In the increasingly complex and competitive world of commercial payments, the benefits of automating the accounts receivable (AR) and accounts payables (AP) functions continue to grow. Automation allows companies to maintain tighter control of their spending, take better advantage of price breaks, and use their financial and human resources more efficiently.
Organizations can benefit from automation in ways they may not even anticipate. A new report from Javelin Strategy & Research, Global AR/AP Automation: Improving Cash Visibility and Reducing Risk, looks at the ways that contemporary automation processes have resulted in fewer errors, reduced risk of fraud, and even a decrease in compliance issues.
The Cash-Flow Challenge
Perhaps the most important advantage of AR/AP automation is that it significantly improves liquidity and cash-flow analysis by providing real-time visibility into financial transactions. Automated dashboards and reports can offer immediate insights into cash inflows and outflows, allowing businesses to monitor their cash positions in real time and make informed decisions about their liquidity needs. This continuous monitoring can help businesses optimize their working capital and ensure that they have sufficient funds to meet short-term obligations.
Artificial intelligence is playing a big role in the development of these automated tools. Through the use of machine learning and AI, predictive analytics can forecast cash-flow trends based on historical data. These forecasts are invaluable for a business’ planning in the short and long terms. They help companies anticipate future liquidity needs, identify cash shortages or surpluses, and plan accordingly.
“The most difficult thing to do in business is to forecast liquidity and cash flow,” said Albert Bodine, Director of Commercial & Enterprise Payments at Javelin and the study’s lead author. “You used to have a room full of MBAs spending days, if not weeks, doing the cash-flow liquidity. Now you can get cash-flow and liquidity recommendations in seconds for some platforms. Predictive analytics have the ability to analyze mountains of data and then identify trends and mitigate risk much faster than humans would be able to.”
Artificial intelligence is passing out of its fad phase and is now seen as a legitimate tool, Bodine said. Machine learning also has a dramatic impact on the financial and banking worlds.
“I think of AI as something that can ingest an enormous amount of information and data in milliseconds, extract trends from that, and then make recommendations,” Bodine said. “Think of the number of humans it would take to do that.”
Comprehensive Compliance
Any business operating in today’s complex financial environment has discovered how important it is to comply with regulatory standards. The easiest way for an organization to get in trouble is by making mistakes when it comes to regulation or compliance issues. In areas such as anti-money-laundering efforts and know-your-customer rules, infractions can result in multimillion-dollar fines.
Automating payment processes can go a long way toward preventing these issues. It’s easy to make sure an automated system is regularly updated to keep itself aligned with the latest regulatory changes, and this frees humans from having to adjust for every new rule. These systems also facilitate real-time audits and reporting, allowing businesses to maintain their compliance responsibilities with minimal manual effort.
“The global regulatory and compliance environment has gotten so complex and so overweighted with laws and regulations that it’s difficult for any organization to keep up these days,” Bodine said. “Compliance-as-a-service companies have started to pop up to completely automate this process, and to integrate AI to assist with keeping abreast of everything. At a minimum, this type of machine learning is a strong addition to compliance efforts at companies. But I would go as far as to say if you know you don’t have a significant level of automation and in your compliance or regulatory efforts, you probably are not compliant.”
Reducing the Human Element
Of course, automation greatly reduces the number of human errors in your operation, enhancing accuracy in everything the organization does. When manual systems are eliminated, invoice receipt, processing, payment, audit trail, and downstream analytics reach new levels of efficiency. Fewer hands involved means maximized streamlining and efficiency.
But Bodine stressed that it’s important for organizations to fully commit to an automation strategy.
“Being 25% automated is almost worse than not being automated at all,” he said. “I’ve never come across an organization that’s 100% automated, even among the biggest, most sophisticated organizations. But a halfway effort into the world of automation can almost be more problematic than just staying entirely manual.
“It really takes a commitment, and there can be significant costs associated with it. But the ROI is certainly there over a reasonable amount of time, in many different areas.”
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