We’re getting ready to close the books on 2020, and after the year it’s been, for many, it’s not a moment too soon. The good news is that 2021 looks like a much better year, starting with the vaccine rollout, which will allow people and businesses alike to begin to transition to the next normal.
Next year is also looking up for the Accounts Payable (AP) department. It will be a year of accelerated tech trends and increased focus on the strategic importance of AP to the organization. I recently participated in a webinar (watch on-demand) with Andrew Bartolini, Founder and Chief Research Partner and Bob Cohen, VP, Research of Ardent Partners, a research and advisory firm. In the conversation, they shared their predictions for what 2021 has in store for AP.
Prevalent Trends That Will Affect Accounts Payable in the Coming Year
Here are some forecasts for the year ahead and the impact they will have on AP:
1. Work from Home Will Outlast COVID
Over the past year, workers had a chance to experience the flexibility and work/life balance that working from home (WFH) offers, and they liked it. And, as businesses became comfortable that work was getting done remotely, they were open to the WFH concept, appreciating the opportunity it offers for reducing real estate and other operating costs during a time of tightening budgets. Not all companies, though, had good experiences with remote work during the pandemic. The more manual a company’s AP processes were, the greater its pain. AP departments relying on manual, paper-based processes for invoice processing and payments were particularly hit hard. For example, to issue payments, an AP staffer at one company had to go into the office to pick up check stock and print the checks, drive them over to the CFO to sign them, and then mail them to vendors. It’s clear that as WFH continues post-COVID, process automation will fast become a de facto requirement of doing business.
2. AP Digital Transformation Will Continue to Accelerate
As the problems with manual processes were exposed during the pandemic, the importance of smooth-running AP operations quickly became apparent to business leaders. At the same time, management realized the critical role that AP plays in business continuity, and even survival; payments needed to be made on time in order to keep the supply of goods and services flowing. As noted in Ardent Partners report, The State of EPayables 2020, “The pandemic makes it evidently clear that while manual processes impede efficiency and visibility, it can also threaten business continuity and organizational resilience.” These realizations have increased management buy-in for digital transformation, opening up greater opportunity for AP automation in 2021.
3. AP Becomes an Intelligence Hub
AP holds critical financial information on cash flow, spend, outstanding liabilities and more, which is of great value to Finance, Treasury, Procurement, Accounting and business units across the organization. While this data is hard – if not nearly impossible – to access using paper-based processes, automation enables organizations to easily view and analyze AP data for business insight. As departments across the organization are increasing their need for this information, there is greater focus on extracting and leveraging intelligence from the data to improve performance and make smarter decisions.
4. B2B Payments will Become a Strategic Business Process
To manage cash flow, companies will be taking a closer look at payment terms, such as whether to pay early or on time, and will focus on reducing costs, such as by consolidating vendors. AP will continue to morph from a cost center to a profit center as companies look for ways to increase revenue, such as obtaining cash-back rebates from virtual cards, which is also a key reason behind the growing popularity for this mode of payment.
5. Cash Becomes King Again
During the pandemic, liquidity became even more important, when we saw, for example, cash-strapped healthcare suppliers use virtual cards more than ever before. The pressure to ensure liquidity will drive major initiatives to manage cash more effectively, including through strategic B2B payments, supply chain finance, and other strategies.
6. Use of Gig Workers Will Increase
At the same time organizations are becoming more comfortable with remote workers, they are shifting their employment practices to increase the use of freelancers, consultants, and other gig workers. Along with the growing number of 1099’s, AP departments can expect an increased volume of invoices, different reporting requirements, and other changes they will need to accommodate.
All of these trends add up to one mega trend: the increasing strategic importance of AP. No longer viewed as a back-office function, AP will continue to gain appreciation from business leaders for the value it brings to organizations – from its role in paying suppliers to keep goods and services flowing, to providing visibility into key financial data to help the organization make smarter financial decisions. The recognition of AP’s strategic role bodes well for AP departments everywhere as we get ready for 2021.