THE STATE OF

ACCOUNTS PAYABLE
AUTOMATION 2024:
A COMPREHENSIVE REPORT

C M S . K R E D X . C O M
TABLE OF
CONTENTS

01
State Of Accounts Payable
2023: An Overview

02 Automation:
The Road Ahead

03 4 Reasons
Automation Fails

04 Accounts Payable In
2024: The Solutions
STATE OF ACCOUNTS PAYABLE: 2023
Ongoing economic uncertainties, coupled with the lingering effects of the pandemic continued
to impact various facets of businesses in 2023. From disruptions in supply chains and workforce
dynamics, the landscape is evolving, signaling a departure from traditional business practices.
Vendor relationships have gained heightened significance, necessitating companies to optimize
operations with reduced staff, while accommodating the demands of a hybrid workforce.The
global landscape is further complicated by external factors such as the war in Ukraine, inflation,
and escalating interest rates, adding layers of uncertainty and placing corporate finance at the
forefront. Finance leaders are adopting a cautious approach, closely monitoring balance sheets,
reducing risks, and prioritizing "cost reduction" over expansive growth.

More than half of the CFOs surveyed for Deloitte’s CFO Signals 2Q 2023 report, stated that
their CEOs are asking them to focus on cost reduction. According to the report: “More than
one-third of CFOs say their CEOs want them focused on strategy/transformation, performance
management, revenue growth, investment, and capital/financing. And more than one-quarter of
CFOs indicate their CEOs are asking them to focus on working capital efficiency and risk
management.”

WHAT IS YOUR CEO ASKING YOU TO FOCUS

ON IN THIS BUSINESS ENVIRONMENT?

Strategy/transformation: Identify/execute
new strategies and transformative initiatives
40%
Performance management: Monitor/manage
performance against targets
39%
Revenue growth: Identify/evaluate/launch
growth efforts
39%
Investment: Get funds allocated to the right
capital expense/operating expense uses
36%
Capital/financing: Manage availability and
cost of debt, equity, retained earnings, etc
34%
Working capital efficiency: Drive improvements
in receivables, payables, & inventories
32%
Risk management: Identify, monitor, and
mitigate internaland external business risks 27%
Stakeholder relationships: Manage relationships
with financial markets and investors
23%
Business developments: Monitor developments:
economies, policy, geopolitical events 20%
Property, plant & equipment efficiency: Drive
utilization/divestiture of hard assets
6%

Other 2%

AP Automation in 2024 - KredX CMS 3

THE ROAD AHEAD
In Mineral Tree’s 8th Annual State of AP Report, Accounts Payable (AP) emerged as a focal
point, with liquidity and cash flow assuming even greater importance.
“Finance leaders are keeping a close eye on their balance sheets, taking fewer risks, and
focusing more on "cost reduction" over growth. Accounts Payable (AP), in particular, has
become ground zero as liquidity and cash flow have become even more indispensable.
Recognizing the vital need for greater productivity, visibility, and control over cash, it’s no
surprise that the finance leaders resoundingly chose AP as their number one digitization
priority again this year,” states the report.

TOP-OF-MIND ISSUES FOR AP TEAMS IN THE

CURRENT ECONOMIC CLIMATE

60

50

40

30

20

10

2.5%
49.1% 43.1% 42.3% 26.2% 26% 17.7%
0
Reducing AP Improving ability Gaining better Renegotiating Delivering Improving other
processing costs to manage cash visibility into current terms with insights to inform supply chain
flow (e.g. cash position strategic vendors business strategy resiliency
extend DPO)

Despite prevailing economic conditions, a noteworthy 52.1% of all AP teams surveyed

expressed a momentum to either adopt or increase investments in automation. With slightly
over half of AP teams committing to digital transformation, there exists an untapped opportunity
for companies to bolster their investments.

Such initiatives can lead to heightened productivity, improved cash flow management, and risk
reduction, offering a range of benefits for organizations willing to embrace automation.

