Financial professionals at AFP 2024 presented the case for optimizing the accounts payable (AP) process. While automation is ideal for many AP departments, convincing the CFO to invest in the technology requires the identification of key pain points and a careful business case to show why such an investment is needed.

Integrating Payables Across Business Units

AP departments are generally overworked, bogged down by processing hundreds or thousands of invoices manually. Manual processing easily leads to errors and fraud, while also putting a strain on companies’ finances, as AP employees often need to be paid overtime to get the work done. Furthermore, overworking AP teams has led to considerable turnover in the profession, putting even further strains on organizations. Meanwhile, slow invoice processing can also negatively impact vendor relationships, as a high days sales outstanding (DSO) ratio can create cash flow problems for suppliers.

Clayton, a leading single-family home builder of modern manufactured and site-built housing, has nine diverse business units and they all make payments in their own ways. Cynthia MacGeagh, CTP, Treasury Manager, explained that when she first came on board, there was a desire for one "magic box" solution that would integrate all of the company’s payables and send them to the bank so that they could be distributed to various vendors. However, she quickly found out that integrating payables efficiently required an understanding of the differences between each business unit.

MacGeagh spoke to the different units and learned what their needs were. While there were some commonalities, they generally had very diverse needs when it came to payables. Mortgage entities used wires, manufacturers used checks, etc. “It was beyond just integrated payables,” she said. “You really need to talk to your boots on the ground. They're the ones that have to do the day-in and day-out work and understand what their needs are. Some things could work for all business units, the common denominator. But then there are some tweaks and changes that need to be made to meet with the specific needs of a particular business unit.”

The use of checks will continue to plague companies with rampant fraud, errors and slow processing times until they finally move away from them. Andy Sullivan, Vice President of Channel Sales for Bottomline, noted that one of the positive developments that emerged during the Covid pandemic was that it forced some companies to finally move away from checks. But even after nearly five years, many companies remain check-heavy.

Indeed, the 2024 AFP Payments Fraud and Control Survey Report revealed that checks were the payment method most targeted by fraud in 2023, up 65% from the prior year. Despite that, 70% of organizations using checks said they have no plans to discontinue doing so.

Finding the “Why” to Automate AP

While automating the AP process can be incredibly efficient, organizations need to identify pain points before implementing it, explained Mike Watercott, CTP, Working Capital Consultant for US Bank. Fully 77% of CFOs acknowledge that automation can eliminate errors in the invoice process, according to 2023 research by PYMNTS and Corcentric. Moreover, 93% of CFOs reported that AP automation can result in better invoice tracking.

CFOs also found that AP automation streamlined the overall procure-to-pay cycle. Integration between the buyer and seller reduces payment friction, according to 83% of CFOs. But is all of that enough to convince your CFO to invest in automation?

In MacGeagh’s case, she answers to multiple CFOs, and each one has different needs and pain points. So, implementing AP automation was all about finding the “why” for each of them.

However, if you can find that “why” and implement the right solution, then there are plenty of efficiencies you can uncover. Treasury departments like MacGeagh’s that work with multiple business units will find that each unit stacks its priorities differently. But with enough time, treasury may be able to address each of their concerns. MacGeagh advised against trying to do it all at once; taking the time to figure out how to integrate each unit’s payables can have positive results in the long run.

Furthermore, implementing these new technologies can have positive effects beyond just process improvement and cost savings; it can actually produce substantial revenue. By implementing electronic payables and virtual cards, MacGeagh was able to positively impact financial statements. “A lot of organizations look at treasury as a cost center, but it can be a revenue generator with some of these technological advancements,” she said. Clayton has leaned on its banks for a more equitable use of its deposits by increasing earnings credit rates (ECRs), expanding the use of its various card programs and, more recently, embracing the Premium ACH rail. This has eliminated the expenses associated with monthly bank service charges, while increasing cash received in the form of rebates.

Fraud Prevention

Sullivan generally sees revenue generation as an outlier for digital transformation efforts. Instead, he believes that protecting against fraud loss and reputational damage is a much bigger motivator for treasury departments and the CFO to adopt AP automation. “Revenue is great, and some organizations are driven by that, but it's not always a key focus for many organizations making these efforts,” he said.

Among the most devastating types of fraud are business email compromise (BEC) scams. According to the FBI’s 2023 Internet Crime Report, BEC scams accounted for $2.9 billion in losses last year, with the average cost of a scam increasing to $183,000, up from $84,000 in 2022. Yet according to the AFP research, less than 60% of organizations have created written policies and procedures to safeguard against BEC, and less than half have actually tested the policies.

It’s still astonishing to me how many organizations still fall for these scams. They’re not new. I wrote a BEC scam-centric Treasury in Practice Guide all the way back in 2015. BEC wasn’t well known at the time, but we quickly saw how effective and devastating these schemes could be to treasury and AP teams. And while they have evolved somewhat as criminals have incorporated deepfake and AI technology, the tactics themselves remain largely the same.

Vendor invoice fraud can be a bit harder to catch than the typical “CFO calls an employee and asks for an urgent money transfer” version of a BEC scam but it can still be identified rather easily if companies are paying attention. Unfortunately, it still happens, largely due to overworked AP departments that are processing thousands of invoices manually and aren’t double-checking new payment instructions every time they come in.

So, while automating AP isn’t a panacea for fraud, it certainly can help to reduce problems like BEC because it can catch a lot of those discrepancies. That has to be a key motivator when building the business case for the CFO.

Presenting Your Case

It may be challenging for treasury and AP teams to convince the CFO (or CFOs) to automate payables, but the proof is in the data. There really isn’t any downside to doing so, and the cost will ultimately pay for itself with the ROI. It reduces fraud and errors, streamlines the entire process, cuts down the time needed to process payments, and can improve DSO for your vendors. And because employees aren’t spending so much time manually entering data, they can perform more strategic work, making turnover less likely.

The PYMNTS/Corcentric survey found that CFOs whose organizations integrated automation software into their AP processes saw significant improvements in multiple areas. Convincing your CFO might take some doing. But if you can effectively present the “why,” you might find your CFO saying, “Why not?”

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