What would you pay for a tool that turns 20 hours of work into 15 minutes?
In 1979, you would have paid about $100, or the equivalent of $370 today.
The tool you would have bought was VisiCalc — the world’s first computerized spreadsheet (Excel’s predecessor). And by the standards of the time, it would have basically turned you into a “super-accountant.” This was thanks to one tiny, but incredibly powerful feature we all take for granted today: the ability to automatically recalculate an entire spreadsheet based on changes in a few cells.
Today, a small change in AP technology is creating an outsized impact on how firms are offering AP services to clients.
Disruptions in business banking are creating opportunities in AP
Innovations like VisiCalc always represent a big opportunity for the early customers. While the rest of the accounting industry slowly catches up to a new technology, those who get their hands on it first reap the benefits of efficiency for much longer and create a competitive edge for their firms.
Thanks to fintech innovations, a similar opportunity has opened up in accounts payable automation. There’s been an explosion of AP tools, all of which simplify bill payments by integrating banks with accounting software.
Some fintechs are taking a different approach. Instead of relying on AP integrations, neobanks — virtual banking providers that emerged in the past 5 years — have started to bundle their business banking services along with AP management functions. The result has been a much more efficient AP workflow, and, for many firms, a final departure from tedious processes and integrations traditionally associated with AP.
Relay Financial is one such neobank. We bring convenient business banking (no-fee checking accounts; virtual and physical cards; ACH, wire, and check payments) and accounts payable workflows into a single hub. By managing client AP processes at the bank level, accountants and bookkeepers are getting best-in-class settlement times, better visibility into business financials, reliable bank feeds, and their own login for secure banking collaboration.
The ability to deliver a better AP process is here. And so is the appetite for that process.
Small businesses want firms to provide AP services
Small businesses still struggle with AP, and many are looking to outsource these functions to accounting and bookkeeping firms. According to a 2019 survey by OnPay, more than 1 in 3 small businesses want their accountant or bookkeeper to help with managing AP.
And this appetite for better AP has only increased since Covid-19. Data from Ardent Partners shows that 5% more firms rated AP as “very” or “exceptionally” valuable to their operations in 2020 compared to 2019. And when asked about the impact of Covid-19 to their AP process, 1 out of 4 businesses reported the pandemic as having a “significant” or “extraordinary” impact on the function.
Given the financial management expertise of most accounting and bookkeeping firms, advisors are in the perfect position to help small businesses overcome these AP challenges. The good news is that the costs associated with offering AP services have been falling as well.
Offering AP services has become more affordable
While the appetite for better AP continues to rise, the cost of invoice processing has actually fallen almost by half throughout the last decade. Ardent Partners’ yearly reports demonstrate this steady decline — the all-in cost of processing a single invoice fell from $19.10 in 2012 down to $10.89 today.
And there’s more to the data. The businesses that have invested in their AP process are doing even better than the rest. In fact, they are 4.3 times more efficient, paying an average of just $2.56 per invoice. And just as was the case with VisiCal, the best-in-class firms are leveraging new technology to gain this edge.
The best-in-class small business AP process is now built directly into banking
The key difference between traditional AP and the new process is not just the underlying technology. What’s changed is also where accounts payable “lives.”
AP integration technology itself is not new. Middleware has existed for a long time, allowing you to manage AP by connecting your accounting system to your bank. But much of this middleware technology was designed to serve the needs of enterprise companies. For SMBs, this has rendered some of the middleware inaccessible, whether due to the software’s complexity, its costs, or both.
So, instead of acting as another “connector,” the neobanks like Relay Financial are offering spend management tools that live next to your checking account. Rather than managing AP manually or relying on expensive middleware, with Relay you get bill pay workflows and banking in one place.
The result is significant gains in speed and cost-efficiency. Bundling banking services and AP comes with meticulous Xero and QuickBooks Online integrations, bill approval workflows, best-in-class settlement times, reliable bank feeds, and secure banking collaboration. Best of all, the gains in AP efficiency translate to a much easier, more effective way of offering these services to your clients.
To find out more about what a “banking-enabled” AP process looks like and how it can benefit your firm, visit www.relayfi.com. And to learn more about Relay Financial, make sure to register for the Insightful Accountant webinar, “How to Offer Accounts Payable as a Service” on June 29. You can register here.