AP Automation in 2024 - KredX CMS 4

AP AUTOMATION:
THE CHALLENGES
Achieving success in accounts payable (AP) automation projects is a common challenge.
According to the Institute of Finance and Management (IOFM), despite 77% of AP departments
implementing some form of invoice processing automation, 68% still manually handle the
majority of invoices from suppliers.This discrepancy underscores the complexity faced by AP
departments in fully realizing the potential of automation.

KredX surveyed a group of AP heads across Indian enterprises and the majority of them agreed
that complex installation processes of automation tools and invoice exceptions were the primary
challenge for AP departments, emphasizing the need for effective solutions.

While few AP automation projects outright fail, feedback from the 2023 IOFM's APP2P Spring
Conference & Expo indicates that many fall short of delivering expected value, facing issues
such as inadequate financial returns, scalability problems, and unmet functionality expectations.

10%

30%

35%

25%

Complex Installation Manual Handling Of Data Misreads & Exceptions Limited Scalability

AP Automation in 2024 - KredX CMS 5

COMPLEX INSTALLATION
Many automation tools do not support the native functionality of existing ERPs and a shift
means a disruption of pivotal processes.

One prevalent issue hindering AP automation projects is the reliance on outdated optical
character recognition (OCR) systems with intricate setups. This uncertainty often leads to
extended training periods for OCR systems, accompanied by substantial costs in professional
services fees.

MANUAL HANDLING OF DATA

A significant oversight in many AP departments is the lack of automated methods for
extracting data from emailed invoices or those received as PDF attachments. Treating emailed
invoices akin to traditional mail, some teams manually input data into ERPs or accounting
software, causing inefficiencies, errors, and delays in invoice approvals.

The effectiveness of an AP automation solution is reflected in the percentage of invoices

posted directly to an ERP application without human intervention. Solutions requiring
significant manual handling not only burden AP teams but also escalate processing costs, as
revealed in an IOFM report indicating three times higher costs for manual processing.

MISREADS & EXCEPTIONS

Contrary to vendor claims, OCR technology is not foolproof. A single misread character can
lead to exceptions requiring manual intervention, resulting in prolonged processing times.
Invoice data misreads may further lead to erroneous payments and downstream issues,
posing a substantial challenge for AP teams.

LIMITED SCALABILITY
Many OCR systems necessitate additional software licenses and staff hires as invoice
volumes increase, posing a barrier to scalability. The cumulative costs of these requirements
contribute to the failure of automated invoice processing projects.

To overcome these challenges, modernizing invoice processing with solutions that integrate
intelligent data capture, digital workflows, and expert assistance is essential. These solutions
offer benefits such as fast setup, standardized processing for any invoice format,
guaranteed data capture accuracy, touch-free posting, and scalability without the need for
additional licenses or staff.

AP Automation in 2024 - KredX CMS 6

ACCOUNTS PAYABLE IN 2024:
THE SOLUTIONS

At a technical level, highly mature finance operations rely on sophisticated analytics, visualized
reporting, and advanced automation and orchestration. Each technology category follows a
maturity curve, exemplified by analytics with its four stages:

1 DESCRIPTIVE Providing insights into past events.

2 DIAGNOSTIC Explaining why an event occurred.

Forecasting future outcomes based

3 PREDICTIVE on trends and the current state.

Offering optimal solutions by calculating

4 PRESCRIPTIVE numerous resolution pathways.

Prescriptive finance analytics, representing the pinnacle of maturity, serve as virtual consultants
and powerful tools for critical financial planning and decision-making.
They provide real-time, always-on strategy optimization recommendations, moving away from
relying solely on infrequent and costly human analysis toward a data-driven approach for crucial
operational and decision-making processes.

In today’s business landscape, CFOs and their teams play a crucial role as owners and handlers
of essential data required for generating forecasts and supporting strategic plans and decisions
of senior leaders.

