Accounts payable (AP) teams have historically been regarded as cost centers that process invoices and payments. But the rise of financial technology (fintech) is changing that perception.
Fintech brings together money, infrastructure, and processes to optimize business payments and empower accounts payable teams. As a result, AP can shift from being processors to strategic managers that enhance an organization’s financial health.
How Fintech is Shaping the Future
Fintech is revolutionizing how businesses handle financial processes – especially accounts payable. This article explores the transformation that fintech enables for AP:
Greater Efficiency
By digitizing payments and leveraging automation, fintech cuts costs and unlocks strategic advantages.
Enhanced Visibility & Control
Real-time dashboards provide transparency into approvals, fraud prevention, and cash flow.
Smarter Decision-Making
With holistic data and optimized workflows, AP gains analytical superpowers to guide organizational success.
The remainder of this piece highlights specific fintech strategies for upgrading accounts payable capabilities. First, let’s examine the evolving role of AP.
The Role of Fintech in Accounts Payable
Accounts payable used to be regarded as an operational necessity to pay vendors and suppliers. However, it was often treated as an inefficient cost center prone to errors and fraud.
Fintech flips this script for modern accounts payable teams.
Fintech Connects Systems to Streamline Payments
In the past, AP dealt with disjointed processes involving purchase orders, invoices, and payment execution across disconnected platforms. This fragmented workflow introduced bottlenecks that stunted productivity.
Fintech provides the digital infrastructure to seamlessly integrate procurement, invoice management, approval chains, and payment networks into unified systems. This connectivity delivers frictionless end-to-end experiences that optimize cash flow.
Fintech Automates Manual Tasks
Much of the accounts payables’ legacy workload consisted of manual data entry, validation, and transaction processing. Employees got bogged down performing repetitive clerical duties while fraud slipped through the cracks.
Intelligent algorithms built into fintech solutions automate these mundane chores to free up human capital. AP staff can then concentrate on value-added activities requiring situational judgment.
Fintech Generates holistic Data for Decisions
Previously AP lacked real-time visibility into approval chains and payment activity across the enterprise. Important status updates got buried across disconnected spreadsheets and on-premise servers.
Fintech liberates this data to create end-to-end transparency. Cross-functional analytics empower accounts payable with decision-making superpowers using a single source of truth.
Let’s explore the key fintech strategies for upgrading accounts payable.
Key Strategies and Trends
Fintech unlocks game-changing capabilities for accounts payable teams seeking to increase efficiency and upgrade strategic influence over company finances.
Digitization: Enhanced Reporting and Security
Transitioning from paper to electronic systems remains Table Stakes 101 for leading AP groups. According to Ardent Partners, best-in-class AP departments are almost 5x more likely than laggards to describe themselves as >90% digital.
Electronic invoicing, contracts, purchase orders, and payments achieve:
- Faster approval velocity to accelerate cash flow
- Data-driven analytics provide enhanced spend visibility to optimize costs
- Payment tracking to prevent fraud and ensure delivery
Getting beyond 10% digitalization unlocks exponentially increasing returns. This enhanced connectivity furnishes superior:
- Reporting: Granular metrics around AP activity facilitate data-driven decision-making. Teams gain insight into historical trends and forward-looking projections to strategically guide organizational success.
- Security: Online payments come embedded with multi-factor authentication safeguards to confirm legitimate identities. This protects against both external cyber threats and insider fraud risk – saving millions.
The cyber insurability of accounts payable procedures now depends upon comprehensive digitization. Insurers even provide discounted premium rates to highly digitized firms given reduced exposure.
While over 90% of large enterprise AP departments transitioned digital, only 56% of mid-sized firms currently leverage ePayments. Small and medium businesses concentrating late to the digitization megatrend now risk falling critically behind competitors.
Those migrating recently still rely extensively upon manual validation steps around data entry and transaction processing. Exploring cutting-edge automation for these functions promises massive efficiency gains as the next strategic priority.
Automation: AI and Machine Learning
Rote data tasks devour employee attention spans without exercising uniquely human judgment skills. Offloading these repetitive chores to robots liberates the AP brain trust for judgment-intensive responsibilities generating true value.
>50% of mid-market firms name process automation as their top 2021 priority. Leading solutions incorporate artificial intelligence (AI) and machine learning to handle:
Invoice Processing
- Smart data extraction to glean key details from unstructured documents
- Invoice validation against purchase orders and contracts
- Anomaly recognition to flag suspicious invoices requiring human review
This alleviates low-level Accounts Payable Associates from manually assessing and entering hundreds of invoices daily. Instead, AP departments can reallocate resources to:
- Vendor Management: AI tracks market data and news to highlight strategic suppliers and sourcing opportunities based on overall contract health (not just unit price).
- Fraud Prevention: Unsupervised machine learning techniques comb through massive transaction records to pinpoint outliers requiring additional scrutiny – saving millions.
- Process Improvement: With additional bandwidth available, AP Associates have cycles to dedicate towards mapping current state processes and identifying waste areas for future automation opportunities.
Business leaders increasingly view AI / ML-enabled automation as the defining competitive differentiator over the coming years. Investing here arms Accounts Payable with next-generation capabilities to guide enterprise resilience and profitability.
Visibility & Control: Real-time Dashboards
“Flying blind” hinders the strategic decision-making velocity required of modern businesses. Unfortunately, legacy AP workflows relied upon inaccurate Excel spreadsheets that delivered stale snapshots after transactions already settled.
