The Way AP Departments Pay for Automation Will Never Be the Same
Written by: Bradley Bloch, CEO of factura.ai
Change historically comes slowly to accounts payable.
But in 2020, everything seemingly has changed in the way that businesses process their payables:
• New operating models
• New risks
• New challenges
• New economic pressures
Accounts payable departments are responding to these changes by accelerating their push towards digitization. Therein lies another big change: the way that accounts payable departments pay for automation. Forward-thinking providers of automated accounts payable solutions are eschewing the onerous license fees of traditional on-premise systems in favor or subscription-based pricing.
Subscription business models are not new. For years, consumers have paid for newspapers, magazines, cable television services, mail-order goods, and other services on a subscription basis.
As most users of home office software suites and customer relationship management (CRM) applications know, subscription-based pricing also has become ubiquitous in cloud computing.
All told, more than half of all businesses have changed or are in the process of changing their pricing for goods and services to a subscription-based model, the Economist Intelligence Unit reports.
But subscriptions are a relatively new phenomenon in accounts payable. Purchasing accounts payable software historically has required businesses to pay a large lump-sum license fee.
Shelling out a large amount of money upfront is one of the biggest barriers to automation cited by accounts payable departments, the Institute of Finance and Management (IOFM) reports.
But as the popularity of cloud computing has grown and more businesses have embraced the digital economy, subscription pricing is closing the gap on perpetual licensing models in accounts payable.
The economic fallout of the pandemic is likely to accelerate the trend towards subscription-based pricing. Eighty-six percent of businesses are implementing cost containment, the PwC COVID-19 U.S. CFO Pulse Survey finds. In this environment, lump-sum capital expenditures are a tough sell with cost-conscious senior management, no matter how compelling the case for automation.
With a subscription-based pricing model, accounts payable departments pay a fixed cost each month, based on their number of locations and their volume of invoices. Accounts payable leaders can have the peace of mind knowing exactly how much it will cost to process their invoices each month.
While achieving more predictable costs is a big driver of the push towards subscription-based pricing models for accounts payable leaders, subscription-based pricing offers additional benefits, including:
1) Less risk. No one likes to pay for something that they do not use. Yet many accounts payable departments purchase software licenses that provide more features than they need. Accounts payable departments are not being wasteful. The one-size-fits-all license models employed by many providers of automated accounts payable solutions leave them no choice. In today’s uncertain times, there is no telling when, or if, business requirements will grow. Subscription-based pricing eliminates the risk of paying for more capacity than you need.
2) Pricing scalability. Invoice processing requirements change over time. Businesses are bought and sold. Operations expand and contract. Product lines are added or scrapped. All this has a big impact on invoice processing volumes. The problem is that an upfront license fee does not scale with your invoice processing volumes. When invoice processing volumes decline, departments pay for more software than they need. When invoice processing volumes grow, a department may have to cough up another big license fee. It does not have to be this way. Tiered subscription-based pricing models allow businesses to pay fees that align with their current invoice processing volumes and can scale along with their business.
3) More functionality. Lump-sum license fees are only the tip of the iceberg when it comes to buying accounts payable software from some technology providers. It is not uncommon for departments to be nickel and dimed for all the features and functionality that they need. Many departments must make the difficult choice between asking senior management for more money or living without the features that are key to helping a department achieve the full potential of accounts payable automation. This is a big reason that many departments operate in a semi-automated manner. Subscription-based pricing eliminates these difficult decisions. Subscription-priced solutions come with all the features an accounts payable department might need, including optical character recognition (OCR), workflow approvals, an image and data archive, and ironclad security. Users also are assured that they will receive new features as they become available, without the need for another capital outlay.
4) Ease of deployment. On-premise accounts payable solutions – which typically require lump-sum license fees – have a well-earned reputation for drawn-out implementation cycles and large infrastructure demands. Organizations no longer have the appetite for that sort of disruption. Subscription-priced cloud-based accounts payable solutions are easy to deploy, use, and maintain. There are no setup fees. There are no servers to install or configure. Browser-based technology eliminates the need for software downloads. Little or no involvement is required from IT. Employees can be trained from wherever they work. The solutions have built-in user controls and security. Software upgrades are done automatically.
Seventy-one percent of accounts payable departments plan to automate further in 2020 in response to the challenges created by the pandemic, IOFM finds. Even departments that describe themselves as “largely automated” plan to deploy more automation. Only six percent of accounts payable departments have thrown in the towel and have no plans to budge from their manual operations.
Accounts payable departments must carefully consider the pricing model offered by providers of automated solutions. Compared to traditional license fees, subscription-based pricing models offer better cash management, less risk, pricing scalability, more functionality, and ease of deployment.
If accounts payable automation is in your plans, Factura.ai wants to speak to you.
Contact us at https://factura.ai/quiz/ or call 1-833-905-2159 to arrange a no-obligation consultation and online product demonstration.