How Back-Office Modernization is Driving Better Business Sustainability

The COVID-19 pandemic has completely changed how businesses view and manage their priorities. More than ever before, organizations realize the importance of closely managing their business costs with operational efficiency and performance.

However, across the globe, as organizations reexamine their operations, it has become abundantly clear that outdated accounts receivable (AR) and accounts payable (AP) processes still plague many businesses. To add to this new dilemma, the accelerated movement toward a paperless business model due to COVID restrictions has caused costly disruptions across multiple industries.

This new reality has created a renewed sense of urgency in organizations to modernize and digitize their back-office processes to support better business resilience.

Recognizing Today's Global Economic Challenges

In today's economic landscape, there is no shortage of challenges that businesses face. This is especially the case for organizations expanding into international marketplaces and trading with business partners in foreign currencies.

International companies have typically had to walk through more administrative and financial hoops than local B2B companies and their customers. When confronted with multiple invoicing requirements, tax laws, and trade restrictions, organizations have several hurdles to overcome when scaling their business into international markets while also ensuring long-term financial stability. From an AR and AP perspective, there are also many risk factors to consider when deciding how to do business with organizations outside of their home countries, especially when deciding on good credit and payment terms. And, of course, these risks only continue to increase during disruptions like an ongoing global pandemic.

However, global commerce is only one of the many areas where businesses are feeling increased operational pressure. COVID-19 has also continued to drive B2B e-commerce growth to unprecedented levels. While this growth has created many new opportunities for businesses, it has also exposed many of their weaknesses. Not only have the e-commerce surges resulted in significant disruptions in global supply chains, but they have also put major pressures on AR and AP teams to perform as businesses struggle to keep up with shifting demands.

Increased Reliance on AR and AP Process Optimization

The speed at which the world is changing has forced businesses to put more focus and reliance on their AR and AP teams. According to a recent Frost & Sullivan report (https://finance.yahoo.com/news/frost-sullivan-b2b-businesses-industries-101500116.html), total overdue invoices in the B2B sector have increased from 25% to 45% year-over-year. Coupled with the fact that 33% of financial managers are still waiting an average of 45–60 days to receive their payments, it's no wonder why cashflow management has become a chief concern for many businesses.

To address these issues effectively, procurement and payroll teams now rely on automation tools and improved data management processes to provide business stakeholders with relevant insights into partner relationships. By investing additional resources into digitized operations, including invoice automation, real-time payment solutions, paperless systems, and business spend management (BSM) platforms, AR teams can get paid faster and ease the strain placed on their cash flow.

In addition, more companies are choosing to invest in third-party payment platforms in order to quickly and seamlessly receive and manage payments. Cloud-based software has created new innovations in corporate spending and has provided a more simplified automated approach to reconciliations between businesses and their clients.

New Digital Payment Solutions

Company work-from-home strategies, remote office setups, and social distancing protocols have contributed to the increased demand seen in digital payment solutions. More than just a business necessity, these new digitized payment solutions give AP and AR teams a much more simplified way to manage their day-to-day activities. By reducing wait times for paper check processing, expediting payment approval requests, and unifying reconciliation processes under one platform, these new digital payment solutions become a critical component of business growth and resilience.

Improved Automation and Streamlined Workflows

By far, one of the main issues that continuously impacts productivity levels in AP and AR teams is the heavy reliance on manual and repetitive billing processes. In fact, a new report from MSTS shows that 94% of B2B financial teams say that billing and invoice entry still remains a manual process when updating their systems. New invoice automation tools driven by artificial intelligence (AI) have reinvented how AP and AR teams optimize their daily workloads. These new tools are designed to automatically extract relevant details from invoices, documents, and other relevant databases while fully integrating into an organization's ERP and accounting systems. The result is a significant reduction in data entry errors and considerable improvements in operational efficiency.

Companies that have begun focusing on digitizing AP processes are reaping more than just time and cost-saving benefits. The value that these modernized back-office solutions provide goes beyond internal operational improvements. With cloud-based software, businesses significantly improve their visibility into spend and transaction data by having one integrated experience from procure-to-pay. These new solutions also help expand partner relationships, reduce the likelihood of accounting discrepancies, and maximize working capital.

Position Your Business for Operational Success

Regardless of the disruptions presented by COVID-19 and the new economic challenges organizations face worldwide, there are effective ways to position your business for operational success. By relying on back-office modernization tools and solutions that automate and improve AP and AR processes, organizations can continue to maximize their cash flow while utilizing new technologies to further build and sustain their business.