Real-time dashboards centralize disparate data streams into a single source of truth – providing unprecedented transparency into:
- Approval Chains: Step-by-step visibility over outstanding invoices and payment requests pending across the enterprise. AP can track bottlenecks and expedite high-value items to accelerate cash flow.
- Payment Status: Confirm outgoing transactions are securely delivered as expected. Forecast future cash balances with precision based on projected settlement timelines.
- Fraud Analytics: Analyze trends around transaction times, locations, devices, and channels to uncover threats early. Custom business logic tailored to your risk appetite prevents 99% of attacks before they occur.
Arming accounts payable with real-time analytics eliminates previous blindspots’ handicapping responsiveness. Leaders gain awareness to guide processes strategically based on actual (not theoretical) business conditions.
Process Improvements
While automation addresses the how-around transaction execution, optimizing procedural workflows fuels strategic influence over what gets prioritized during spend allocation decisions.
Fintech propels accounts payable into a guiding role for purchase policies and payment schedules. Modern solutions incorporate capabilities to streamline processes end-to-end – from procurement through settlement.
Spend Management
Gone are the days of AP teams passively paying whatever invoices show up in the inbox. Leading groups actively shape upstream purchasing behaviors by:
- Setting automated policies around required POs and contract enforcement
- Negotiating enterprise deals for discounted unit costs
- Whitelisting/blacklisting of merchants based on risk profiles
Consolidating expense tracking to seamless platforms also reduces off-policy spend leakage escaping through manager expense reports or employee reimbursements.
Payment Optimization
AP workflows typically involve a flurry of activity at month’s end to validate and batch outbound wires for recurring supplier payments.
Leveraging data and algorithms allows accounts payable to graduate from reactive check writers to strategic advisors optimizing cash flow velocity through:
- Dynamic discounting for early invoice settlement
- Rolling payment schedules aligning cash deployment with revenue cycles
- Just in time payments are triggered automatically upon delivery acceptance
This enhanced process influence provides compounded savings that quickly ripple across the income statement.
Payment Controls
With great power comes great responsibility. The newly unlocked automation and analytic superpowers equipping modern accounts payable teams would prove catastrophic if misused.
That’s why leading fintech solutions incorporate capabilities to govern payment activities through configurable business logic, identity verification, and access designations.
- Multi-factor authentication verifies legitimate users before permitting sensitive actions around data access, transaction approval, and payment initiation.
- Configurable workflows encode procedural checklists, approval chains, and compliance protocols directly into platform architecture. These rules trigger alerts for intervention when expected sequences deviate.
- Permission-limited access contains blast radius potential by segmenting functional visibility across business units, cost centers, and user profiles. Granular designations prevent privilege creep.
These handrails don’t restrain agility during normal operations. But when inevitable edge cases arise involving user errors or outright attacks, payment controls activate to automate policy enforcement – providing resilience.
As a result, accounts payable shifts focus from application security towards delivering business value. Leaders liberate resources for process improvements and spend optimization, confident fine-tuned controls govern execution.
Hyperautomation
While many companies now enjoy basic automation around invoice processing and reconciliations, true hyper automation interlinks platforms into end-to-end systems without touchpoints.
For accounts payable this enables straight-through processing (STP) for transaction flows directly from purchases through settlement without any manual intervention required.
Cutting-edge technologies like artificial intelligence, smart contracts, and machine learning power next-generation hyper automated capabilities such as:
Touchless Invoice Processing
-AI Procurement analyzes market rates for recurring purchases (like office supplies), initiates orders, and confirms receipt delivery.
-Upon acceptance, smart contracts automatically approve supplier payments and initiate outbound wires on optimized schedules.
Conditional Payments
- IoT sensors embedded in shipped goods relay GPS delivery confirmation and quality inspection metrics back to the originating platform.
- These readings flow into blockchain-enabled smart contracts that trigger same-day supplier payments only once all expected criteria pass. No human input is needed.
Anomaly Management
- Natural language processing parses conversations and documents to uncover risks early.
- Unsupervised machine learning models baseline normal transaction patterns to detect outliers for further review.
- Over 99% of fraud and errors get flagged autonomously without any rules defined.
Such straight-through hyper-automation enables previously unimaginable scalability for accounts payable operations. Leaders reduce transaction unit costs nearing zero while attaining previously impossible levels of oversight.
This frees the AP brain trust to absolve itself of manual responsibilities and instead advise across critical facets like:
- Contract Negotiations
- Vendor Analysis
- Early Payment Discounting
- Spend Optimization
True hyper-automation eliminates stray invoices or payments falling through the cracks across disconnected systems. Transactions flow frictionlessly while humans handle edge cases and continuous improvement.
Conclusion
Fintech solutions empower accounts payable leaders to embrace emerging capabilities and access new sources of value for their organizations.
Instead of merely paying the bills, modern AP teams strategically guide workstreams to:
- Optimize cash flow velocity
- Uncover cost savings
- Prevent fraud loss
Automation and analytics alleviate manual burdens to unlock human judgment for high-leverage decision-making. This unbridled potential makes accounts payable central players advancing operational resilience and profitability.
Leading finance executives now regard AP not as an obedient calculator – but as a strategic asset. Teams play offense aligning payments to corporate strategy, instead of just playing defense against errors.
Those still relying upon legacy manual processes sprint blindly toward obsolescence. The future favors the bold Accounts Payable groups actively partnering with fintech to transform their function from cost center into value creator.
