The pandemic shutdowns and resulting increase in remote work—including for those in an organization’s accounts payable department—laid bare the importance of automating the “business-critical” function, says Anders Fohlin, CFO of Medius, a provider of cloud-based spend management solutions based in New York City.
Fohlin spoke with StrategicCFO360 about how AP automation is freeing up time for analysis, how to mitigate risk and why cryptocurrencies can’t be ignored.
Tell us about the acceleration of AP automation and how Covid and remote work are affecting the AP/AR function.
AP automation has exploded over the past few years. But Covid-19 and the resulting increase of employees working remotely forced the hand of many businesses. It led to a sense of urgency and exposed the need to be able to work from anywhere. This pushed the adoption of AP automation solutions to many businesses that might have just started to consider switching from the manual process.
The end result is that many now see how AP automation can reduce costs and improve accuracy and productivity. But most importantly, it showed the value of the finance team’s time being spent on other tasks. For example, accounts payable is no longer viewed as a service function sitting toward the end of a process. AP plays a business-critical role in collecting and analyzing data and transforming this information into prescriptive recommendations that drive business performance. The additional time provided by automation allows the AP team to react and respond. To be more proactive in overall operations.
Talk about mitigating fraud risks in digital business payments.
Fraud is an unfortunate reality when it comes to any form of business payments. According to the 2020 AFP Payments and Fraud Control Survey Report, business email compromise schemes were the most common type of fraud attack last year, with 75 percent of organizations experiencing an attack and 54 percent reporting financial losses.
There are a number of things companies can do to mitigate risks—like installing malware protection or ensuring a segregation of duties—but an automated AP system armed with artificial intelligence and machine learning is key. Computers can analyze much more data than humans and, in real-time, flag suspicious activity for review. Technology is also capable of detecting changing tactics used by fraudsters. Using technology to help protect against fraud allows financial teams more time to focus in on other tasks—like building supplier relationships.
What’s your perspective on the impact of cryptocurrency on B2B payments?
Cryptocurrency is certainly a trend that cannot be ignored. Blockchain banking and decentralized finance are two of the biggest stories here. They allow for alternative solutions and investment opportunities. However, most businesses are proceeding with caution. Cryptocurrencies have shown to be extremely volatile, making them an unpredictable component of a company’s finances. The risks are high and can make ordinary financial tasks, like budgeting, extremely difficult if not impossible.
There are a host of other issues including regulatory clarity and sustainability concerns. While there are certainly opportunities with cryptocurrencies, there are also many challenges.
What is the biggest opportunity in today’s market for AP departments?
The biggest opportunity in today’s market comes from a shift in perspective. Gone are the days when AP departments are looked at as a necessary service department fulfilling seemingly basic tasks. Sophisticated AP solutions are not only managing invoices, but also creating analytics and dashboards. Critical insights and up-to-date information—like liquidity and cash flow—are more important than ever and are instantly accessible. Today’s AP departments are an intelligence hub that manage key components that impact the bottom line.
Plus, with more time available, AP departments can take proactive steps to make a bigger impact on operations. We found in a recent survey that 73 percent of procurement respondents report that supplier relationships have suffered due to late payments, with business consequences including higher costs, being unable to fulfill customer orders and even losing orders altogether. Automated solutions help reduce this issue and can free up time for AP departments to work directly with suppliers to resolve any issues. Another example is working across different departments to identify which suppliers might be causing issues across the company and work with them to improve the process. The more time available to access people’s brains and insights, along with the time to act, is good for the company.
How is insight from the AP process shaping the way companies do business?
Insight from the AP process is helping to improve process efficiencies while adding value along the way. The whole source-to-pay process is harmonizing and making smooth a historically fragmented process. Businesses have traditionally focused on the bits and pieces of the process and less on how all the pieces fit together. Using automated AP solutions as an example, you can see the impact to the fuller process.
Technology has helped AP teams refocus time and efforts away from the minutia and toward the bigger picture. AP teams can now focus on their role in the entire source-to-pay process and spend time to make things run more efficiently. They can work directly with both suppliers and internal departments to identify and correct any underlying issues. Plus, they have the analytics and insight to make informed decisions and recommendations. Imagine an entire source-to-pay process that takes advantage of automated solutions and technology. It’s an exciting opportunity for all those involved.