We’ve officially entered the new year which means strategy planning is at the top of every leader’s mind. Inflation and rising interest rates have most firms worried about their cash flow, and thus, finance departments are doing all they can to reduce overhead and organizational inefficiencies in 2023.
Why AP Automation is Key to a Strong Year
Most finance predictions for 2023 focus on business process improvements and cost savings, as opposed to ground-breaking new innovations. This is a direct result of firms’ risk aversion to invest in new technology amidst the current market. Rather than exploring new cutting-edge solutions, most teams this year will drill down on their existing tools to increase efficiencies and help the bottom line.
As the top back-office digitization priority for the last two years, accounts payable is a great example of a tool that is trusted amongst finance teams to simultaneously target multiple areas of concern including security, process inefficiencies, and disorganized AP workflows.
6 AP Automation Trends for 2023
Preparing for trends in Accounts Payable (AP) can help teams build resilience and brace for a recession. Here are 6 AP trends you need to know going into 2023.
1. Cash Flow Will Be King
A recent global survey of CFOs conducted by Everest Group found that improving cash flow continues to be a priority for a large majority of finance executives. This should come as no surprise, as increasing costs of goods and a looming recession place extra pressure on both suppliers and buyers to keep close track of their cash. Consequently, 2023 will be a big year for finance departments to fine tune their existing cash forecasting models.
To support these forecasting improvement efforts, AP teams will likely turn towards digital tools like AP automation solutions to crack into analytics and elevate their cash forecasting models. Although AP automation rates jumped from 32% to 51% between 2021 and 2022, more than 80% of firms still haven’t fully automated their AP workflow. We expect to see the majority of these AP teams use the year ahead to fill in some of those digitization gaps.
2. Teams Will Focus on Expediting Payment Timelines
As we covered in the first point, cash forecasting will be a focal point for businesses throughout 2023. As a result, vendors and their customers will both look to streamline payment timelines to secure their cash as quickly as possible. During the next 12 months, expect to see initiatives from both parties as they try to streamline AP and AR to shorten the time it takes to bill, approve, pay and deposit funds.
This can manifest in a variety of ways, but most likely will result in increased demands from vendors for faster payments, like electronic payments (ePayments). Last year, 82% of vendors reported wanting more ePayments from their customers, and 2023 should be no different. Experts predict ePayments will continue to gain momentum during the next 12 months, presumably at the expense of checks.
3. New Fraud Methods Will Target Vulnerabilities of Hybrid Teams
98% of B2B firms reported fraud attacks in 2021, resulting in an average loss of 3.5% of their annual revenues. Unfortunately, bad actors continue to adapt their methods to prey on new vulnerabilities, specifically those within hybrid and remote work models. These digital work environments open up space for communication gaps and security vulnerabilities, which become advantageous for fraudsters looking to gain access to private financial data.
According to a survey by Everest Group, controllership and compliance initiatives to mitigate risks will be the second biggest focus area for CFOs in 2023 (cash management took the #1 spot). With that, there’s no doubt that the new year has a lot in store for security. Finance teams must be ready to upskill or find new staff that can help strategize compliance and security risks.
4. Real Time Payments Will Rise in Popularity
When asked how much of a factor real time payments (RTP) will be for B2B payments this year, some experts predict they will become mainstream by the end of 2023. With that, they warn companies to take care evaluating the pros and cons of real time payments before making any widespread changes to their payment mix. Else, they may unwittingly cannibalize their card revenue stream in a rush to embrace RTP.
While we expect to see real time payments grow in popularity, the extent of its expansion ultimately depends on whether or not financial institutions and fintech companies can work together to identify more practical use cases. One such example is instant payroll for workers in the gig economy, like Uber drivers and TaskRabbit movers. Instant payroll on The Clearing House’s RTP network grew 104% between Q1 and Q2 of 2022.
The Clearing House’s Real Time Payment Network is currently the largest example of a real-time payments network in the United States, but the Federal Reserve plans to launch their real time payment solution, FedNow, later this year. With that launch, real time payments in the United States should become more accessible for teams, further supporting its growth.
5. Executives Will Continue to Focus on Data
More than 70% of organizations confirmed increased investments in advanced analytics and technology for 2023, according to Everest Group. Beyond improving their cash flow models, AP teams this year will use their analytics to better track late payments and identify bottlenecks in their payment process.
This use of data analytics to optimize processes and track cash flow will solidify AP’s increasingly strategic role within their firms in 2023 and beyond.
6. Hybrid and Remote Teams Will Remain
Before the pandemic, nearly 85% of AP teams worked full-time from an office. Today, that number has dropped to just 31% as the rest of AP teams work in a remote or hybrid model. As teams continue to work from home, it’s imperative for finance leaders to enable them with modern digital tools to support their work, no matter where they are.
In 2023, we’ll see more AP teams invest in tools that improve security, data and document organization, as well as support remote collaboration amongst staff. As a result, these digital-first teams will achieve impressive gains even amidst inflation and recession concerns.
Strategize for Success
There’s no telling exactly what 2023 has in store for the business landscape, but firms today can prepare by investing in AP automation, organizing their payment workflow, and analyzing their financial data to identify gaps in their current approach. With an AP automation tool like MineralTree, your team can begin the process of digitizing its AP function, all while improving data accuracy and analytics capabilities. To learn more, schedule a demo today.