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Only six months into 2023, and we’re already in the midst of one of the most eventful financial years in recent memory. From a string of regional bank failures to rising interest rates, to an epidemic of tech layoffs, it seems that every week brings about new challenges that demand companies to adapt. However, amidst this increasingly uncertain and rapidly changing financial landscape, make no mistake: inflation is also steadily on the rise. And as business leaders, we cannot let this critical issue get lost in the fray or risk suffering the consequences for our indifference.
Unfortunately, to date, when inflation brings a business’s financial health into question, leadership often takes a reactionary approach, merely looking at price hikes or reprioritizing product sales. However, these strategies rarely do businesses any good. Instead, business leaders need to pause and consider how they can embrace more forward-thinking strategies that help their companies not only adapt, but evolve in the face of uncertainty. This starts by automating your accounts payable (AP) infrastructure.
Today, existing AP processes can be both cumbersome and cost-intensive, requiring an exhaustive amount of time and energy to manually sort and process payments in real-time. By automating these processes, finance teams can remove these costs from the system, offsetting the impacts of inflation, while consequently bringing their payments networks into the digital age. In fact, over 75% of finance leaders agree that their accounts payable (AP) function can play a key role in offsetting higher costs related to inflation.
Below are just a few of the many benefits of AP automation in fighting inflation and ensuring that our finance departments are prepared to navigate the road ahead.
Improving Productivity
You may not realize it, but AP automation can be a finance team’s secret weapon in productivity, allowing individuals to take on more strategic, higher-value tasks – while leaving painstaking manual invoicing to be automated in the background. Just consider that seven in ten finance teams spend as much as 520 hours (about 3 weeks) per year on manual accounts payable tasks that can otherwise be automated. Imagine the potential productivity gains that can be achieved if we simply redirected these efforts toward more analytical and data insight-driven work. Not only could businesses save time, but they could also open new revenue streams that offset the impacts of inflation.
Rather than raise the price of goods and services every time the market rate increases, businesses should instead look for new windows of opportunity to increase revenue. Yes, inflation may affect your bottom line in the short term, but knee-jerk price increases can have lasting and indelible impacts on your customer loyalty that can be far more damaging to long-term growth. Thankfully, investing in automation today will pay dividends in new revenue streams tomorrow – allowing your organization to avoid price hikes and encourage sustainable business growth.
Increasing Accuracy
Ask anyone in finance, and they’re likely to say the same thing: Manual AP processes are rife with human error. Consider the following hypothetical: If – for example – your AP department has just a 2% error rate, your firm could end up paying $200,000 if it processed just $10 million every year. Perhaps more concerning is the time and energy your AP team spends managing these errors – scouring their books to ensure that the right money is going where it should. In the fight against inflation, every penny counts, and human error can be a costly consequence of manual operating processes.
With AP automation, business leaders can mitigate the risk of inadvertent mistakes – such as paying invoices twice or to the wrong vendor. In fact, most AP systems operate with character recognition software that allows the system to automatically extrapolate key details from the invoice, analyze it and then route it to its intended destination. By streamlining these processes, companies can save time and money in troublesome errors, leveraging accuracy as a first line of defense in the pursuit of cost savings.
Expanding Visibility
It’s worth noting that AP automation doesn’t just allow companies to work faster; it allows them to work smarter as well. Indeed, when AP processes are automated, business leaders can gain unprecedented access to real-time financial data, allowing them to make informed financial decisions in the face of inflation. This visibility can be an invaluable tool when deciding whether to raise prices or cut costs. Like all of life’s greatest challenges, knowledge is power, and a deeper understanding of cash flows and expenses can only help businesses navigate today’s uncertain economic landscape.
Final Thoughts
For far too long, AP automation has been overlooked as a “back office” function that isn’t a business driver like sales or marketing. In the face of rising inflation, however, this is all about to change. Soon, if not already, AP automation will be viewed as a key tool in the finance team’s toolbox optimizing their internal operations with cost efficiency in mind. By doing so, not only can business leaders curb inflation in the near term, but they can also ensure they’re well-positioned for financial success in the years to come.
Alex Cedro is VP of Finance at Tipalti