CFOs Are Sabotaging Their Own Accounts Payable Optimization Plans

Chief financial officers (CFOs) and controllers today have an opportunity to become change leaders within their organizations, spearheading modernization and optimization of financial workflows — and the enterprise overall.

Accounts payable (AP) digitization is high on the priority list these days, with plenty of friction points from purchase order through payment reconciliation ready for a facelift — and, luckily, plenty of technologies are available that promise to ease that friction.

But the reality of AP automation is far more complex and messy than many realize, according to iPayables CEO Ken Virgin. Speaking with PYMNTS, he explored some of the biggest challenges that continue to plague AP departments even with sophisticated technologies.

Virgin said that, even when organizations make headway in their efforts to optimize accounts payable workflows, a disconnect between AP department heads and the CFO can cause that modernization project to implode entirely.

Persistent Pain Points

Paper is typically looked at as the culprit behind AP friction. Even PDFs, which some professionals incorrectly assume ease the pain of physical documents, still require manual coding, data extraction and processing.

Technologies like artificial intelligence (AI) and optical character recognition (OCR) have flooded the AP technology market with promises to tackle this pain point and automate the handling of data from physical and nonstandardized electronic documents. The problem, said Virgin, is that these tools can often promise more than they can deliver.

“A lot of what I’ve seen and read is really overpromising,” he said, pointing to solutions that place use of AI and OCR front and center and vow straight-through processing yet still require AP personnel to step in and manage various workflows. “We’ve taken on quite a few customers in the last year or so that were quite disillusioned from what they were sold with OCR and AI.”

Key areas of friction, like exceptions, are especially challenging to solve by OCR and AI alone, considering these tools are far from 100 percent accurate.

Solution providers have also taken to developing supplier platforms and B2B ecosystems to achieve straight-through processing, but once again, this approach can be misleading. Virgin noted that while these ecosystems can indeed migrate a significant workload off the accounts payable department, these portals can often move that burden onto the shoulders of suppliers’ accounts receivable departments.

That’s not to say innovations in accounts payable solutions have been all for naught. Tools like machine learning (ML) can play a vital role if implemented properly and is one of the technologies iPayables itself uses to ease challenges like the pain of coding invoices that are not linked to a purchase order.

Bot technology is also especially promising, said Virgin, especially in the area of managing exceptions. The virtual card is another tool, one that he described as “its own little beast” that continues to deepen its presence in the AP flow to digitize B2B payments while also supporting automation and data integration.

Rewarding Change

Regardless of which tools AP teams use to digitize and automate, there is a bigger picture as to why AP modernization efforts can hit a snag, or fail entirely, that goes beyond the nuances of particular friction points or technologies.

It’s a matter of change management, or lack thereof, and a disconnect between CFOs and heads of AP departments, said Virgin.

“It used to be that when we came in with portals, the AP team was pretty aligned with the controller and the CFO on what they wanted to do to modernize their AP departments,” he recalled. “A disturbing trend is that they are not aligned nearly as much as they were in the past.”

The result is that AP managers will agree to and accept the AP modernization plan as spearheaded by the CFO when working with an AP technology vendor. Yet when it comes to putting that plan into action, AP leaders can intentionally sabotage efforts in an effort to retain their staff.

Virgin said there have been instances in which AP managers were not submitting their invoices to portals in order to keep staff members in place to process those invoices manually. It’s a matter of preserving coworkers’ jobs, which have been placed in jeopardy as a result of automation, as well as preserving AP managers’ own positions as department leaders of several dozen professionals. Indeed, he noted, there have been cases in which AP managers were demoted following an AP automation initiative that had lowered the staff count of the department.

“This is a controller and CFO problem,” he said. “They don’t take a step back and ask how this will impact their AP manager or director.”

According to Virgin, the solution is for CFOs to understand that they cannot reward AP department leaders and staff for achieving automation goals by firing and demoting professionals. Through proper change management, those staff members can be rewarded through promotions and responsibility shifts, giving AP leaders an incentive to find success with their digitization roadmaps without having to worry about the future of their or their colleagues’ careers.