New research finds manual finance processes are stunting business growth and creating risk of fraud

New research assessing the state of finance departments in the UK and US reveals that inefficient manual processes are holding back businesses – with four-in-five (80%) finance leaders admitting that their accounts payable (AP) function is not fit to enable continued growth.

The research (AP Trends in Fast Growth Businesses), commissioned by fintech unicorn Tipalti, surveyed and interviewed 500 finance leaders in fast-growth businesses in the U.K. and the U.S. The findings expose the negative impact manual AP processes, such as invoicing, PO matching and handling payments, are having on business growth, ability to manage operations effectively, employee morale, and even the finance teams’ reputation in the wider business.

In addition to this, the research reveals the impact outdated AP processes in fast-growth businesses are having when it comes to fraud – with four in five (82%) of finance leaders reporting fraud and risk exposure as a top AP challenge of theirs.

Finance isn’t future fit

Almost one-third (31%) of finance leaders believe AP will ‘slow down potential business growth’ if challenges continue or intensify – with four in five (80%) saying finance can only become a strategic driver of growth in the business when AP inefficiencies are minimised. Four in five (83%) also believe teams would spend any time freed up by automating AP on growing the business in other areas.

However, time is clearly being spent elsewhere. Worryingly, finance leaders surveyed said that 43% of the end-to-end AP function is currently manual or paper-based. As a result, on average it takes finance almost an hour (50 mins) to process an individual supplier invoice, 11 days to close monthly accounts, and 13 days to close quarterly accounts. This equates to, on average, more than half (53%) of finance time in a typical week being spent on manual AP processes – rather on tasks that aid strategic initiatives.

And this is taking a negative toll on operations – with, on average, almost a quarter (22%) of supplier invoices being paid late. This is despite reforms announced last year by the UK Government to tackle the growing issue of late payments and the impact on small businesses. In addition to this, the survey highlighted a growing frustration towards the finance team – with two-thirds (63%) admitting they have received feedback or criticism from the wider businesses about the AP inefficiencies.

“The negative impact that manual AP processes are having on business growth, exposure to fraud and finance teams’ reputation — just to name but a few —should serve as a wake-up call to businesses,” said Chen Amit, Co-Founder and CEO at Tipalti.

“Too many hours are spent doing manual tasks that could be automated. Understanding the benefits of automation is key – teams have more time to spend focusing on strategic initiatives that help scale the business, in addition to finding new opportunities for growth. Furthermore, it improves visibility and control – which is crucial for fast-growth businesses today.”

AP challenges are increasingly difficult to ignore

Main factors that are making AP challenges increasingly difficult to ignore include increasing number of supplier invoices to process per month (39%), increasing number and type of suppliers to pay (38%), pressure to transform AP/finance processes from the wider business (34%), an increasing number of cross-border supplier invoices and payments (33%), and the speed and scale of business growth (32%).

On average, over one quarter (27%) of supplier payments are cross-border/international and, on average, one-third (32%) of spend is international – signalling the importance of an automated platform that has global payment capabilities. However, fuelling the challenge is the fact many businesses are using a plethora of tools, with the average business using four different logins or systems when making a supplier payment.

Fears manual work leads to burn and churn

The Impact of manual processes is also having a negative effect on the finance/AP team. Concerningly, over three quarters (78%) of finance leaders say that too much manual work is overwhelming staff, with 73% admitting staff productivity and morale is a concern. At a time where businesses continue to grapple with the Great Resignation, a worrying third (32%) of finance leaders fear that if AP challenges continue or intensify, it will lead to burnout or churn.

The top AP inefficiencies identified in the survey are obtaining and validating supplier details (61%), order requisition/PO generation (58%), matching POs to invoices (55%), payment authorisation (55%), payment execution (54%), invoice and payment reconciliation (53%), supplier invoice approval (52%), and supplier invoice data capture and GL-coding (52%).

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