Over recent years, the accounts payable (AP) industry has undergone a huge amount of change and transformation. The rise in remote working and the ongoing financial crisis have led to increased business reliance on AP, which has sped up AP digitisation and automation. Meanwhile, the introduction of e-invoicing mandates continues to disrupt AP operations and cause compliance headaches.
So, what are the key trends which will impact the accounts payable industry in 2023? Each year, Tungsten Network’s parent company, Kofax, sponsors a whitepaper by research and advisory firm, Ardent Partners, analysing the main drivers and predictions for the AP industry based on independent market research and surveys. The aim is to help AP, P2P, and other finance professionals better prepare for the year ahead.
Let’s take a look at the top accounts payable trends identified in the 2023 report. To see the full whitepaper that we’ll be referring to throughout this article, click here.
Trend 1 - Economic headwinds impact AP operations
One of the largest and most impactful trends facing AP functions this year is the challenging economic climate. Inflation, rising interest rates, labour shortages and political unrest are all bringing financial uncertainty to businesses and affecting AP operations. As a result, accounts payable teams are having to change the way they process invoices, pay suppliers, manage cash flow, and more.
A primary aim for AP functions will be to work strategically with the business in reducing costs, improving supplier relationships, and maximising cash flow.
Trend 2 - Inflation remains a top priority for Accounts Payable
Over the last decade, low interest rates and readily available credit have driven market growth. However, the market has experienced higher inflation, rising interest rates, and increasing debt since 2021. Unfortunately, it looks like it’s set to stay this way for a while to come.
From an accounts payable perspective, managing an inflationary period will require greater collaboration with the rest of the organisation — including finance, procurement, treasury, as well as direct collaboration with suppliers.
Trend 3 - Cash flow and payment terms are a core focus
With rising interest rates and economic uncertainty in mind, the way that cash is managed by AP teams has never been more important. When and how invoices get paid can hugely affect an organisation’s cash flow, liquidity, profitability, and its relationship with suppliers. It’s therefore imperative that AP provide accurate and timely intelligence around cash management.
A global recession brings sales and revenue pressures, along with increased competition and more frugal spending habits. Therefore, days payable outstanding (DPO) and days sales outstanding (DSO) are placed under a microscope, and invoicing processes are being scrutinised. Seen as a potential solution, supply chain financing and capital management initiatives are gaining interest, which is boosting the importance of invoice approval times and supplier/buyer contracts.
Trend 4 - AP’s positive impact on the supply chain
Due to recent events such as the pandemic and the subsequent market changes, the supplier-buyer relationship has changed significantly. Where buyers used to have the upper hand, the power balance has now shifted in favour of suppliers. This has led to many businesses experiencing supply chain disruptions over the past couple of years.
While not traditionally associated with supply chain management, accounts payable is actually an important part of managing supplier relationships. To maintain a solid reputation among suppliers, it’s crucial to pay invoices accurately and on time. So, it’s no surprise that over half (55%) of all AP departments in Ardent Partners’ research study indicated that supplier management skills were critical to future success.
Trend 5 - Global e-invoicing mandates continue to impact AP teams
As a way to reduce the global VAT gap and improve invoicing processes, governments across the world have been introducing e-invoicing mandates and placing pressure on businesses to comply with such changes.
So far, more than 50 countries worldwide have announced measures around e-invoicing and e-reporting compliance, with more to come in the near future. The problem is, each country is enforcing different rules and regulations for e-invoicing, making it very complicated for multinational businesses to navigate. Therefore, more companies are turning to e-invoicing compliance experts such as Tungsten Network to help manage these complex and ever changing requirements.
Trend 6 - Digital transformation of AP functions reaches mid-market
Digital transformation has been happening across the AP industry for the past 20 years. However, this has largely been limited to large and enterprise-level organisations.
As the benefits of AP automation become more widely known, an increasing number of mid-market enterprises (with annual revenues of $50m - $500m) are adopting automation technology within their AP functions. The key drivers for this uptake include greater productivity and workload management, lower costs, faster processing times, and increased transaction security.
Trend 7 - Hyperautomation gains traction in accounts payable
To automate any (or all) parts of the ePayables framework, businesses must first leverage the technologies that go into hyperautomation.
Simply put, hyperautomation in AP consists of boosting invoice and payment automation by introducing technologies, such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA). These technologies make it possible to do more with less and do it faster, more accurately, and less expensively than ever before. Over the past few years, more AP automation providers have incorporated these technologies into their solutions, and their use will continue to increase moving forward.
Trend 8 - Visibility into AP data becomes more critical
Accounts payable functions have access to a gold mine of data, which for too long has been untapped and underutilised. Today, new and improved data analytics and reporting tools are transforming AP teams into a ‘hub of intelligence’ that leadership teams are utilising for a more clear and accurate picture of the business’s financial activities to help optimise spend.
Trend 9 - Distributed & extended workforces change how and where work gets done
Since the Covid-19 pandemic, the way we work has been forever changed. Research by Ardent Partners revealed that 85% of P2P and AP teams have introduced some level of hybrid work since 2020. Attracting and retaining talent now requires flexibility and pragmatism.
However, staff shortages, low unemployment rates and economic uncertainties have led to a rise in the use of the extended workforce, also known as ‘gig’ workers. Ardent Partners research found that 82% of businesses expect an increase in the use of non-employee workers in the year ahead, which will continue to impact AP functions and the way staff payments are managed.
Trend 10 - AP adopts a customer service mindset
Once seen as a back office function, accounts payable is now much more visible and respected by stakeholders across an organisation. As such, AP functions have higher expectations to live up to - including being more customer-focused and staying attentive to the needs of both internal and external clients.
AP teams can now support its constituents by sharing data, information and knowledge which add value to clients. In the recent research by Ardent Partners, it was found that 7 out of 10 organisations believe that adopting a ‘customer service mentality’ is a critical skill for the next generation of AP.
Accounts Payable trends - a conclusion
From digital transformation to distributed workforces, it’s clear to see from these accounts payable trends that 2023 will be another big year for AP. As leadership teams begin to recognize the value that AP functions can deliver to the wider organisation, including improving supplier relationships and sharing valuable data, its development will continue to be a priority.
Economic uncertainty and political unrest also continues to highlight the significance of AP and its ability to reduce costs and improve operational efficiency. As such, further investment in AP automation and hyperautomation is sure to be a running theme throughout the year.
Looking to the future, AP’s responsibilities in supply chain management will come to the forefront as interest rates continue to rise.
Enhance AP capabilities and embrace e-invoicing with Tungsten Network
As a global leader in invoice automation, Kofax and Tungsten Network can support organizations at every level of maturity in their journey towards true e-invoicing. We can help your business adopt e-invoicing and drive digitisation across accounts payable whilst ensuring you and your supply chain remain compliant amid legislation changes, as well as improve operational efficiency and turn your AP function into a profit centre.