic clearing house payments. Overall, the average percentage of payments being made electronically in 2021 was 60%.

Remote work has also increased cybersecurity vulnerabilities and made companies more aware of these risks. Our research showed that an overwhelming 93% think that the switch to remote work increased the urgency of tightening cybersecurity practices in their company’s accounting department. Seventy-eight percent of respondents said that recent highly publicised cyber-attacks had caused their organisation to look more closely at measures to take to ensure security.

76% Say that their accounts payable (AP) department has received a fraudulent invoice — And 58% say they have experienced vendor fraud

As a result, many have implemented measures to protect themselves, including AP automation. Automation comes top of the list for our respondents as the best way to become more cyber secure, with 72% saying it would make their company less vulnerable to ransomware and other attacks. Other measures already taken to deal with this increased threat include AI security monitoring at 51% of those we questioned, third-party auditing at 44%, and the addition of a security architect at 39%.

How automation is changing the game

As we have seen, those that reported success during the pandemic – 94% – were overwhelmingly those who had automated their AP process. Seventy-four percent said they had fewer late payments since automation, with 67% reporting that they had no late payments at all since automating. Auditing has become easier for 81% of respondents thanks to automation, 71% report fewer errors and 76% said they now enjoy increased visibility over their payments.

And there are other benefits. An incredible 89% report decreased labor costs as a result of automation, while seven in 10 said they had enjoyed better collaboration between finance teams and other departments thanks to leaving manual processes behind. Seventy-three percent of those who had automated their AP said their company qualified for early bird discounts now, and 77% reported better relationships with vendors as a result of automation.

Communication within AP departments had improved because of automation for 79% of respondents, who said that their automated AP platform is effective at spotting potentially fraudulent billing and/ or payments. Approval times were faster for eight in 10. The same number said that automation had also given them better forecasting capabilities. More than three quarters – 78% – said automation had freed up their time to focus on more high-level tasks now that they no longer had to focus so much on manual data entry.

Perhaps it is no surprise that this had a positive impact on employees. Greater productivity and less overtime were reported by 76% of teams that had automated their AP function, and 75% said they now received fewer calls and emails about the status of payments and invoices, as well as higher employee engagement.

Investment in automation is ongoing as organisations start to see these benefits. There are several reasons driving these plans in 2021, according to our respondents: 75% said they hoped to gain improved productivity, 60% said they were interested in saving money through automation, and 59% said they hoped it would bring increased growth. 

These perceptions seem to be borne out in reality. Those with fully automated AP functions were 36% more likely than average to say their automation has
enabled increased growth. Increased employee morale was cited by 30% of employees as a reason for increasing investment in AP automation, with those who have a fully automated AP function 29% more likely to say this. At the same time, 40% of respondents cited improved vendor relationships as a strong incentive to put money behind automation, with those who have a fully automated AP function being 30% more likely to say this.

“£30,000 per year is the estimated average saved per year by companies with automated AP functions.”

79% of respondents said communication within AP departments had improved because of automation

Saving money features highly on the list of reasons to automate, and this seems justified. Our research showed that the average saving for a business that automates its AP function is a huge £30,000 per year. In fact, the savings were so significant that those with fully automated AP functions were 20% more likely than average to say they are planning further investments in automation in the future.

AP automation is the top priority for 83% of those surveyed for investment in 2021. Meanwhile, planning automation is the top operational priority for 78% of our respondents in 2021. There are several issues these companies are looking to resolve. Electronic payments are a top automation priority for 44%, with eliminating data entry the most important issue for 42% and another 37% looking to automation to help them with document matching and verification.

And it’s not just AP automation that is in the works. Many companies are also considering automating their accounts receivable (AR) function, with 46% of our respondents saying that this process had already begun in their department. A total of 36% said this function had already been fully automated. Those who had already automated their AP function were 21% more likely to have begun this process with their AR function than those that were only partly down that road.

83% said AP automation is the top priority in 2021.

Our research showed that the average saving for a business that automates its AP function per year is a huge GBP £30,000

What Finance Teams Awake at Night

Cyber-attacks have increased since the pandemic but they are not the only concern for our respondents. Other pain points include fraud and expenses, with 76% saying that their department has received a fraudulent invoice, and a further 58% have experienced vendor fraud. Employee expense abuse was reported by 61%, and 62% said their department has encountered out-of-policy expense claims.

These problems are intrinsically linked to paper-based systems. Seven in 10 of our respondents said they believe paper-based processes are more vulnerable to fraud than automated processes. In many cases, fear of fraud has led finance teams to add more people to the approval process. This has in turn increased overtime for 77% of respondents as the approval process becomes more complex and lengthy.

However, most of the professionals in our survey said they were confident in the security of their current systems. In total, 49% said they trusted that
their company’s current processes would protect against fraud, while those with a fully automated AP were 63% more likely to say they were ‘very confident’ in their department’s protections. In contrast, those who have not begun automating their AP function were 25% less likely to have faith that their organisation’s current systems could protect them against fraud than those who have fully automated. Half of all respondents said they are only ‘somewhat’ confident that their procedures would offer the necessary protections.

Manual processes are one of the top pain points for accounts departments. The biggest issue associated with them is lost invoices, with time-consuming data entry coming second and paper invoices coming third. An average of 40% of invoices are still arriving on paper, the survey found.

Doing things manually also leads to more errors. A total of 88% blamed the majority of payment errors on manual systems, and two out of three said they were working longer hours as a result. Working this way also causes delays on approvals. The average time it took for our respondents to obtain invoice approval from department heads was 11 days. A lack of visibility into any step of the payables process was a problem for 71% of respondents, who said it left their department open to fraud.

7 in 10 agreed that lack of visibility makes forecasting more challenging

63% said lack of visibility caused them to have to work overtime

Late payments caused by a lack of automation present a huge problem for companies. Seven in 10 of those we surveyed said that payments not being on time had caused strained relationships with their vendors. A total of 68% said late payments harm their company’s reputation and put them at risk of supply chain disruptions.

Better balance

The pandemic has in most cases disrupted the work/life balance of finance teams for the worse. In our survey, 79% said they had been working more hours since March 2020. Employees worked an average of 10 hours extra per week. This has had major implications for their quality of life. A heavy workload has negatively impacted the mental health of 59% of respondents, who said the stress of their jobs kept them awake at night. More than half, 55%, said they do not have enough time in the day to complete all the tasks on their to-do list, while 69% said their job makes them feel tired.

Nevertheless, remote work could be the key to getting a better work/life balance. It had improved things for 81% of respondents, who were 14% more likely to say this if they had automated their AP function.

Doing things manually also leads to more errors. A total of 88% blamed the majority of payment errors on manual systems, and two out of three said they were working longer hours as a result. Working this way also causes delays on approvals. The average time it took for our respondents to obtain invoice approval from department heads was 11 days. A lack of visibility into any step of the payables process was a problem for 71% of respondents, who said it left their department open to fraud. Seven in 10 agreed that lack of visibility makes forecasting more challenging, while 63% said lack of visibility caused them to have to work overtime.

In conclusion

It is clear from our survey that accounting teams have faced huge challenges and seen the way they work change dramatically since March 2020. Those who had automated their AP processes saw the best outcomes, in terms of productivity, security, cost savings, employee morale, and more. This has led to the vast majority of companies prioritising investment in automation of their AP processes in 2021, while some are still reluctant to do so. Remote working is enabled by automation, and in turn, makes employees happier and more able to focus on work that adds value as manual processes are eliminated. In today’s much-changed climate, automation can solve many of the pain points organisations are facing and bring huge savings in the process.

Download the full whitepaper here for more information