Artificial intelligence can achieve some amazing feats, but few are likely to give SMEs more satisfaction than getting paid on time.
Late payments are a major pain, both for the suppliers who need to chase up their cash and for the late payers themselves, who risk damaging their reputations and business operations.
According to the UK government’s most recent figures, large businesses pay a quarter of their invoices late. On average, SMEs are owed £22,000 each. Remedying this could boost the economy by an estimated £2.5 billion a year.
“The impact is pretty vast, considering that 99% of businesses are SMEs,” says Angus Milledge, EMEA SMB Director at spend software specialists, SAP Concur.
All too often, a firm will use outdated accounts payable (AP) processes. “So, when they receive a supplier invoice, the only way to capture it is manually,” he says.
The ideal solution is to automate AP tasks, like manual data entry. A typical invoice contains an average of 70 data points, he explains, “and if you introduce AI or machine learning, the system accurately scrapes data from the invoice and puts it in your finance system. That is a huge saving in terms of productivity.
“The beautiful thing about AI is that it’s constantly learning, so the more supplier invoices that are processed, the smarter your solution becomes.
“In a manual world you’ll often have a really astute and productive finance team, but the biggest bottleneck is usually the approvers. It’s not really their day job to sit approving invoices – they’ve got other things to worry about, and that’s the Achilles’ heel in the whole process.”
Milledge acknowledges that the prospect of radically changing a traditional business’s AP processes can be daunting. “But eventually, most hit a critical point where the decision is to invest in additional headcount to support the volumes of a growing business, or in technology incorporating AI to make that a more seamless and faster process.”
The benefits of implementing an automated supplier invoice management solution are manifold. An independent study in seven countries by consultants Analysys Mason found that in SMEs and firms with fewer than 2,000 employees, increased efficiency alone saved finance teams 134 hours a week and an average of £11 (€13) per invoice.
Embracing automation means that these teams can route invoices swiftly to reviewers so that they aren’t stuck or lost on email or paper. Where a purchase order system is in operation, the same technology automatically checks and validates invoice data.
Digitally centralising the information prevents the kind of duplicate payments that can occur when some invoices are submitted on paper and others are sent by email. The system also flags up fraudulent invoices, which have proliferated post-lockdown as chancers try to take advantage of manual processes.
About 17% of invoices contain errors. “To locate those, a typical finance team would need to go through 100% of those invoices. With SAP Concur, we can pull out those 17% to show you where the error is. That makes a huge difference,” says Milledge.
Another benefit of the SAP Concur AP system is that they generate reports on spending data and trends, giving crucial insights to senior managers. What’s more, by timing payments to optimal effect, they enable the business to manage its cashflow and capital better.
Analysys Mason’s study found that companies using Concur Invoice saw a positive return on investment within seven months and saved an average of £31,000 annually. Having automated their invoice management processes, firms also saw late payments drop by 24% and misplaced supplier invoices fall by 22%.
The issue has taken on a new urgency in recent months as the government, in its own words, “takes action to back small businesses and tackle late payments”.
From 2018 to 2022, the number of late payments fell slightly, from 31% to 26%. In late 2023, the Department for Business and Trade announced tougher measures to deal with the problem, building on its Reporting on Payment Practices and Performance Regulations.
Initiatives include strengthening the Prompt Payment Code, broadening the powers of the Small Business Commissioner and taking forward legislation to extend payment performance reporting obligations.
“I think the government’s looking at it through a new lens to make sure that it’s enforced better, and there are penalties to make sure that the smaller businesses are able to grow, invest and receive their money in time,” says Milledge.
One significant development came in the Chancellor’s 2023 Autumn Statement, which tightened payment time requirements for firms bidding for large government contracts.
“From April 2024,” said Jeremy Hunt MP, “firms bidding for government contracts over £5 million will have to demonstrate they pay their own invoices within an average of 55 days, tightening to 45 days in April 2025, and to 30 days in the coming years.”
For SAP Concur’s Milledge, the government’s intervention looks like a gamechanger.
“It’s going to become necessary to stick to agreed payment terms with suppliers,” he notes. “It’s not just a case of ‘it’s nice that we pay the majority of our invoices on time’ – it’s going to become a requirement of running an effective business.
“From my perspective, it’s not just a case of companies reaching a point where they have to decide whether to invest in additional human resources or in technology.
“In order to source products and services from businesses, do they want to be considered as prompt payers? And will they ever be in a position to tender for government business?
“It seems like it’s going to be a requirement to do business going forward, and that’s good news for business and the economy.”
To find out how SAP Concur uses AI to automate and transform invoice processing, visit www.concur.co.uk/invoice-management.
