Accounts Payable (AP) is an accounting term that refers to the outstanding sum of money that is to be paid by a company to its vendors, clients, and suppliers for the goods and/or services they have provided. This sum of money is recorded on the company’s balance sheet as a current liability to be cleared up in the upcoming financial cycle. At the same time, the total increase or decrease of AP in the complete fiscal year appears on the cash flow statement. The main aim of maintaining such a record is to assist with timely payments and ensure appropriate financial management. In the long run, this reduces the chances of paying late fees and penalties and helps the company maintain good relations with its clients.
Typically, account payment processing involves several steps that need to be performed meticulously to avoid any errors. When the company receives the vendor’s invoice, the finance department matches it with the purchase order and approves the final payment. In the next stage, the department lists the transaction as a liability in the balance sheet. In the authorization step, the company has to make sure that it completes within the allotted timeframe to optimize its cash flow in the near future. In large multinational corporations, wherein several departments are handling different orders, performing these tasks manually becomes a tiresome activity, thus increasing the chances of errors and miscalculations. To resolve this issue, companies now use accounts payable automation systems which use software programs to reduce the burden on the employees and enhance the efficiency of the entire process.
Increased use of accounts payable automation to streamline financial operations
Recently, the Institute of Financial Operations & Leadership (IFOL) conducted a study that showed that more than 50% of companies dedicate more than 10 hours per week to manually perform all the AP processes. As per these enterprises, these activities increase their labor and payment costs, thereby bringing down the overall profitability. In such a scenario, the demand for accounts payable automation has grown significantly.
In the last few years, several IT companies have designed AP automation systems that perform different tasks such as receiving and coding invoices, seeking approval, completing transactions, and reconciling with the vendor electronically. During the COVID-19 pandemic, almost all the major countries put in place travel restrictions and social distancing norms. As a result, many companies had to shift to work-from-home models, thereby increasing the demand for AP systems that provide digital payment features. In the post-pandemic period, many businesses are shifting toward AP automation systems to manage their invoices more efficiently and improve communication between different departments.
Integration of AI and cloud-based technologies creating new growth opportunities
Recently, Allied Market Research published a report on the global accounts payable automation market which states that the industry is anticipated to gather a revenue of $17,047.16 million by 2032. The sector accounted for $5,378.58 million in 2023 and is estimated to rise at a CAGR of 13.9% during 2024-2032. The growing need to digitize financial audit processes and technological advancements in online payment software programs are anticipated to help the landscape flourish.
The emergence of AI and machine learning has further opened new avenues for the growth of the industry. These innovations help in detecting any frauds or anomalies in the accounting and bookkeeping processes. AI tools designed for financial audits can efficiently detect duplicate invoices, miscalculations, and transaction discrepancies, streamlining payment processes Many companies are even using natural language processing techniques to analyze purchase orders, sales history, and vendor information to their financial operations. At the same time, robotic process automation has also become an important part of AP systems as they aid in minimizing human errors. RPA enables companies to automate repetitive tasks such as invoice matching, approval routing, and data entry. Similarly, AP automation solutions embedded with ML are deployed for predictive modeling to optimize cashflows and forecast payment cycles.
Along with this, the rising penetration of Internet service and the growing investments in digital infrastructure have increased the adoption of cloud-based technologies. In the last few years, IT companies have designed cloud-based account payable automation systems to offer businesses 24*7 accessibility. Moreover, these systems provide secure communication channels, improving the collaboration between different departments, vendors, suppliers, and other stakeholders.
Ingenious product launches helping the sector flourish
The launch of several accounts payable automation solutions by leading companies has augmented the growth rate of the landscape significantly. In April 2024, HighRadius, a major digital finance platform, unveiled its first GenAI native solution to automate AP processes. With features such as Supplier Connect and AP invoice automation, the solution aims to introduce AI-based tools to streamline transactions and manage fiscal responsibilities in a better way. Sashi Narahari, CEO of HighRadius, commented that the product was launched to cater to the demands of the industry comprehensively.
In June 2024, Otelier, a hotel management systems developer, revealed its AP automation system designed specifically for lodging and boarding operators. The distinctive feature of this solution is that it allows for easy integration of digital payment apps such as DigiPay, thereby helping businesses complete transactions.
Summing up, the accounts payable automation industry is expected to witness huge growth due to the increase in demand for these advanced systems to assist companies in settling their outstanding payments. The emergence of AI, ML, and cloud-based technologies has improved the quality of AP automation solutions, thereby opening new investment opportunities in the landscape.
✍ **𝑨𝒓𝒕𝒊𝒄𝒍𝒆 𝒘𝒓𝒊𝒕𝒆𝒓: Akhilesh Prabhugaonkar