This data encompasses sales, order fulfillment, supply chains, customer demand, business
performance, as well as real-time internal, industry, and market statistics.

AP Automation in 2024 - KredX CMS 7

 FOUR KEY TECHNOLOGY AREAS THAT HOLD
SIGNIFICANT PROMISE FOR FINANCE TEAMS ARE:

Virtual
Card
Rise of
Payments
SaaS
Ecosystems

Emergence of
Embedded
Finance

Intelligent
Automation

INTELLIGENT AUTOMATION
The adoption of machine learning-driven optical character recognition (OCR) for data extraction
from invoices, coupled with concurrent mapping to purchase orders and goods received notes
to identify exceptions, is a prevalent practice in Accounts Payable. In the realm of AP
automation, vendors are set to integrate artificial intelligence (AI) comprehensively throughout
the invoice-to-pay workflow. This strategic evolution extends to emerging use cases, such as
real-time fraud monitoring to mitigate financial risks, supplier risk verification, and the
implementation of conversational AP.

EMERGENCE OF EMBEDDED FINANCE

Effective management of working capital has become paramount in the evolving economic
landscape. Industry reports indicate that SMEs in India occupy a modest 6%-7% credit share,
facing a substantial credit gap amounting to nearly $1.1 trillion. In response, AP automation
vendors are anticipated to collaborate with Financial Institutions (FIs) to integrate credit card
products seamlessly with Accounts Payable processes. This strategic bundling aims to empower
customers to expedite payments for approved invoices to suppliers, facilitating accelerated
transactions without impacting the buyer's cash reserves. Embedded credit products, including
both secured and non-secured commercial credit cards, are poised to play a pivotal role in
2023, offering companies an avenue to enhance liquidity. Forward-thinking businesses will
leverage immediate credit lines to achieve working capital objectives without imposing undue
burdens on suppliers and potentially introducing supply chain risks.

AP Automation in 2024 - KredX CMS 8

RISE OF SAAS ECOSYSTEMS
Established industry leaders and emerging Software as a Service (SaaS) entrants are set to
harness the potential of ecosystems by providing complementary solutions that add value and
set their offerings apart. In the context of payables, this entails a comprehensive financial
operations proposition, wherein AP software vendors act as orchestrators of the ecosystem.
They bring together a diverse array of offerings, including tax payments, compliance,
reconciliation, credit products like Business EMI Cards, supply chain finance, cross-border
payments, —all seamlessly integrated into a single platform. This model not only enhances
customer retention but also distinguishes service providers by offering a unified experience in
accessing various services within the same platform.

VIRTUAL CARD PAYMENTS

The evolution of virtual payments represents a transformative step in the realm of accounts
payable.Virtual cards stand as a secure alternative to traditional check payments and
Automated Clearing House (ACH) transactions. A significant shift is anticipated among B2B
vendors currently accepting credit card payments, as they transition towards adopting virtual
card payments. The creation of a virtual card results in the instantaneous generation of a
single-use card number, offering a secure means of making specific payments within
authorized limits.

These cards are effectively "locked down," ensuring transaction security by specifying the
payment amount, maximum credit limit, and a defined time limit.By generating single-use
numbers tailored to each transaction, virtual payments streamline the payment collection
process for vendors while mitigating the risks of fraudulent transactions.

IN CONCLUSION
To maintain a competitive finance capability, CFOs must champion and consider investing in
innovation, as per organizational needs. From Automation to Embedded Finance and Virtual
Cards, 2024 promises to be the year of change. However, successful adoption depends on
the company’s current strategies, needs, trajectory, available technologies, and talent. It is
important to acknowledge and call out that digital transformation in finance cannot occur all
at once. It is important to roll out a roadmap with logical milestones.
Moreover, companies should avoid falling into common pitfalls. Legacy enterprise resource
planning (ERP) systems and other core business systems should not serve as excuses to
avoid necessary changes in finance areas like purchase order-to-pay functions.

AP Automation in 2024 - KredX CMS 9