Manual processes in financial sector push up fraud risk

The findings are part of a study conducted by fintech company, Tipalti, comprising interviews with 500 finance leaders in fast-growing companies in North America and Great Britain.

The results of the study paint a stark picture of the negative impact manual AP processes, such as invoicing, PO matching and handling payments, are having on business growth, ability to manage operations effectively, employee morale, and even the finance teams’ reputation in the wider business.

In addition to this, analysts have underlined the impact outdated AP processes in fast-growth businesses are having when it comes to fraud - with four in five (82%) of finance leaders reporting fraud and risk exposure as a top AP challenge of theirs.

Is future finance fit for purpose?

The study found that almost a third (31%) of finance leaders believe AP will ‘slow down potential business growth’ if challenges continue or intensify, with four in five (80%) saying finance can only become a strategic driver of growth in the business when AP inefficiencies are minimised. Further, four in five of those polled also believe teams would spend any time freed up by automating AP on growing the business in other areas.

However, time is clearly being spent elsewhere. Worryingly, finance leaders surveyed said that 43% of the end-to-end AP function is currently manual or paper based.

As a result, on average it takes finance almost an hour to process an individual supplier invoice, 11 days to close monthly accounts, and 13 days to close quarterly accounts. This equates to, on average, more than half (53%) of finance time in a typical week being spent on manual AP processes, rather on tasks that aid strategic initiatives.

The situation is taking a negative toll on operations, with, on average, almost a quarter (22%) of supplier invoices being paid late. In addition to this, the survey highlighted a growing frustration towards the finance team - with two thirds (63%) admitting they have received feedback or criticism from the wider businesses about the AP inefficiencies.

Chen Amit, Co-Founder and CEO at Tipalti, said:

“The negative impact that manual AP processes are having on business growth, exposure to fraud and finance teams’ reputation — just to name but a few —should serve as a wake-up call to businesses.

“Too many hours are spent doing manual tasks that could be automated. Understanding the benefits of automation is key – teams have more time to spend focusing on strategic initiatives that help scale the business, in addition to finding new opportunities for growth. Furthermore, it improves visibility and control - which is crucial for fast-growth businesses today,” Amit added.