Despite a period of relative stability over the last year, very low levels of economic growth, combined with concerns relating to a possible (and now confirmed) Brexit as well as the destabilising events across Europe, have meant that the background for most organisations has remained challenging. So during the first three months of this year we took an in-depth look at how this was affecting the UK’s purchase to pay departments, the challenges they faced and their strategies for the future.
We found that on the whole, companies are continuing to look at ways to maximise on existing resources and to ensure that any new investment in terms of technology, process or people can demonstrate a reasonably short ROI. This year being able to “maintain standards” overtook “implementing new technology” as the major challenge faced.
The results pointed to a complex environment where in some cases, despite the increased requirement for data analysis, legacy solutions lacked the capacity to generate the data required and the task often involved manual input. However, they pointed out that any new solution would need to sit within an existing framework, which in turn would necessitate a diversion of available resources to implement.
Almost 40% of the respondents expected to be affected by the increased collaboration between the different areas of purchase to pay this year. This is on top of the existing 46% who stated that collaboration is something that has already improved over the last year. To some extent, the rise in the use of automation has been an enabler for this.
For some, this has resulted in the joining together of the different areas of purchase to pay to form one P2P department, with a new level of visibility and shared KPIs between Procurement and Finance. In fact, 21% of respondents reported the ambition to become one purchase to pay department, and 28% reported their area as being headed up by someone in charge of the whole P2P function.
However, a widening knowledge gap, particularly within AP is causing difficulties in a number of organisations. Alongside the greater emphasis on data analysis and reporting, executive expectations of AP staff has grown, and in some cases not matched by appropriate training.
Access to cash for some organisations remains strained, and the potential for risk along the supply chain continues to pose a problem. With average payment terms for 52% of respondents at 60 days, we weren’t surprised to see that almost 30% of respondents used some form of traditional supply chain finance this year.
However, we were pleased to discover that more than half of respondents (53%) had heard of the Prompt Payment Code, and it'll be interesting to see how companies respond to the new Duty to Report legislation around payment terms which are due to come into force at some point next year.
Despite the fairly protectionist overtone to “maintaining standards” as the main challenge facing AP, most organisations know this is only something they can achieve if they actively investigate new technologies and new processes. Some of the operational and process challenges faced by AP departments remain the traditional ones of cost reduction and keeping track of invoices – however, the whole area is in the process of a transformation – both in terms of access to new technology and taking advantage of a new corporate culture. Most (63%) expected to be affected by the growth in e-Invoicing, with 42% recognising that the growth of cloud technology is likely to transform the way the operation is run in the future. Interestingly, almost 30% of respondents expected to be affected by the growth of mobile capture for AP, despite the currently low levels of take up. A further 25% expect that the trend towards greater statistical analysis of data will continue to impact their working environment.
The main focus of the AP department remains one of making sure best practices are in place to manage the organisation’s cash flow, ensuring payment to terms while maintaining cost effectiveness and efficiency. But the ways in which this is achieved have changed dramatically over a few short years, breaking down the old siloed way of working – and moving towards a transformation in the way we do business. With greater emphasis on statistical analysis, driven in part by technology which straddles the end to end process, AP and P2P practitioners now have greater career prospects with the potential for strategic influence in their organisations.