Is AP innovation one of the final fintech frontiers?

If you say the word accounts payable, aged payables, or generally anything that touches on the back of house function of a business, bar accountants or bookkeepers, the majority of your audiences’ eyes will glaze over pretty quickly.

Startup founders are probably the worse when it comes to having their head in the sand. Many of them don’t see the financial element as a core function of their business. As a result, next thing you know, payables are far bigger than receivables (if they even have any income early on), and they’re off cap in hand to investors, for more cash to pay the bills. Not a good look.

But managing the whole procurement to accounts payable piece isn’t easy. It’s even harder when these aren’t even discrete functions inside your organisation. As a founder and startup Chief Everything Officer, the early stage of your business is that magical time where you get to try absolutely every role you’d ever wished you’d had, even the ones you were previously grateful you hadn’t…

Jokes aside, one thing which has become evidently clear to me under my lofty CEO title, tangentially operating as a procurement and accounts payable specialist, is that the procurement to AP process is broken. Even the AP process is icky. The whole thing is disjointed and incredibly inelegant, and that’s even the case if you are using the best of breed cloud accounting platforms available, which I am.

Of course, like interest, the problems compound the larger the organisation you are, so I really should be grateful for my lot. A recent report from global invoicing powerhouse Tungsten Network. The 2017 P2P Friction Study Report, which surveyed over 424 global procurement and accounts payable professionals, found that:

  • The average medium to large US business wastes approximately 6,500 man hours per year because of manual, paper-based payment practices
  • This translates to US$171,340 p.a. or £88,000 in money down the drain. I sense it could be more, but is no doubt hard to measure.
  • Most of the solutions to fixing this are super basic, like moving to e-invoicing, or using systems that ensure purchase orders are linked to invoices
  • Suppliers have little to no visibility on where payments are at, creating another admin headache for accounts payable, who need to field their enquiries

It’s easy to jump to the conclusion that the blockchain should solve this, and while I’m sure it can (one day), I am starting to feel like this fintech panacea is the lazy answer. In a perfect world for me, everyone would use Xero Connect, or at least Xero-to-Xero invoices, and we could simply have our accounting systems all talking to one another. But that would require everyone to use Xero, and an homogenous accounting world seems like an absolute utopia.

I don’t have the answer but I can talk to the problem. And herein lies the opportunity for someone much smarter than me to successfully tackle something that is big, sticky and increasingly globalised. Something that helps me get back to the stuff I really want to be doing. I’m 110% sure I’m not alone on that one either.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

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