The Strategic Role of AI in Accounts Payable

"AI is no longer just a tool for efficiency; it’s transforming AP into a strategic function that drives financial clarity and operational agility. Businesses that embrace AI-powered automation in their AP processes are setting themselves up for sustained growth and competitive advantage.” - Chris Wyatt, Finexio Chief Strategy Officer

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Outdated AP systems reliant on manual processes are a persistent burden on businesses. Their inefficiencies contribute to operational delays and hinder overall productivity, affecting various stages of the source-to-pay cycle.

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More businesses are turning to AI to improve AP processes, recognizing the technology’s growing importance. With plans for automation on the rise, firms aim to boost efficiency and address staffing challenges within their AP workflows.

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AI offers significant potential to enhance AP efficiency by automating various tasks and improving accuracy. Companies are increasingly exploring AI-driven solutions to streamline workflows, reduce manual labor and support better financial decisionmaking.

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Businesses continue to struggle with outdated accounts payable (AP) systems that rely predominantly on inefficient, manual processes. These traditional approaches contribute significantly to operational delays, impacting productivity throughout the source-to-pay cycle. Manual workflows can lead to bottlenecks in tasks such as invoice processing and payment execution, among many others. The need for more streamlined solutions is clear.

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Amid these challenges, more companies are turning to artificial intelligence (AI) to modernize their AP workflows. AI-driven automation presents an opportunity to reduce manual labor, enhance accuracy and boost overall efficiency. As firms adopt these innovations, they aim to transform AP from a source of delays into a catalyst for financial efficiency.

Outdated AP Systems Are Bogging Down Businesses
More Firms Are Leveraging AI to Streamline AP
AI Can Boost the Efficiency of Many AP Tasks
Unlocking the Benefits of AI in AP

Outdated AP Systems Are Bogging Down Businesses

Many firms still rely on manual labor for AP tasks, hampering efficiency.

Recent PYMNTS Intelligence research finds that many companies continue to depend on complicated and error-prone manual AP workflows, causing widespread disruptions throughout the business. All surveyed CFOs report that their firms experienced friction in at least one area of the source-to-pay cycle in the past six months, with companies facing disruptions in an average of 2.8 out of eight areas. The majority (69%) of businesses report shipping issues as a top source-to-pay disruption, while invoice discrepancies and order accuracy disputes are cited as major pain points by 25% and 24% of CFOs, respectively.

63% of CFOs say their companies’ AP cycles have encountered delays.

These difficulties come as AP automation remains relatively uncommon. As of November 2023, 36% of mid-sized companies still had not automated any AP processes. Among those firms that have introduced AP automation, 44% had automated only one or two processes, and only 4.6% had automated all.

Inefficient practices are causing widespread delays in AP cycles.

In fact, delays are the norm rather than the exception. PYMNTS Intelligence research shows that nearly two-thirds (63%) of CFOs experienced delays in their AP cycles.

These inefficiencies are common in areas throughout the source-to-pay cycle. For example, 15% of CFOs experienced delays in supplier onboarding, 17% in invoice matching, 18% in payment authorization, and 23% in payment execution, to name just a few.

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More Firms Are Leveraging AI to Streamline AP

Firms see AP automation as highly important, and many are already adopting the technology.

78% of CFOs say access to AI for their AP systems is very or extremely important.

More than three-quarters — 78% — of CFOs say access to AI for their AP systems is very or extremely important. Only 5% say it is not at all important.

It is not surprising, then, that many firms are integrating more AI capabilities into their AP workflows. In fact, according to a newly published survey, 44% of CFOs are now using AI to optimize AP approvals. An equal share is deploying AI-supported fraud prevention checks.

This rush to automate comes as businesses find their AP labor needs exceeding their staff’s capacity.

The need for increased efficiency is especially urgent because AP teams are already overburdened. In fact, nine in 10 CFOs say they outsource at least some of their accounting tasks, with AP being the most common area to contract out. Moreover, half of finance and accounting leaders who are not already outsourcing said they would consider it for their AP tasks.

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AI Can Boost the Efficiency of Many AP Tasks

AI can streamline a wide range of AP functions.

Take, for instance, invoices. The technology can yield quicker extraction and validation of invoice data and make it easier to check for accuracy. It can also automate supplier onboarding and the management of supplier data. Plus, it can provide fraud-fighting capabilities by analyzing large quantities of data for incongruities. Moreover, businesses are tapping generative AI to easily create reports and data visualizations to enable more informed financial decision-making.

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40% Potential AP efficiency gains that can be achieved by implementing AI

The potential for AP efficiency gains through AI is very high.

AI has the potential to yield efficiency gains of up to 40% for AP processes. In fact, AP ranked as the accounting process that stands to gain the most efficiency through use of the technology.

Among the 74% of CFOs who intend to invest in AI accounting tools by 2024, accounts payable is the most popular investment target.

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Unlocking the Benefits of AI in AP

The integration of artificial intelligence in accounts payable processes presents a key opportunity for businesses to enhance efficiency and accuracy. As teams adopt AI technologies, they can streamline workflows, reduce manual labor and ultimately transform AP from a bottleneck into an asset.

Companies that embrace these innovations stand to gain a competitive edge in an increasingly fast-paced market.

Key benefits of AI integration in AP:

Increased efficiency: AI can improve AP processes by automating tasks and reducing cycle times.
Error reduction: Automated systems enhance accuracy, minimizing costly mistakes associated with manual data entry.
Enhanced financial insights: AI enables more informed decision-making through better data analytics and visualization.
Cost savings: Automating AP tasks can lead to significant operational cost reductions.
Scalability: AI technologies allow teams to handle larger volumes of transactions without proportional increases in staffing.

The evidence is clear: Businesses that invest in AI for AP stand to gain more than just time savings. They can improve accuracy, enhance financial visibility and free up the capacity for higher-level initiatives. Modernized AP processes can become a catalyst for financial agility, cost savings and overall business success. Now is the time to leverage AI technologies to unlock the full potential of AP operations.

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Originally posted on PYMNTS | October 30, 2024