MineralTree, an accounts payable (AP) and payment automation solution provider, has unveiled its sixth annual State of Accounts Payable report. The research effort surveyed finance executives about the impact of the pandemic on their AP operations, supplier relationships, the use of different electronic payment methods, and their adoption of AP automation.

COVID, remote work mandates, and supply chain dependencies all helped accelerate the digitisation of businesses, particularly in the back office where inefficient manual processes created enormous challenges for staff. The strategic importance of AP was elevated as organisations recognised the need for better cash flow management and prompt supplier payments to keep goods and services flowing.

Key themes for AP in 2021

MineralTree’s 2021 State of Accounts Payable Report explores how a once-in-a-lifetime event left its mark on finance organisations and the lasting effect it will have on AP processes going forward. Several key themes and trends emerged.

COVID accelerated back-office digitisation, with AP becoming the #1 priority

58% of all respondents - and 70% of those who worked fully remotely during the pandemic - believe that COVID was a catalyst to digitise the finance function.

Respondents ranked AP as their #1 back-office digitisation priority, followed by forecasting and accounts receivable (AR). Enabling a remote workforce, improving cash management, and ensuring business continuity were all key drivers.

Supplier relationships grew more strategically important

Despite the various pandemic-induced challenges and disruptions, only 10% of respondents made fewer supplier payments over the last year. Nearly 40% made more.

58% said their supplier relationships grew more strategically important; the percentage was even higher for healthcare organisations (73%) where the steady flow of supplies is critical to delivering care.

B2B digital payments grew but haven’t yet reached the tipping point

44% of respondents reported a decrease in cheque payments, while 50% noted an increase in ACH payments over the last 12 months. However, despite digital payment growth, 45% of respondents still make more than half of their business payments via cheque; ironically, they cited ease-of-use (69%) and cost (44%) as the primary drivers for current payment types.

64% of respondents intend to make more digital payments in the next year, but it’s clear they haven’t yet reached the tipping point and obstacles to growth remain.

Top barriers to automation reveal inertia and perception issues

Although the pandemic exacerbated challenges with manual AP processes, the biggest barrier to adopting AP automation is the belief that current processes work, cited by 32% of respondents.

Lack of budget (18%) and lack of clear ROI (16%) were also key barriers, though they can be overcome by building a holistic business case that encompasses efficiency gains, cost reduction, and virtual card rebates.

AP automation accelerates digital payments

Overall, 32% of respondents have implemented some form of AP automation. However, only 9% have automated the end-to-end AP process from invoice capture through payment execution, suggesting a significant opportunity for improved efficiencies.

64% of respondents who have automated are processing more payment volume with the same size team. They also report above-average increases in ACH and virtual card payments, along with a greater reduction in cheque usage.

"An end-to-end approach can deliver enormous operational efficiencies, better cash management, better fraud protection, and richer insights - all while accelerating digital payment growth," said Vijay Ramnathan, president of MineralTree. "We’ve seen this within our own customer base, where many organisations have reaped the benefits of AP automation since the pandemic and the percentage of ACH and virtual card spend has grown 31% and 270% respectively. Despite the perceived barriers, the business case for AP automation is actually quite compelling, with a very quick payback and significant short- and long-term ROI."

Methodology

For the sixth consecutive year, MineralTree surveyed a wide range of finance professionals involved in AP to analyse their current state of operations, challenges, and outlook for the future. The 669 respondents represented a mix of industries, company size, and job level. Annual revenues ranged from under US$1m to more than US$1bn, with the majority at the US$10-100m level. Job level of respondents varied, with the greatest number holding executive positions, followed by manager, director, and individual contributor. The report is a snapshot of where the industry is at a specific point of time, providing a benchmark against which to compare AP practices and digitisation plans.