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CFOs can modernize their AP processes to optimize for today while setting their financial operations processes up to scale and adapt to future business changes. FEI Daily spoke with Chen Amit, Co-Founder and CEO of Tipalti, about the current issues with accounts payable and where companies should be investing to improve their processes.
FEI Daily: What are the current issues with accounts payable?
Chen Amit: I would say there are three main issues. One is risk and many of our mid-market companies reach out to us either because they have failed some of it, whether it is a tax audit, an anti-money laundering audit, etc. The government caught them underperforming on their anti-money laundering activities, poor governance, poor compliance, risk management in general is the first bracket.
The second bracket is capability. We are serving high growth companies. For them, because they default to using labor, for them to grow at the pace they want to, just hiring and staffing only people that they need to complete all of these tasks is daunting. It's not what they want to focus on. They want to focus on their core business, their core competency, and capability becomes an issue for them.
The last is efficiency. Labor comes with two charges. One is cost and the other is human error.
FEI Daily: What kind of investment are businesses looking at to improve their AP processes?
Amit: Finance leaders who are looking to optimize their AP processes have a few options. One is to add more headcount. This is not scaleable, however, can expose you to human error and fraud as you grow financial operations, and is an expensive option. Oftentimes, you can also pair this approach with some process improvements to find some incremental time savings.
The other primary option is to apply technology. The goal here is eliminate workload so that current staff can do more with less and can focus their time on higher value strategic finance activities, while enhancing AP financial and compliance controls. You can often eliminate the need to hire more future AP headcount if done correctly.
When pursuing this approach, look for technologies that address your holistic AP process, automating each of the core workflows in AP. This typically includes supplier onboarding and management, AP tax and regulatory compliance, invoice processing, US and cross border supplier remittance, supplier payment communications, and payment reconciliation and AP financial reporting. Only addressing one of these processes in isolation of others often backfires, as you essentially just kick the can down the road creating more problems in other parts of the AP workflow. The platform should also include robust financial and fraud controls and capabilities that your business will need as it becomes more complex, such as multi-entity management or early payments program capabilities. You don't want to implement a technology today that you will need to replace in a few years.
FEI Daily: We talk with CFOs about how they can be more strategic in their roles. How will automating financial operations change the role of the CFO?
Amit: There is so much grunt work, so many mundane tasks, and so much labor that is involved in really simple tasks that require the attention of the finance department, of the CFOs, the VPs of finance, the hiring and management team, and those who are just processing invoices and processing payments and matching lines between their bank statements and their payment statements, which is really not strategic.
Our mission statement at Tipalti is to liberate finance teams so that they could make true strategic impact.
FEI Daily: What is preventing businesses from streamlining their AP processes?
Amit: Awareness. The only thing that is delaying this option in the market is awareness, because we see the demand.
One of the things we talk about with finance departments and CFOs is optimizing their processes for today but also what will your finance and your AP process look like tomorrow? The key thing as a CFO looks to modernize AP is not only looking at what they have to do today, but putting systems in process that they will scale with the company as it changes and finance needs to obviously adopt and be agile to those changes in the future. Do you expect to have a more global supplier base in the future? What systems will you need to handle that? If you're a growing company, are you going to have to strengthen your AP financial controls to prevent audits and fraud and comply with the tax rules? Are you going to acquire companies or have a multi-entity structure? Will you have mandates to make AP more cost neutral? And how are you going to do that in the future?